Here's the Average RRSP Balance at Age 40 in Canada

Here’s the Average RRSP Balance at Age 40 in Canada

The RRSP can be a great vehicle for saving and investing. And while Canadian retirement savings may look impressive, there is so much more work to do.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 18, 2024 7:00 pm EDT

As of 2024, the average Registered Retirement Savings Plan (RRSP) balance for 40-year-old Canadians stands at around $103,000. While this figure may seem respectable, many are beginning to realize that it might not be sufficient for a comfortable retirement.

As Canadians approach retirement age, costs associated with living, healthcare, and potential lifestyle choices can add up quickly. With experts suggesting that having approximately $1 million saved for retirement is ideal, the current average could leave a considerable shortfall for many.

RRSP Canadian Registered Retirement Savings Plan concept — Source: Getty Images

The problem

This average RRSP balance poses a challenge, especially considering that retirement expenses often exceed expectations. Factors like inflation, increased healthcare needs, and unexpected emergencies can put a strain on savings. Furthermore, many Canadians may plan to maintain a certain lifestyle in retirement, which requires more substantial savings. The reality is that relying solely on RRSP funds may not provide the financial freedom desired during retirement years.

To bridge this gap, Canadians can adopt various strategies to boost their RRSP balances. Increasing contributions, especially when combined with employer matching, can make a significant difference over time. Exploring other investment vehicles, such as stocks or mutual funds, can also lead to higher returns than those offered by traditional savings accounts. The power of compound interest can work wonders, thus making it crucial to start investing early and regularly to maximize retirement savings.

Consider Sun Life

One strong investment choice is Sun Life Financial (TSX:SLF) on the TSX, which has shown impressive earnings momentum. In the first quarter of 2024, Sun Life reported an underlying net income of $875 million, reflecting a healthy growth trajectory. Kevin Strain, the company’s President and CEO, stated on earnings, “We delivered on our Client Impact strategy by advancing our asset management and insurance businesses,” highlighting the company’s robust performance in a competitive market. With strong fundamentals and a commitment to driving shareholder value, investing in SLF can be a wise choice for Canadians looking to secure their financial futures.

In fact, the stock still looks quite valuable, offering a 4.3% dividend yield as of writing, as well as a trailing price/earnings (P/E) ratio of 14.2. Shares are also up 10.3% at writing, showing that even in this last volatile year, the stock has performed quite well. And that should certainly give investors further confidence about the long-term future of this dividend stock.

So while the average RRSP balance for 40-year-olds may sound decent, it often falls short of what’s needed for a comfortable retirement. Yet by increasing contributions and investing in solid opportunities like Sun Life Financial, Canadians can work towards building a more secure financial future.

Bottom line

In a nutshell, while the average RRSP balance for 40-year-old Canadians sits at around $103,000, it’s clear that many may need to step up their savings game to enjoy a comfortable retirement. With costs rising and experts suggesting a target of about $1 million, it’s essential to explore ways to boost those savings, whether through increased contributions or smart investments like Sun Life Financial (SLF) on the TSX. So, if you’re looking to secure your future, keep an eye on those investments and make every dollar count!