Canadians now expect to need $1.7M in order to retire: BMO survey
Canadians now believe they need $1.7 million in savings in order to retire, a 20 per cent increase from 2020, according to a new BMO survey.
The eye-watering figure is the largest sum since BMO first started surveying Canadians about their retirement expectations 13 years ago. It's also a drastic increase from the $1.4 million in savings Canadians expected to need for their nest eggs just two years ago.
The results reflect Canadians' concerns about current economic conditions, particularly inflation and higher prices, said Caroline Dabu, head of wealth distribution and advisory services for BMO Financial Group.
"If you look at the average Canadian, they're feeling the rising inflation costs," said Dabu.
"And so, not surprisingly, we are seeing that Canadians are feeling they absolutely will need more to retire."
Canada's annual inflation rate hit a four-decade high of 8.1 per cent in the summer of 2022 and has since fallen to 6.3 per cent as of December 2022. BMO Economics expects the country's CPI to decline to around three per cent by the end of the year.
The sharp increase to Canada's inflation rate in 2022 exceeded wage gains, eroding purchasing power for most families and heightening fears about the future. The BMO survey found that just 44 per cent of Canadians are confident they will have enough money to retire as planned -- a 10 per cent decrease from 2020.
But while the $1.7 million figure may sound overwhelming to working-age Canadians, Dabu said the number says more about the economic mood of the country than it does about real-life retirement necessities.
"Certainly when we're working with clients, we find that many overestimate the number that they need to retire," she said.
"It really does have to be taken at an individual level, because circumstances are very different ... But $1.7 million, I would say, is high."
While rising inflation may require tweaks to a retirement plan -- such as contributing slightly more to savings each month if you're a young worker, or making cash flow adjustments if you're nearing the end of your working career -- Dabu said these changes don't necessarily have to be drastic.
When it comes to retirement planning, Dabu said, knowledge is power. By working with a professional financial advisor and making a plan that encompasses individual circumstances and goals, Canadians can come up with their own retirement savings number.
"In the survey, we note that 53 per cent of Canadians didn't know how much they will need to retire," Dabu said.
"That increased confidence comes from knowing the exact number that I need to save for, and how I'm going to get there."
The BMO survey also found that approximately 22 per cent of Canadians plan to retire between the ages of 60 and 69, with an average age of 62.
Millennial and generation z Canadians are the most nervous about their ability to save and invest right now, the survey found. However, all age groups -- 74 per cent of survey respondents -- said they are concerned about how current economic conditions will affect their financial situation, and 59 per cent said economic conditions have affected their confidence in meeting their retirement goals.
The BMO survey was conducted between Nov. 4 and 7, 2022 by Pollara Strategic Insights via an online survey of 1,500. The survey's margin of error is plus/minus 2.5 per cent, 19 times out of 20.
This report by The Canadian Press was first published Feb. 7, 2023.
MORE Business News
BREAKING | Ottawa gives final approval for Rogers $26B purchase of Shaw
opinion | This is how much debt is normal for your age
Have you ever stopped to wonder how much debt is typical for your age?
opinion | What happens if you mistakenly get a larger tax refund?
Was your 2022 tax refund larger than you expected it to be? For many, this likely comes as a pleasant surprise. However, overpayments are likely the result of a mistake on your part or the Canada Revenue Agency. If you don’t amend your returns and the overpayment isn’t returned, you could end up in hot water.
How to claim Ontario's staycation tax credit on your tax return
People in Ontario who vacationed in the province last year can claim the trip on their upcoming tax returns, and here’s how to do it.
Thinking of an alternative lender? What it could mean for your mortgage
As economic conditions make it harder to qualify for a mortgage, Canadians are increasingly looking to alternative lenders, particularly amid interest rates. CTVNews.ca looks at why Canadians are seeking private lenders and the potential benefits and risks attached to them.
opinion | Tips on how to get the most out of your TFSA
The federal government's latest TFSA contribution limit increase took effect this year. On CTVNews.ca, personal finance contributor Christopher Liew outlines eight tips on how Canadians can get the most out of this popular savings account.
opinion | These are the new tax brackets for 2023
There are going to be some changes to Canada's tax brackets as we move into 2023. These changes could impact how you’re taxed when you file your 2023 income tax returns next year.
Canadian food bloggers share tips, tricks to make filling budget-friendly meals
Food bloggers and cookbook authors say meal-planning and simple recipes can help home cooks put together filling and tasty dishes on a budget -- an increasingly stressful challenge amid rising food prices.
Canadians fell for more home improvement scams in 2022, new report finds
The Better Business Bureau says Canadians fell for home improvement scams the most in 2022, in a report highlighting the riskiest scams and how much money they cost Canadians.