Whether you’re already retired, nearing retirement or decades away, persistent inflation can make you question whether you’re saving enough. Inflation reduces the purchasing power of your savings, so higher inflation means higher living costs and more money needed to preserve your current standard of living.
After the pandemic, Canada saw a substantial rise in inflation, climbing from about 2% in 2019 to a peak 12‑month rate of 8.1% in June 2022. By October 2023, the reported inflation rate had eased to roughly 3.1%. With living costs higher than many expected, some near-retirees are considering delaying retirement to boost savings. In a June 2023 Labour Force Survey, about 55% of people planning to retire but not yet fully retired said they would keep working if they could do so part-time.
When planning for retirement it’s important to review every potential income source: government benefits, employer pension plans and your personal savings and investments. How does your projected income compare to the average Canadian retiree, and what practical steps can you take now to strengthen your retirement nest egg?
The average Canadian retirement income
Data from the 2021 Canadian Income Survey show the average after-tax income for senior families was about $69,900 in 2021, while the average after-tax income for a senior individual was about $31,400. That works out to roughly $5,825 per month for a couple and about $2,616 per month for a single senior. Whether those figures are enough depends entirely on the lifestyle you want in retirement.
Your needs can differ greatly from the averages. For example, if you’re 35 and plan to retire at 65, estimate the monthly after-tax income you want in today’s dollars. Suppose you want $3,000 per month. With 30 years until retirement and an assumed inflation rate of 3% per year, that $3,000 in today’s dollars would be equivalent to about $7,282 per month in 30 years. Knowing that future target helps you assess how much you’ll need to save and where the money could come from.
Sources of retirement income: CPP, OAS and more
Starting retirement planning early gives you time to bridge any gaps and to take advantage of compound growth. In Canada, retirees typically rely on a mix of government income, employer-sponsored plans and personal savings. The main sources include:
| Retirement income source | How it works |
|---|---|
| Canada Pension Plan (CPP) |
|
| Old Age Security (OAS) |
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| Guaranteed Income Supplement (GIS) |
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| Employer-sponsored pension plan |
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| Personal retirement savings and investments |
|
Build retirement savings with RRSP contributions
The Registered Retirement Savings Plan (RRSP) remains a central part of many Canadians’ retirement strategies. RRSP contributions are tax-deductible and grow tax-deferred until withdrawal. For 2023 you could contribute up to 18% of your previous year’s earned income, to a maximum of $30,780. RRSP contributions can be made during the calendar year and during the first 60 days of the following year; for the 2023 tax year the contribution deadline was February 29, 2024.
RRSPs can hold a variety of investments, including public stocks, bonds, exchange-traded funds (ETFs), mutual funds and guaranteed investment certificates (GICs). Choosing the right mix depends on your time horizon, risk tolerance and other savings.
The benefits of all-in-one ETFs
Investors often look to the stock market to pursue growth that outpaces inflation. Exchange-traded funds are a popular choice because they can offer diversification, professional management and typically lower fees than comparable mutual funds, and they are easy to trade through online brokers.
All-in-one ETFs simplify portfolio construction by combining multiple asset classes—equities, fixed income and sometimes alternative assets—into a single fund. That reduces the need to manage and rebalance several separate holdings yourself.
As an example of target allocations for all-in-one ETFs as of October 31, 2023, the following breakdowns illustrate how different risk profiles allocate assets:
| Fidelity All-in-One ETFs | Conservative | Balanced | Growth | Equity |
|---|---|---|---|---|
| Ticker | ||||
| Equity | ||||
| Fixed income | ||||
| Crypto |
Given current inflationary concerns, younger Canadians planning for retirement may need more than government and employer pensions to meet future needs. Personal savings—in RRSPs, TFSAs and non-registered accounts—and investments such as ETFs can help supplement public and workplace income.
Further reading on investing
- Taking an active approach to ETF investing in Canada
- How many ETFs can Canadian investors own?
- Building a “core and explore” portfolio with an all-in-one ETF
- ETFs and RESPs: investing for education
- Buying ETFs in Canada: an ETF screener tool
Sponsored content disclosure
This article is a paid post and may highlight a client’s product or service. It was produced by MoneySense with input from freelancers and approved by the client.
An important notice regarding investments
Investing in ETFs may involve commissions, management fees, brokerage fees and other expenses. Some all-in-one ETFs may pay indirect management fees because they invest in underlying funds that charge their own fees. Management fees and other costs can reduce returns. ETF values change frequently; investors may experience gains or losses, and past performance is not a guarantee of future results.
Where an ETF holds a small allocation to alternative assets such as a bitcoin-linked product, that allocation can range from a small percentage of the portfolio and the portfolio may be rebalanced periodically if allocations deviate from their targets.
The information in this article is provided for general information only and does not constitute investment, tax or legal advice. Investors should evaluate strategies against their own objectives and tolerance for risk and consult a professional advisor as needed.