How much do I need to save for retirement?

When I first started working in the financial industry over 3,000,000 minutes ago, one of the common rules of thumb was that you needed to save 20% of your income for your retirement. I immediately began to question this advice as it seemed too simple to implement, not to mention an extreme generalization.

Imagine if you came to see me at age 45 and you asked, “Marc, how much do I need to save if I want to retire at 55,” and I answered with “Well, you should probably save 20% of your income.” Your response might be something like, “Okay, and how much do I need to save if I want to retire at 65,” and I answered with “Ummm, you should keep saving 20% and you’ll be okay.”

A few issues that may pop up in your head might be:

  • Why am I paying this guy to be my advisor?
  • Would the answer be 20% if I told him I wanted to retire at 75 as well?
  • Does he not know I have a mortgage to pay?
  • Did he even listen to my questions?

Personalize your retirement plan

Rather than using age-old rules of thumb, I highly recommend personalizing your plan by focusing on how much you anticipate spending in retirement. If you know how much you’ll be spending every year, you can determine how much you need in your retirement pot by the time you retire.

Of course, the financial industry has a rule of thumb for this as well. It states that you’ll spend 70% of your annual working income when you retire. Once again, red flags immediately shot up with this strategy.

Meet Bob and Julie – a case study

Imagine Bob and Julie each made $100,000 per year. By rule of thumb, each of them can expect to spend $70,000 per year once they are retired.

Bob’s idea of retirement includes:

  • Being his grand-kids’ personal Uber for all their activities
  • Fishing
  • Attending the Brier every year

Julie’s idea of retirement includes:

  • All-inclusive 5-star winter vacations in Mexico
  • Buying the sports car she always wanted
  • Paying for her grandson’s AAA hockey

These retirements look entirely different. To tell each of them that they’ll spend $70,000 per year in retirement is irresponsible. Bob might be able to live off $50,000 per year which would allow him to retire many years sooner. On the other hand, Julie’s retirement will likely cost her more than $70,000 per year, so she’ll run out of money if she doesn’t put more away or work longer.

The moral of the story

Use your own numbers. You need to determine at what point you would like to retire and how much your lifestyle will cost you in retirement.

E.g., I would like to retire at 60 and spend $80,000 per year until I’m 70 as I will be doing more travelling. After age 70, I’m okay to spend $50,000 per year until I pass away.

By building out your own plan, you can determine how much money you need to be saving today so that you can achieve your retirement goals of tomorrow. Watch this two-minute video, Am I on Track to Retire?, for more tips on reaching your retirement goals.


Marc Winnipeg Financial AdvisorMarc Sabourin is a Winnipeg based Financial Advisor and Retirement Specialist with Harbourfront Wealth Management. His focus is on helping pensioned employees achieve their retirement goals. He draws on his real-life experiences to explain strategies that are often presented as intricate. He believes financial literacy is an integral part of one’s financial well-being and his goal is to make learning about these topics fun and enjoyable.