How Much Do You Really Need To Retire?

I’ve given you the challenge of thinking about what sort of retirement lifestyle you want to have. You’ve also determined, as well as you can, what income you may be likely to receive when you retire.

It’s quite frustrating to try to figure out how much money you will need for your desired retirement. How can you decide without having some idea of how much it will cost? Is dreaming of exotic vacations and travelling around the world on a 13-m yacht realistic? Or should you be thinking about reading a book on your deck? Many people have no idea what they’re even aiming for.

How Much Do You Really Need To Retire?

How much do you really need to retire?

Since we all like to compare ourselves to others to see where we stand, here’s what the average retiree spends for three different levels of retirement lifestyles. (Sources: BMO retirement survey and the Government of Canada).

Basic – Low Budget

Canada makes sure that seniors don’t live in extreme poverty. A 65-year-old couple who each receive average CPP payments ($640.23 per month) as well as Old Age Security and Guaranteed Income Supplement would receive a little over $32,000 per year. A single 65-year-old would get just over $19,000.

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This amount covers bare-bones basic needs: a modest paid for house or rent for a one-bedroom apartment in a smaller city or town, one older vehicle or public transit, home-prepared meals, typical health and dental costs and low-cost entertainment and recreation – and not much spare cash for indulgences.

Many seniors live this frugally and it doesn’t have to be dreary. Not everyone has the desire to travel or play golf. Low-and no-cost recreation includes hiking, walks in the park or beach, puttering around the house and yard. There are organizations, clubs and guilds for every conceivable interest that welcome new members and have little or no cost. Or, you can even take in pricey entertainment if you volunteer at certain venues.

You don’t need any savings at all for this lifestyle, but this modest budget does require careful planning and prioritizing (especially for singles).

Middle-class retirement

Most Canadians desire more than just the basics. Many retirees want to spend time doing such things as a moderate amount of travel, pursuing pricey hobbies, eating out at restaurants, and other entertainment. Many maintain vacation cottages or winter homes in warm places. Senior couples who enjoy different activities are more likely to own two cars.

According to BMO, median spending by a couple over 65 is about $57,600 a year, and average spending is about $42,000 – $72,000, assuming no debt and a paid for home.

Related: A financial assessment for your retirement

Assuming a couple receives about $32,000 a year from CPP and OAS and have no employer pension, they’ll need a nest egg that can support an additional $10,000 to $40,000 a year in extra spending, plus inflation adjustments. Financial planners suggest that you need retirement savings that amount to 25 times your desired retirement income (excluding CPP and OAS) if you want to keep spending that much for the rest of your life. So for a middle-class retirement, you need a nest egg of $250,000 to $1-million.

A single retiree doesn’t just cut that amount in half. S/he needs about $30,000 to $50,000 for a middle class lifestyle and savings of $275,000 – $775,000.

Deluxe retirement

Here, the fundamentals are the same – paid for house, two cars, vacations, restaurant meals, etc. – but the house is higher end, the cars are luxury, and the vacations more exotic. These retirees are more likely to own a vacation or winter home, and there’s more money available for spoiling the kids and grandkids and giving to charity. You are leading a deluxe life if you are spending $100,000 or more a year.

If you don’t have an employer pension, you’ll have to be a millionaire to afford it. An additional $70,000 (to top up CPP; OAS is likely to be clawed back at this income) means you need a $2.2 million plus nest egg.

(An exception here is if you and your spouse had long careers as public employees. Your combined public sector indexed pensions when you retire will probably pay about $100,000 a year plus inflation adjustment.)

Retirement scenario What you’ll get Annual cost per couple Annual cost for single       What you need to save
Basic no-frills -Rent 1-bedroom apt

-Public transit

-home-cooked meals

-typical health/dental costs

-few extras

$32,000 $19,000 Nothing
Middle-class -own average house/condo

-one or two cars

-annual vacation

-occasional dining out

-active hobbies

$42,000 –


$30,000 –


$250K-$1M (c)


$275K-$775K (s)

Deluxe -large house/luxury condo

-2 luxury cars

-regular exotic travel

-fine dining

-upscale memberships

$100,000 + $75,000 $2.2 million + (c)


$1.4 million + (s)


*All savings amounts assume retirement at 65 and no private pension.

