I’m 45 and just beginning to save for retirement seriously. I’ve heard conflicting advice about how much I should have saved by now. Some say I should have one times my annual salary, others say two times. What’s a realistic savings target for someone my age? And how can I catch up if I’m behind?
We asked Angela Fennelow, CFP, financial planner, Sun Life and CEO of Fennelow Financial Solutions Inc., to answer this one.
At 45, you’ll want to look at savings strategies that are going to maximize tax efficiencies now and in retirement to maximize growth, Ms. Fennelow said.
“The adage of paying yourself first may be simpler to implement than setting a target amount as a function of your annual income,” she added.
First, take a look at a few things: your annual income and your budget, your current lifestyle and your desired lifestyle in retirement.
“You’ve still got time to invest,” she said, “and it is prudent to look at your budget and save as much as you can afford without making your life miserable right now.”
She advised taking advantage of retirement savings matching programs – if available through your employer – considering RRSPs and TFSAs and setting up regular weekly, bi-weekly or monthly savings contributions through pre-authorized withdrawals. To see where you’re at now in relation to your goals, meet with an adviser and get a plan in motion.
“While I’m not sure where the one times or two times salary idea came from, it does relate nicely back to the ‘pay yourself first’ concept,” she said.
She pointed out that, even for a person earning at the lower end of the pay scale, the benefits over time are worth it. “For example, with $35,000 times 10 per cent over 25 years, you’ll have saved $87,500. Considering factors like increasing salary over time, growing contributions and the performance of your retirement savings investments, your savings could reach one to two times your salary.” However, she cautioned that it’s crucial to understand this is not a one-size-fits-all solution.
Ms. Fennelow suggested comparing your situation to the 2024 Statistics Canada findings for average assets and debts by age group. “I find it hopeful to see the increases in average savings for those 45 and up, compared to 35 to 44s, and it’s not surprising. Middle age is usually when people have established careers and savings patterns have built momentum.”
She also noted that averages don’t always tell the whole story: The median figures on the Statscan table show half the people in the age group have less than $128,000 in retirement savings and half have more.
Additionally, if you’re a parent wanting to help with your children’s postsecondary education costs, setting aside money in a family RESP for them can help keep your retirement savings on track. When they go to college, university or trade school, the tuition bills will start to roll in. “And your children benefit from the government grants and bonds they contribute to the RESPs,” Ms. Fennelow added.
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.