Have you ever wondered how your retirement savings stack up compared to others in your age group?
It’s a good question to ask. Although your actual retirement needs are personal and absolute, it doesn’t hurt to know how you stack up compared to your peers. This information can tell you whether you’re saving as high a percentage of your income as you ought to be. If you’re doing well compared to the average, you have a reason to be optimistic, even if your amount isn’t quite what it needs to be.
65 years old is a pretty common age for Canadians to retire. It’s when you are presumed to start taking your Canada Pension Plan (CPP) — though you can take it at any time between 60 and 70 inclusive. Also, it’s just a few years before the age at which Registered Retirement Savings Plan (RRSP)/Registered Retirement Income Fund withdrawals become mandatory (71). In this article, I will share the average RRSP balance at age 65 in Canada and discuss its implications.
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$129,000
According to Ratehub, the average 65-plus-year-old Canadian has $129,000 saved in their RRSP. The figure rises to about $160,000 if you include the Tax-Free Savings Account (TFSA). In total, the average retiree has $319,000 saved.
A note on who Ratehub’s survey sampled. It took a poll of Canadian adults and sorted them into age groups. The figure above is for “ages 65 plus.” This means it’s technically not the average for a 65-year-old retiree, but it’s the closest available figure. The figure for age 65 specifically is probably slightly higher, as peoples’ retirement savings decline starting around age 65, reversing the prior trend of rising in early/middle adulthood.
What does the average Canadian retiree’s RRSP balance tell us? Many Canadians will need generous pensions in order to truly retire. Although most Canadians retire from their “official” job on schedule, many have to take part-time jobs in retirement to make ends meet. $129,000 in the RRSP and $319,000 in total are inadequate sums. A $319,000 portfolio yielding 2.8% only pays out about $8,932 per year in dividend income. Unless you think you can time the markets and make gushing capital gains, you’ll need more than $319,000 to retire on.
One alternative
If you have more than $319,000 saved for retirement but not quite enough to quit working, one method you could use to make it work is to invest in a high-yield portfolio. I mean “higher-than-average” yield, not true junk bond stuff: outrageously high yields usually indicate a risky investment.
One stock you could consider for your high-yield portfolio is Royal Bank of Canada (TSX:RY). It is a Canadian bank with a 4% dividend yield. A $500,000 portfolio yielding 4% pays $20,000 per year. If you add CPP and Old Age Security to that, you might be able to cover all your expenses.
Royal Bank has distinguished itself with its stability. It was around during the Great Depression, the Savings and Loan Crisis, the 2008/2009 financial crisis, and the 2023 banking crisis. In none of these crises — all of which saw several banks collapse — did RY face the risk of going under. In many of these crises, RY did not even cut its dividend.
How has RY been able to achieve such stability? It’s simple: by playing it safe. Banking is the kind of industry where, if you take enormous risks, you eventually go bankrupt when market conditions turn against you. Some bankers take enormous risks because they can collect huge bonuses before their employer finally fails, but shareholders get wrecked when bankers prove incompetent. Royal Bank has avoided this kind of thing and has rewarded its shareholders by doing so.
