Yes Virginia, you do have to save.

Yes Virginia, you do have to save.

Do I really have to save for the future?

“… it’s so much more fun to spend my money on clothes, eating out and vacations,”  or “I can’t save because I need money for mortgage, food,  gas, clothes and  kid’s activities… there’s nothing left at the end of my  month.”

If your ‘reason’ for not saving falls into one of these categories, the answer is: no you don’t have to save …AS LONG AS:

  • You are getting a large inheritance – and your parents will not be spending all their money on healthcare and travel while they’re alive, or giving it away to a charity when they die.
  • You marry rich and stay married (i.e. no divorce: or if you do divorce, he is very generous or has a lousy lawyer)
  • You are going to die young anyway, so you may as well spend your money before you go.
  • You will be perfectly comfortable living on only $1,200/month (from the Canadian Pension Plan and Old Age Security)
  • You know you will win the lottery in the future.

In every other case, YES you do need to save for the future.

It’s simple math. The average life expectancy of a female is 83 years old (according to Wikipedia). If you retire at 65, you should plan to live 18 years without an earned income.  The current maximum monthly income from the Canada Pension Plan at age 65 is $960 before tax.  The current maximum monthly income from Old Age Security is $526.85 before tax.  That is generally not enough to maintain much more than a subsistence lifestyle.

So what can you do?

Save money.  If you have a pension plan at work – that’s terrific – and yet, even this may not be enough.  Take time to assess your current pension in future terms. You may need to supplement your pension income with personal savings to ensure a comfortable lifestyle.

Pensions are becoming less common and not everyone has one.  The government has set up Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Plans (TFSAs) to encourage Canadians to save.  Use them.

How much do you need to save?

It depends on how much you want to spend in retirement.  Let’s assume that you have a chunk of money saved by age 65, enough to last you to age 83 or even 90.  If you pay 25% taxes and earn 5% or 6% interest (at 2.5% inflation) you will need these amounts to provide $3,000 or $6,000 income per month.

$3,000/month income At 5% At 6%
To last to age 83 $581,500 $546,000
To last to age 90 $775,400 $712,000


$6,000/month income At 5% At 6%
To last to age 83 $1.2 million $1.1 million
To last to age 90 $1.55 million $1.4 million

These amounts may look large from this end of the tunnel, but not so large when it’s time to spend the cash. One thing is certain: the sooner you start to save, the easier it will be to get there.


This article was prepared solely by Laura Chanin who is a registered representative of HollisWealthTM (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views and opinions, including any recommendations, expressed in this article are those of Laura Chanin alone and not those of HollisWealth. 
TM Trademark of The Bank of Nova Scotia, used under license. 

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