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  1. Rosemary on December 30, 2015 at 8:30 am

    Thank you for this. First it clarifies what BASIC supports there are for seniors in Canada which is better than what is portrayed on FB so I feel a little better now about how Canada treats seniors. Secondly, I am pleased to see I am solidly in the middle class which is where I have always been so that is encouraging as well.
    Not too pleased to hear about the public pension amounts. There should be a reasonable cap on public pensions. Using this guide, they are upper middle class folk and something isn’t quite right about that positioning. I know they work hard but so do most of the rest of us.

    • Dave on July 18, 2017 at 9:12 pm

      Those “gold-plated” public pension plans aren’t as gold-plated as you might think. First, the employee is required to contribute a very large portion of their income to those plans (reducing their take-home income and ability to save money after tax). And remember, public-sector salaries are generally below the private sector (especially where I live). And second, the contribution to the pension plan wipes out the RRSP contribution amount. Meaning that those people effectively can’t contribute to an RRSP. But I doubt all the trolls on this site really care about the facts. It is more fun to simply complain about all the public sector “fat cats”. And yes, I am one of them (fat cats, that is).

      • rg on December 30, 2017 at 7:29 pm

        Hooray! You are right on, public sector employees pay for their retirement benefits through their working years.It’s like a mandatory retirement contribution.They cannot usually max out on RRSPs, their take home is lower.

      • BMWIan on September 8, 2018 at 5:29 am

        Government pays are for the most part considerably larger than those of the private sector. The benefits are considerably better for the most part. I understand that they pay more to have the pension. But lets be clear here – their pay levels facilitate the payments. Also, the payments don’t fully cover the costs. The total payments don’t come near covering the costs. Only the government can afford to allow this to occur. Our future taxpayers will bear the cost.

    • Rob on December 20, 2017 at 10:00 pm

      Everyone should be able to participate in a plan that pays a decent pension.

      Many private companies clearly can provide better pension plans than they do, but they choose to pay out millions to the CEOs, VPs, CFOs, contractors/consultants etc. instead.

      We shouldn’t fall into the trap of pulling down those who do have decent pensions. We should be fighting to get the same as them.

      • rg on December 30, 2017 at 7:34 pm

        If you don’t have a contribution plan with your employer save and invest for your own retirement.Strapping employers with yet more freebies for those that can’t plan and implement for their own retirement will eventually be the demise of decent jobs in Ontario and Canada.

  2. Peter on December 30, 2015 at 8:49 am

    Rosemary is quite correct about the gold-plated public pensions. Every time a gov’t tries to update / rationalize these ‘luxuries” they cave at the least union reaction.

    • Rob on December 20, 2017 at 10:05 pm

      Peter, I don’t know what your job is or who you work for, but if your pension plan is not as good as those in the public sector, then we should be fighting to get you the same as them.

  3. Mintycake on December 30, 2015 at 10:13 am

    The lesson of this article is, work for the government. LOL. But seriously, you also have to figure in health care costs as you age. Sure you can go to a seniors home for care even on basic retirement amounts but is that where you want to end up? Luxury retirement homes in Ontario will run you $4000 a month for a couple. This article is a good one but leaves that bit out (or assumes you sell the home to pay for retirement home, but what if one out of the couple needs care and the other wishes to stay in the home?)

    • boomer on December 30, 2015 at 1:00 pm

      @Mintycake: You make a good point. The statistics usually only take into account basic health care such as meds (most of which a largely covered by a typical drug plan), dental and eye care. My parents sold their house to move into a retirement home that I wouldn’t really call luxury, and pay over $4000 a month. The question has come up as to what would happen if my 92 year old father should have to go into an extended care facility. It’s tough.

  4. Tom on December 30, 2015 at 12:52 pm

    The estimates should be rough, i planned my retirement in detail but i found out that on my first year of retirement, there was an adjustment , by the end if the first year, i was spending less on some items than i estimated, for instance car expenses went down, as i didnt drive as much, but travel went up because i had more time. So retirement is a continuous transition from one spending mode to another.

