Average Savings By Age in Canada

While Everyone knows they should put some money aside for retirement, it's always easier said than done. For most people, retirement seems ages away when they are still preoccupied with mortgages, student loans, mortgages, and other important expenses. Planning for retirement can also seem overwhelming, especially if you don't know where to start. So what are the average savings by age in Canada?

The average savings by age in Canada can help one know how much people need to save at their current age. Most people still wonder whether or not they are working towards their financial goals. Luckily, knowing about the average savings by age in Canada can help you manage your finances and understand the things at play.

How much do you need to retire in Canada?

If Statistics Canada is anything to go by, most senior families in Canada have a pre-tax annual retirement income of $65,300. Since everyone has different goals, income, and expenses, there is no one-size-fits way to calculate retirement savings.

Factors Affecting Your Retirement Savings

• The age you want to retire
• Where do you want to retire
• The kind of lifestyle you want to live
• Whether you’ll continue working after retirement or not
• Whether you’ll support other people
• Whether you have a mortgage or other debt

According to financial planners, most Canadians need 70% of their pre-retirement income to fund one year of retirement. This assumes that there’ll be no more commuting expenses, fewer dependents, and lower housing costs if you’ve cleared your mortgage.

Since you are likely to live for 25 years after you retire, you can take 70% of your annual salary and multiply it by 25. For instance, if you earn $60,000 per year, you can take 70% of that and multiply by 25.

How much should you have saved by age?

If you are unsure what to do, figuring out how much you can save by age can be tricky. According to Fidelity, by the time you hit 30 years, you should have saved at least one year of your salary. By age 60, you should have saved eight times your annual salary if you want to enjoy your life after retirement.

How to save for retirement by age group

If you want to calculate your potential savings and measure progress, you need to choose goals based on the stage of your life. You should also review your retirement plans every three years or when something important happens in your life...

Saving in your 20s

After graduating, the first thing to do is to clear your student loan. This way, you can build a healthy credit score and establish an emergency fund with enough money to cover you for at least six months in case something happens.

Once you are employed, save at least 15% of your gross income for retirement. While retirement is the last thing you’d want to hear in your 20s, the earlier you start, the easier it will be in the future. You’ll save less each month and earn interest from your money by saving early.

Saving in your 30s

It can be hard to save for retirement when you still have mortgage and childcare expenses. The best way to start is therefore, to use tax-advantaged savings accounts that offer a lot of perks. These accounts will not only reduce the amount of income taxes you pay but are also tax-free, even when withdrawn.

Saving in your 40s

Since your 40s is usually your peak, you need to use salary increments and bonuses to boost your savings. You should also minimize your monthly expenses. For instance, you can refinance your mortgage or review your insurance plans to cut down on costs. If you are just starting or have not planned for retirement, talk to a financial advisor about your goals and the options, you have.

Saving in your 50s

While in the 50s, your retirement is just around the corner. It's, therefore, the best time to increase your savings, monitor your investments, and make sure you have enough resources to support you during your retirement years

Saving in your 60s

In your 60s, you can keep saving if you’re unsure whether to leave the job.

Why Most Canadians Don’t Save?

One of the reasons why Canadians don't save compared to other countries is because of debt. Since most Canadians use a big percentage of their income to pay debts, they have little money to save.

Apart from that, the cost of living in Canada has also increased, thus making paying for expenses such as rent, mortgage, groceries, and other essential services such as daycare left with almost nothing to put aside for a rainy day.

How You Increase Your Savings For Retirement

While saving for retirement can be a challenge, here are some tips to help you out;

Consider your financial status

First, you need to know your financial capability and compare it to another person with the same earnings. If you have a credit card or other debts, you’ll want to settle them first.

Use RRSP accounts

If you are employed fully, you likely have an RRSP. In this type of retirement scheme, the company contributes the same amount you contribute for your retirement.

Invest your money in high-interest savings accounts

If you want to grow your money faster, get a high-interest savings account (HISA). This can help you on your way to building your retirement funds.

Choose a Tax-Free Savings Account

Tax-free savings accounts allow you to deposit funds and watch your money grow. Compared to other investment options, there is no limitation on when you need to withdraw money. They also don't charge any fees for premature withdrawals.

Conclusion

The golden rule of saving for retirement is to start saving without hesitation. While your savings might seem inconsequential, they will grow in the long run. Take advantage of different types of accounts and start building your funds. That way, you can have enough money to enjoy your retirement.