How much do you need to retire at 65? How big is your retirement nest egg?

How much money you need to retire will depend on your particular circumstances:
  • When do you want to retire?
  • What are your government benefits?
  • What are you spouse's government benefits?
  • Are you in debt payed off or will you still have a mortgage?
The table below suggests how much a single retired person and a couple may spend during retirement.  If you have a budget today, you could check your spending habits and adjust for work expenses that you may not have in retirement (e.g., daily vehicle costs and depreciation, dress clothes, etc.).  Of course your spending habits can be a lot higher or lower depending on your tastes.  Here are nest egg requirements if you need to (want to) retire at age sixty five (65).

How much do you need to retire? How big should your retirement nest egg be? What will you spend during retirement?
The rule of thumb is that your retirement nest egg has to be 25 times your annual spending needs.   So a middle class couple may need $250,000 to $750,000 to cover middle-class spending of $40,000 to $60,000 per year.  That assumes government benefits contribute $30,000 per year, that is, Canada Pension Plan benefits (reasonable if you both had long careers with average wages).

The table shows how much you need to retire at age 65.  The size of your nest egg increases if you retire earlier.

Of course there is a lot of fine print associated with the nest egg table:
  • Typical annual amounts in today’s dollars, assuming no traditional defined benefit employer pension. (2012 values ... add 5% for 2014)
  • Spending before taxes, assuming the seniors own their own home mortgage-free.
  • Assumes long careers at average wages, although these amounts are less than maximum benefits. Current maximum benefits per senior per year: OAS is $6,481 and CPP is $11,840 for a total of $18,321. You’ll get maximum CPP if you start CPP at age 65 and had worked for almost 40 years at average pay or better
  • Provides for an annual withdrawal from the nest egg of 4% at retirement plus inflation adjustments. (The factor 25 equals 1 divided by 0.04.).  There is a small chance that you may outlive your savings.
  • Don’t count the value of your home equity or cottage. Canadians born after March 1958 will have the start of OAS payouts delayed and will need to compensate proportionately. If your start to OAS is delayed by two years to age 67, then you will need an extra $13,000 to offset that.  Consider you home as extra security - you could use that equity with the HomEquity CHIP program, or the REIT and MIC alternatives in other posts.


Do you have good genes and plan to live to age 100?  Just add 40% to the nest egg retired.  Want to retire at age sixty (60)?  Add 20% to the savings required.