    • boomer on December 31, 2015 at 10:26 am

      @Tom: You are right in that you can only estimate your expenses. But, really, retirement is just another stage in your life. We made adjustments when we bought our first house, had our children, maybe there was a job loss or critical illness or the roof blew off your house. People are remarkably adaptable. The key is to plan as best you can, then make adjustments along the way as reality sets in.

  5. Robert on December 30, 2015 at 10:53 pm

    “There are organizations, clubs and guilds for every conceivable interest that welcome new members and have little or no cost. ”

    I’d like to add a caveat to this. I am finding that for the most part, most activities of a social nature are not available during the time one suddenly has free. Things are mostly on an evening and weekend schedule. So, if you wand to fill the hours of your old 8-6 grind, you may have to look far and wide or start your own.

    • Beth on December 31, 2015 at 3:39 pm

      I have the opposite problem — many of the activities and volunteer opportunities I’d like to join happen during the day. Sadly, I’m not a stay at home parent or retiree!

      I’m not worried about finding activities when I’m retired. I’d like to find activities while I’m working! 🙂

  6. Big Cajun Man (AW) on December 31, 2015 at 7:05 am

    Yes, you should work for the government if you want to have a nice retirement (or a Government based organization like Hydro One, or other Quasi-Crown Corps). The Pension is the key part of the retirement. I am lucky in that I work for the government, not sure if I was going to be able to retire, but thanks to some luck, I can retire, I am working on what type of retirement it will be.

    Robert, it is interesting because my Church runs a bunch of things for the parish and they are usually run during the day, because most of the folks running them are retired (so you might find a few things to do during the day).

  7. SST on January 2, 2016 at 10:21 am

    After reading ‘The Real Retirement’ a couple years ago, I researched the current retirement reality in Canada. The average retiree household has a bankroll of $300-350,000. And the “senior” demographic contains the least amount of poverty. In other words, don’t listen to the banks and financial advisors declaring you absolutely need a million dollars to retired or else you’ll be eating cat food for 30 years, so best to let them handle your money (for a fee). Fact is, over a 40-45 year working life, today’s retiree could have realistically amassed their $300k by saving cash only — no financial sector required.

    One thing not mentioned was that current retirees have a higher probability of having a private pension than future retirees. Their “low” savings could be a result of knowing they didn’t need to save that much due to being subsidized. I’ll have a government pension when I retiree which will support a ‘basic no-frills’ retirement; my personal savings & investments are basically for all the extras (or basics, should the government fail).

  8. Ian on October 5, 2017 at 4:33 am

    SST is very correct to comment on the current retirees having a much greater likelihood of having a private pension plan. I believe that this will create a bit of a crisis for future governments and that the tax implications for senior pensioners with larger private pensions will be impacted – perhaps more than we could currently imagine. Remember that the current governments are taxing and spending at a significantly increased rate.

  9. JP Beaudet on December 13, 2017 at 11:37 am

    Thanks for the informative article. Although we both come from working class families my wife and I are in the Deluxe category our recipe was to spend less than we earned , know exactly where we were spending, invest wisely our savings and last but not least having the luck to rely on two defined benefit pension plans. We are still spending a whole lot less than we could afford but I guess old habits die hard. Unfortunately it seems to me our recipe is no longer fashionable and I fear many will have to deal with the no frill version.

    • henry on December 20, 2017 at 7:05 am

      JP….I would not count 100% on the defined benefit plans. I had one but when the company was bought by US company. The layoffs(25% of staff and still laying off people based on quartly results rumor target is reduce staff by75% end results, some jobs shipped to US call centers operations centers) started starting with people on the defined benefit plans. The consent to retire at 55 was removed so you could still retire but you would lose 60% of the pension amount. I took the lump sum out since the plan was only 80-85% funded and I didn’t trust the US company funding it.

      • JP Beaudet on December 20, 2017 at 8:43 pm

        Thanks for your comments Henry, You did well to take the money and run given the circumstances. Defined benefit plans are as good as the sponsor’s financial health. With respect to our situation if both of our defined benefits plans went belly up though unforeseeable events we would be downgraded from Deluxe to Middle-class . I agree with you to count exclusively on such plans is not entirely risk-free hence the need to save and invest over and above.

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