Retirement numbers have a way of getting bigger every time someone publishes a survey. A recent BMO 2026 survey put the average amount Canadians think they need at about $1.7 million. Yet what matters is the spending your savings need to cover after pensions and other dependable income arrive. A paid-off homeowner and a renter can have very different answers, even with the same investment balance. Here’s a practical example that makes the difference visible.
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Start with the gap
Suppose a household wants $60,000 a year to spend and expects $30,000 after tax from public and workplace pensions. Its investments need to provide another $30,000 after tax. If that entire gap comes from a Registered Retirement Savings Plan (RRSP), and the effective tax on those withdrawals is 20%, the household needs $37,500 in gross withdrawals. Taking an initial 4% from savings would imply a $937,500 portfolio. At a more cautious 3.5%, it would imply about $1.1 million.
If the same $30,000 comes from an eligible Tax-Free Savings Account (TFSA), the corresponding figures are $750,000 and about $857,000. The spending is identical, but the account tax treatment changes the required balance substantially.
BMO
Bank of Montreal (TSX: BMO) can provide dividend income within the long-term portion of that plan. Its banking, wealth-management, and capital-markets businesses offer several ways to earn money. However, improving profitability in its U.S. operation remains an important part of the investment case.
In its fiscal third quarter, BMO earned $3.96 per share on an adjusted basis, compared with $3.23 a year earlier. Its $1.71 quarterly dividend used about 43% of adjusted earnings. Reported earnings were lower because charges associated with business exits affected the quarter.
That payout calculation suggests the dividend has room within current operating earnings. It doesn’t mean BMO can finance an entire retirement by itself. At its recent price of $232.10, the annualized $6.84 dividend yielded about 3%. A $100,000 budget bought 430 whole shares, costing $99,803 and generating $2,941.20 annually before tax if the payment stayed unchanged.
That’s useful income, but far below our household’s $30,000 spending gap. A retirement portfolio needs a mix of income, growth, and planned withdrawals. Understanding dividend investing includes knowing when dividends are only one part of the answer.
Considerations
BMO’s purchase price was about 14.7 times earnings. That’s a rough valuation check, not a full-year forecast. It supports a measured position, particularly as bank earnings can weaken when customers struggle to repay loans.
The retirement example also changes when spending changes. An extra $500 a month means another $6,000 annually. At a 4% initial withdrawal assumption, that’s $150,000 more in tax-free savings, or $187,500 more under our assumed RRSP tax rate. Housing costs deserve more attention than a national average.
A TFSA can help manage irregular expenses without adding taxable withdrawal income. Keeping a cash reserve also reduces the need to sell stocks after a sharp decline. Another difference is flexibility. Reducing travel spending during a weak market is easier than reducing rent or a required debt payment. A plan with fewer fixed expenses can handle temporary investment setbacks more comfortably, even when the starting portfolio is smaller.
Bottom line
The useful retirement number is the one that supports your spending after tax. In this example, the same lifestyle requires very different balances depending on the account. BMO can help fund part of the income, but the spending gap, taxes, and room for setbacks determine whether the whole plan works.
