Want to retire with $300,000? $1 million? $3 million? Experts map out three scenarios so you can retire with enough

Planning for retirement can feel overwhelming, especially amid today’s economic uncertainty, with Canadians now believing they’ll need $1.7 million in savings to retire comfortably, according to a 2023 Bank of Montreal survey.

Everyone’s retirement scenario will look different depending on their income and lifestyle, of course. Some people may be fine living on their Canada Pension Plan (CPP) and Old Age Security (OAS).

According to the Government of Canada website, the total maximum amount for both in 2024 would be $24,935 with a maximum CPP monthly payout of $1,364.60 for $16,375.20 and an OAS monthly maximum payout of $713.34 up to age 74 with a yearly amount of $8,560.08. Others may need to save more to have the ideal 70 per cent of their pre-retirement income. 

We spoke with financial experts to find out what Canadians would have to do if they wanted to retire with $300,000, $1 million, or $3 million.

When comparing scenarios, the experts set certain parameters: They focused on two-income households, who started saving at age 25 with a tax-free savings account (TFSA) and a registered retirement savings plan (RRSP) but without an employer pension.

The inflation rate was set to two per cent. The rate of return on investments was set between 4.37 and six per cent to keep the portfolios conservative. The assumed retirement age was set at 65 years with life expectancy set between 90 and 95 years, based on FP Canada’s 2024 Canadian Pensioners’ Mortality Table. They also set CPP benefits at 70 per cent and OAS at 100 per cent for their calculations.

Sam Lichtman, an adviser and founder of Millen Wealth, says saving early is a huge advantage as that allows people to take advantage of time in the market and compound interest.

Plus, a financial plan is time, energy and money, says Samantha Sykes, a financial adviser with Raymond James.

“How much longer do you want to work? How much harder do you want to work? So do you want to go and make more money or sacrifice things?” Sykes calls those the “three strings” people have to pull when it comes to creating a financial plan that includes retirement income.

Planning toward a $300,000 retirement

Sykes said that a couple making a combined income of less than $100,000 annually could start investing $2,000 a year.

“You will be living on a budget,” she says. “But you can make it happen if you stay in the same house and pay off your mortgage because you’re comfortable by your standards. You might go on a vacation every few years.”

Laura Monteiro, an adviser with Sun Life in Northern Vancouver, says that a couple who is 65 and is mortgage free with a total retirement portfolio of $300,000 could have a budgeted monthly spending plan of $4,000, with an additional annual spending need of $3,000 for things like vacations, insurance and taxes.

“Keeping to this spending plan, they manage to live out their retirement successfully, they never run out of cash until age 95,” she says. They would also face minimal to no taxes each year, by income splitting and using available tax credits optimizing their financial situation effectively.” 

Planning toward a $1,000,000 retirement

Monteiro says in this scenario, the couple would have a monthly budget of $6,000 for their retirement beginning at age 65 until age 80.

“As we traditionally see expenses lower after age 80 and onwards,” she says, “the spending plan is reduced to $4,500 monthly after age 80 until death.” 

In addition, the couple would have a $10,000 annual spending budget for vacations and annual expenses such as insurance and home maintenance. She says in this scenario the amount drops to $5,000 a year beyond age 80. This would mean no OAS clawback as their annual incomes would fall beneath the threshold at $47,500 and $37,700.

To meet this retirement goal, Sykes says a couple would have to invest $7,500 a year starting from age 25. 

“They may be maxing out their TFSA and dabbling a little bit on the side because their neighbour may have said, ‘Have you heard about this stock’ and they have a little bit of extra cash to put in it.”

Planning toward a $3,000,000 retirement

While this one offers the most retirement freedom, you have to save more — about $15,000 a year as a couple from the age of 25, says Sykes.

But it could guarantee a monthly income of $10,000 up until age 80 with an included annual expense budget of $20,000. After age 80, the spending plan drops to $8,000 a month. Depending on each partner’s income, there is a small OAS clawback since their income would fall just above the individual annual threshold of $90,997.

All our experts said while these are scenarios and not based on real people, the process is similar to what they go through with their clients. Plus, it’s important to know that people with different needs, income, ages and lifestyle changes will reach different numbers, especially if they start saving young.

“The reality is that their saving rates are going to change drastically over time,” Lichtman says. “And while you could say you need to save $500 a month in these different plans to achieve this goal, realistically speaking, if 500 bucks a month is doable and they have that capacity now, by the time they’re in their thirties, forties or fifties, they’ll be able to put $4,000 or $5,000 a month away.”