Are you 54 years old and unsure how much money you should have saved in your Registered Retirement Savings Plan (RRSP)?
If so, you should know that the precise sum depends on your personal financial circumstances. A person’s retirement income needs vary dramatically with his or her expenses. A widowed retiree taking care of her grandchildren in Toronto has far higher income needs than one spouse in a married couple living in Newfoundland with no kids.
Nevertheless, this being a Canadian personal finance website that attracts a fairly representative audience of adult Canadians, I wouldn’t be assuming too much if I said that your income needs are probably similar to those of the average Canadian. With that it mind, I will share an estimate of the average RRSP balance at age 54, with the aim of helping you gauge how you measure up.
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About $100,000
Although we can’t say the exact amount that the average Canadian has in his/her RRSP at 54, we can say that the amount is likely close to $100,000. This can be inferred from a few facts:
- Most sources available online put the figure for Canadians in the 54–65 age bracket between $90,000 and $110,000.
- Edward Jones – a reputable financial advisory company – puts the averages for the 55–64 and 65-plus age brackets at $100,000. Peoples’ retirement savings tend to plateau in the early years of retirement and start declining after 65. This is consistent with the savings at age 54 being about $100,000.
- Edward Jones further reports that the average for the 45–54 age bracket is $70,000, and peoples’ wealth tends to increase from 45 to 54. So, we’d expect Canadians to have considerably more than $70,000 by age 54.
I should name one reputable source that might conflict with the estimate above: Statcan. Statcan’s most recent CANSIM 205-0002 data table showed $190,000 in private pension assets for 54–65-year-old single Canadians. It showed $250,000 for economic families with breadwinners the same age. These figures are higher than the estimate above.
However, when I looked into it, I noticed that the footnotes to Statcan’s data table mentioned at least four types of pensions apart from RRSPs, and alluded to there being more. So, I feel fairly confident in asserting that the average RRSP balance is close to $100,000.
How to invest your RRSP
If you feel like your RRSP balance is a little short of what you want it to be, you should invest your RRSP money. Investing, when done wisely, increases your account value over time. Index funds tend to be great choices here.
Consider the BMO Canadian Dividend ETF (TSX:ZDV) for example. It’s a Canadian ETF that – as its name implies – holds dividend stocks. The stocks held in ZDV’s portfolio are banks, utilities, and energy companies – in other words, the types of companies that tend to offer significant dividend yields.
Dividend funds like ZDV offer many advantages over individual dividend stocks. First, they are professionally managed, sparing investors the chore of researching companies. Second, they are highly diversified. Third, they tend to have low fees. ZDV itself has 55 stocks and a relatively low 0.39% management fee. Overall, it’s a worthy RRSP holding.
