Are you approaching 44 years of age and wondering how your RRSP balance stacks up?
If so, you’re ahead of the curve. Most Canadians don’t start thinking about how far their retirement savings are likely to take them until they approach retirement. In many cases, they find that they are approaching retirement age with not nearly enough saved. By keeping on top of such things in your forties, you give yourself a good chance of making it to retirement in good shape. In this article, I will share the average RRSP balance of Canadians by age 44, so you can see how you stack up.
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$40,000 to $70,000
According to various online sources, the average RRSP balance for 44-year-old Canadians is between $40,000 and $70,000. Estimates vary from source to source, so I’m giving this range instead of providing one specific figure. Taking into consideration the $200,000 that most Canadians have in their RRSPs by age 65, this imprecise range of values does help us to gauge how far along Canadians are with their savings goals by age 44.
How much is $40,000 to $70,000 from the perspective of somebody saving for retirement?
Let’s assume that the average amount that a Canadian citizen has in his/her RRSP at 44 is $55,000, as this is the midpoint of the range we have.
When you hit age 44, you’re roughly 20 years from the typical Canadian retirement age. If you have $55,500 and compound it at 10% for 20 years, you end up with $370,000. That’s about half of what financial advisors estimate the average Canadian needs to retire on ($750,000), although that amount will be higher in 20 years due to inflation. If you keep adding to your retirement savings at a rate of $10,000 per year and realize a 10% annualized return on your investments, then you definitely stand a chance of making it to retirement in good shape.
Good investments for an RRSP
If you want to compound and grow your wealth tax-free for a long time, it’s a good idea to start investing your money. Stocks in stable, established, blue chip companies can be good bets here.
Consider Alimentation Couche-Tard Inc (TSX: ATD) stock. It’s a Canadian retail/convenience store stock that is currently trading at a relatively cheap level due to some poor earnings releases earlier in the year and management’s controversial bid to buy out 7/11. The poor earnings releases were likely one-time factors, and the 7/11 deal, while costly and requiring debt, probably won’t go ahead due to opposition from the Japanese government. So, both of the concerns facing ATD stock this year appear overblown.
Alimentation Couche-Tard has many characteristics that make it a good long-term holding. First, it has good profitability metrics, including a 20% return on equity and a 10% return on capital. Second, it has grown steadily over the years, with earnings compounding at 14.4% over a 10-year period. Third, the company has a prudent approach to financial management, investing heavily in expansion over the years by investing retained earnings rather than by going into debt. All of these factors add up to an enterprise that has grown and compounded at admirable rates over the last decade. For my money, it’s a good RRSP holding.
