Picture two neighbours, Priya and Dan. Both are 55, earn around $125,000 a year, and plan to retire at 65.
Last month, Priya and Dan compared notes to see how much they need in retirement. While Priya spends $4,000 a month, Dan spends around $7,000.
While the annual income is similar, their retirements will look very different.
A person stands in front of several doors representing different U.S. stock options for Canadian investors.
How much money do Canadians need to retire?
According to Bank of Montreal’s annual retirement survey, Canadians think they need around $1.7 million in retirement, up from $1.54 million in 2024. However, 36% of survey respondents say they are unlikely to get close to this retirement number.
The retirement target also changes by region. In 2025, respondents in British Columbia said they need $2.2 million in retirement, while in Montreal it was around $1.5 million.
These gaps are tied to expenses related to housing and healthcare rather than salaries.
For decades, advisors pushed the 70% rule. Here, you replace 70% of your income to maintain the current lifestyle.
- Russell Investments Canada says 60% is enough for most households, while Fidelity Investments Canada says 80% suits active retirees, according to Investment Executive.
- Actuary Frederick Vettese told the Globe and Mail that even 50% works for many middle-class households.
Russell found that in many households, over half of spending before retirement goes to debt, kids and savings, which no longer exist in retirement.
What will CPP and OAS pay in retirement?
The average Canadian retiree who has stayed in the country for more than four decades after the age of 18 will receive around $20,000 via pension plans such as the Canada Pension Plan and Old Age Security.
For retirees receiving the maximum CPP and OAS, the annual payout will be closer to $27,000.
Priya vs. Dan: The spending math
A common rule says you can withdraw about 4% of your portfolio each year. So, you need about 25 times the yearly income in retirement, after accounting for the CPP and OAS.
Say, Priya spends $48,000 a year and earns $20,000 from pension plans. So, her next egg should have $700,000 ($28,000*25) by the time she retires.
Comparatively, Dan spends $84,000 a year. After a similar pension, he needs $64,000 from savings, which increases the retirement gap to $1.6 million.
Priya and San have a retirement gap of $900,000. So, every $1,000 in extra monthly spending adds $300,000 more to your target.
Saving habits matter too. BMO found financial planners often suggest saving at least 10% of income for retirement. Yet 28% of Canadians save less than 5%, and 38% save between 5% and 10%.
Aritzia: A TSX growth stock to own
Future Canadian retirees should consider owning growth stocks such as Aritzia (TSX: ATZ) to help close the retirement gap.
Since its initial public offering in 2017, the Canadian stock has returned 740% to shareholders. So, a $5,000 investment in ATZ stock soon after it went public would be worth $42,000 today.
In fiscal Q2 (ended in August), Aritzia grew sales by 44% to $1.2 billion. While comparable sales rose 35%, and digital revenue rose 68% to $403 million.
It reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 21%, up 590 basis points year over year. These results exclude $97 million of tariff refunds.
The company ended the quarter with $528 million in cash and no debt. It also bought back about 900,000 shares for $125 million. Management raised its full-year revenue outlook to between $4.78 billion and $4.88 billion, which implies growth of 30% at the midpoint.
CEO Jennifer Wong told analysts: “We offer an Everyday Luxury value proposition and our brand has never been stronger.”
However, inventory rose 36% to $715 million, and management forecast Q3 growth to decelerate to about 25% year over year. Shoppers can also trim clothing budgets fast amid a challenging macro environment.
Analysts tracking ATZ stock forecast adjusted earnings to grow from $5.26 per share in fiscal 2027 to $10.80 per share in 2031. If the TSX stock is priced at 26.6 times forward earnings, similar to the five-year average, it could almost double within the next 40 months.
