Christopher Liew: How much should you have saved to retire at 60?

Two seniors are seen sitting on a bench in this stock photo. (Monica Silvestre / Pexels.com)

Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

For the past couple of decades, age 65 has served as an important milestone for working Canadians. It’s the year when all of your hard work and savings pay off, allowing you to finally relax and retire.

What if you want to retire at 60, though? When you’re younger, a five-year difference may not seem like a lot. However, those approaching 60 know just how valuable time is, and having an extra few years to enjoy the fruits of their labour and spend quality time with family and friends is an enticing prospect.

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Below, I’ll walk you through everything you need to know to retire at 60.

What does it actually cost to retire?

Data from Statistics Canada’s Survey of Household Spending shows that the average Canadian household spent $76,750 per year in 2023.

In simple math, this means that if you retire at 60 and expect to live to 82, you would spend $1,688,500 (not accounting for inflation) to maintain the average cost of living over 22 years for the average household.

That being said, some spending categories naturally decline in retirement - especially work-related costs such as commuting, paying for parking, and daily lunch/coffee breaks. By age 60, most retirees’ children are also grown (or at least older), eliminating child-care and daycare costs.

Also, by this age, you may also have a paid-off home, eliminating a monthly mortgage payment. In some cases, the home may have significantly increased in value, giving you the option to sell the home for a profit and downgrade into a smaller home, a retirement community, or fund a rental lifestyle. Some people even retire onto cruise ships!

Outside of most expensive urban centres, a reasonable annual target for retirement income for a household may fall in the range of:

• $40,000 to $50,000 per year for a modest lifestyle; or
• $55,000 to $70,000 per year for a more comfortable retirement (with more money allocated to travel, hobbies and discretionary spending).

These figures should also include extra room for unexpected health-care costs, home maintenance and emergency expenses.

How much should you have saved to retire at 60?

The answer depends heavily on your lifestyle, location, and other retirement income sources, but the number is likely lower than you think.

The first major factor is your life expectancy. According to Statistics Canada, life expectancy at birth is approximately 82 years overall, with women living slightly longer than men on average. More importantly, Canadians who reach age 60 today can reasonably expect to live well into their mid-80s or older. Retiring at 60 could mean funding anywhere between 25 to 30 years of living expenses.

You may have seen articles claiming you need $1 million to $1.5 million in personal savings to retire at 60. However, that figure is misleading because it assumes your savings need to cover all of your expenses for 22+ years with no other income. In reality, most Canadians will receive significant government benefits that cover a large portion of their retirement needs.

Rather than multiplying average household spending by 22 years, here’s a more practical way to think about it:

Ages 60 to 65: You’ll need personal savings to cover most of your expenses, since Old Age Security (OAS) isn’t available yet and early Canada Pension Plan (CPP) retirement pension is reduced. At $50,000 per year, that’s roughly $250,000 for this five-year bridge period.

Ages 65 and beyond: With CPP and OAS covering a significant share of your income, your personal savings may only need to top up $15,000 to $25,000 per year. A couple both receiving average CPP and OAS could receive roughly $35,000 to $40,000 per year in combined government income alone. Over 17 to 20 years, the top-up from personal savings amounts to roughly $255,000 to $500,000.

This brings a more realistic total savings target to somewhere between $500,000 and $800,000 for most Canadian households. That’s still a significant amount, but far more achievable than $1.5 million. For a single person, you can scale that down by about 40-50 per cent. Again, these are rough estimates for illustration. Your actual needs will vary greatly based on your specific situation.

These estimates also don’t account for the fact that your portfolio continues to earn investment returns throughout retirement. Your savings aren’t just sitting idle; even a conservative portfolio generates modest growth over time, which is exactly why the 4 per cent rule is a good rule of thumb.

Using the 4 per cent withdrawal rule as a reference, a $750,000 portfolio would generate about $30,000 in annual income. Combined with government benefits starting at age 65, that could comfortably support a $55,000 to $70,000 retirement lifestyle.

Retiring early requires solid planning and a tight budget

Ultimately, if you want to retire at 60, you’ll need to plan long ahead of time and make sure you have an airtight budget. You’ll not only be funding an extra few years of living expenses, but you also won’t be able to rely on OAS payments and will have to accept reduced CPP payments until you hit age 65.

To accomplish this, you’ll need to begin allocating additional money to your retirement fund in the years and decades approaching your goal retirement age. The earlier you start, the easier it will be.

Creating a solid budget for yourself is the best way to ensure you’re able to manage your income and expenses while also setting aside enough money for your retirement goals. It’s also important to make sure you’re revisiting and fine-tuning your budget each year to make sure it keeps up with rising costs of living, inflation, and unexpected expenses.

Read more from Christopher Liew:

• Christopher Liew: How much income do you require to become a homeowner in Canada?
• Is it smarter to renew your mortgage for 3 years or 5 years in 2026?
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