It’s the advice you hear passed around like a family recipe: Work hard, save consistently and one day you’ll retire comfortably. But what if this so-called tried-and-true advice is far from a recipe for success and more like a blueprint for disappointment?
Ramit Sethi, podcast host and bestselling author of I Will Teach You to be Rich and Money For Couples, didn’t hold back as he reflected on what he considers the worst financial advice he’s ever received.
“Get a job at an industrial company and work there for 40 years so that I can retire with $1 million in the bank,” he told Money.ca. “I was like $1 million? That’s it?! No, thank you!”
The old axiom about saving $1 million for retirement hasn’t changed much. Today, many Canadians think they’ll need $1.54 million to retire comfortably, according to a BMO study. But Sethi rejects any such advice.
Why Sethi rejects the $1M retirement goal
He says the issue isn’t just oversimplified math but the mindset it fosters: Grinding away for decades only to scrape by on a fixed budget in retirement.
For one thing, he argues that by focusing solely on saving and not spending money meaningfully, people miss out on living a rich life. He thinks it’s too long to wait till retirement, especially when the average age of retirement is creeping up, standing at 65 in 2024, up from about 61 in the 1990s, according to Statistics Canada.
When many Canadians finally do retire, their visions of their golden years — leisure, frequent travel and freedom from the constraints of a 9-to-5 — clash with financial reality. In a study conducted by Money.ca, households headed by those aged 45-54 have an average retirement account balance of $1,077,160. And while that’s close to what Canadians think they need in order to enjoy their golden years, the podcast host thinks there’s still room for growth.
This disconnect is why Sethi encourages people to rethink their financial approach, shifting the focus from reaching milestones to developing a strategy that builds wealth over time.
Building your retirement savings
While a $1-million retirement goal might seem out of reach, there are steps you can take to build a stronger financial future. One approach Sethi encourages is harnessing the power of compound interest.
“The power of compounding is something that is truly hard to understand until you see it over and over again,” Sethi explains.
Compound interest works by allowing your money to grow not just on your initial contribution, but on the accumulated interest as well , creating a snowball effect over time. For example: A 35-year old investing $300 per month with a 6% annual return would have $301,355 by the age of 65. But if that same person started earlier, at age 25, investing the same amount every month, they’d end up with hundreds of thousands more: $597,337, nearly double.
Even though the late investor only contributed $36,000 less in total, they lost out on the exponential growth that comes with compounding over decades.
However, it’s not just about starting early. Maximizing contributions to tax-advantaged accounts like an RRSP, taking full advantage of employer matching programs and diversifying your investments can boost your retirement savings. Taking full advantage of employer matching programs is practically “free money” that can supercharge your savings.
Don’t minimize the value of budgeting, which can free up more cash to invest.
With consistent effort, thoughtful planning, and focus on long-term growth, building the retirement of your dreams is well within reach.
Sources
1. BMO: BMO Retirement Survey: Over Three Quarters of Canadians Worry They Will Not Have Enough Retirement Savings Amid Inflation (Feb 12, 2025)
2. Statistics Canada: Retirement age by class of worker, annual (Jan 27, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
