Start Saving for Retirement at 45: A Practical Plan

Saving for retirement at age 45 gives you roughly two decades to build toward a typical retirement at 65. Where you start matters. Financial advisers often suggest different benchmarks: by age 40 some recommend having roughly two to three times your annual income saved, while by age 45 many suggest aiming for the equivalent of about four times your annual income. If you are at or below those levels, you may be on track; if not, you’ll need to accelerate your plan.

Some people view age 45 as plenty of time to catch up—especially if costly childcare years are behind them. Others worry they missed the compounding advantage of earlier saving. The good news is that deliberate, focused action in your mid-40s can still put you on a path to a secure retirement.

Recent studies indicate most Canadians over 35 have started saving for retirement, yet many lack a formal plan. A large share of savers aren’t confident about how much they will need in retirement, which is understandable since retirement income needs depend on lifestyle, health, and housing choices.

Saving for retirement

A conventional rule of thumb popularized by personal-finance books is to save and invest about 10% of gross (pre-tax) income. The idea is simple: pay yourself first by setting up automatic contributions to retirement accounts. For many people, that consistent habit leads to meaningful savings over time.

But the 10% rule is not one-size-fits-all. Workers who participate in generous defined benefit pension plans—such as some nurses, teachers, and public-sector employees—already have a significant portion of retirement income provided, so they may not need to save as much personally. By contrast, those without employer pensions must rely more heavily on personal savings and investments.

Couples in their 20s and 30s who are paying for childcare and facing higher housing costs often devote less to retirement during those years. That’s reasonable if it’s a temporary trade-off, but it does mean those in their mid-40s may need to redirect extra cash flow toward retirement to make up for lost time.

The “rule of 30” for retirement savings

The “rule of 30,” popularized by retirement expert Fred Vettese, offers a flexible approach: a household should aim to allocate about 30% of gross income to three major commitments—childcare (when needed), mortgage or housing costs, and retirement savings. The balance among those three will shift over time: childcare costs decline, mortgages are paid down, and retirement contributions should increase.

Under the rule of 30, a younger couple might direct a small share (for example, 1%–5%) to retirement while childcare and mortgage payments consume much of the 30% allocation. As those temporary expenses drop, retirement savings should rise accordingly, and then increase again once the mortgage is paid off—ideally several years before retirement.

Mortgage, daycare and retirement savings — a sample breakdown

Below is an illustrative table showing how these components might shift by five-year age bands while keeping total expenditures near 30% of gross income:

Ages	Mortgage payments	Daycare expenses	Retirement savings	Sum
30 to 35	20%	7%	3%	30%
36 to 40	22%	2%	5%	30%
41 to 45	22%	0%	8%	30%
46 to 50	18%	0%	12%	30%
51 to 55	15%	0%	15%	30%
56 to 60	8%	0%	22%	30%
61 to 65	0%	0%	30%	30%

Notes: These figures are illustrative five-year averages. Individual circumstances will vary.

Is 45 too late to start saving for retirement?

The rule of 30 gives some leeway to younger households, but it doesn’t excuse inaction in your 40s. If you’re 45 and have little saved, it’s time to prioritize retirement contributions. Avoid piling on new discretionary obligations—such as financing an expensive vehicle or recreational vehicle—that reduce the money available to rebuild your retirement balance.

Starting at 45, you should aim to save and invest well above the baseline 10% of gross income. Many planners recommend increasing contributions into your 50s—targeting a sustained savings rate of 15% to 20% or more—so you can catch up. By age 50 and beyond, sustained higher contributions and disciplined investing are essential to reach midlife savings targets often expressed as multiples of annual income.

When the mortgage is paid off, those freed-up dollars should be redirected into retirement accounts to further boost your nest egg. The earlier and more consistently you ramp up contributions, the easier it is to rely on compound growth rather than attempting to make up deficits with high-risk investments.

Starting to save in your 40s: practical steps

If you’re in your 40s with limited retirement savings, you can still make meaningful progress. Begin by assessing how much extra cash flow you can allocate to retirement each month. Then create a prioritized list of financial goals—retirement, debt repayment, a new car, travel—and decide how to sequence them.

Consider these practical priorities:

Optimize registered retirement savings: Use tax-advantaged retirement accounts strategically. Contribute enough to make the most of tax benefits, particularly if doing so lowers your taxable income meaningfully.
Maximize tax-free savings accounts: Work toward catching up on any unused tax-free savings room and then contribute the annual maximum to shelter investment gains from tax.
Prioritize short-term and non-retirement goals: Be realistic about which non-retirement goals are urgent. Pay down high-interest debt first, then attack mortgage principal or set aside funds for planned purchases while keeping retirement a top priority.

Committing to save 15%–20% of gross income, or more if possible, can convert modest balances into substantial retirement funds over 15–20 years. The key is disciplined, sustained contributions and a diversified investment strategy aligned with your risk tolerance and time horizon.

It’s not too late

Midlife is a common moment to reach out for professional advice. Many people discover they need a clear roadmap to identify gaps, set realistic targets, and prioritize actions. Research shows that simply having a financial plan improves the likelihood of achieving better outcomes, because a plan creates accountability and a sequence for decisions.