These days, if you retire early, you could expect to live another 30 years — or even longer — in retirement.
Take the hypothetical example of Dave, a 50-year-old IT professional who wants to retire at 60. However, after running several simulations, his financial advisor recommends that Dave has 30 years of savings set aside to cover him until age 90.
But Dave’s not sure how realistic that is. How many people who retire at 60 actually live to 90? Is his advisor being practical or overly cautious?
He’s been contributing to a workplace pension plan and Registered Retirement Savings Plan (RRSP) since his mid-20s, and he estimates he’ll have enough saved to live comfortably for about 20 years if he retires at 60. But if he boosts his savings rate so he can cover an extra 10 years in retirement, his current budget will be stretched thin.
He doesn’t want to penny-pinch in the present when he might only live another 10 or 15 years after retiring: He’s divorced, has no children and doesn’t feel pressure to leave a large legacy.
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Life expectancy versus survival rates
In Canada, life expectancy rose to 79.5 years for men and 83.9 years for women, according to the 2023 data from Statistics Canada (1).
But rather than focusing on overall life expectancy, it’s helpful to think about remaining life expectancy. For example, in Canada a 65-year-old can expect to live, on average, 18.8 years longer based on current mortality rates (2). That said, if you reach age 65, you’ve already passed major early-life risks to give you a financial head start and make your retirement horizon that much clearer.
Still, data suggests Canadians lack clear understanding for how long their savings need to last them through retirement. One study showed fewer than four in 10 Canadians between the ages of 35 and 54 understood that delaying pension benefits means more monthly income, a sign that many Canadians lack “longevity literacy,” an underestimation for how long their savings must last (3).
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
What’s a reasonable longevity period?
If Dave retires at 60, he won’t be eligible to claim his Old Age Security (OAS) benefit for another five years. And if he claims his Canada Pension Plan (CPP) benefits as early as 60, his monthly benefit will be permanently reduced.
He’ll need enough savings to fill those gaps.
Even if Dave waits until age 70 to claim his public benefits, the average monthly OAS payment in 2025 is about $740, while the average CPP retirement benefit is approximately $848 — for a combined total of roughly $1,588 a month, or just over $19,000 a year. These amounts are barely enough to cover basic living expenses for most retirees, highlighting the need for additional income or savings in retirement.
OAS and CPP are meant to be supplemented with personal savings and other income sources. The challenge is figuring out how much is enough — because no one knows exactly how long they’ll live. But you also don’t want to outlive your money.
While financial advisors aren’t doctors, it’s still worth discussing your family medical history to help you estimate your potential lifespan as well as possible long-term care needs.
For example, Dave’s mom died in her early 60s from breast cancer, and his dad died in his early 70s from a heart condition. While Dave is healthy, he assumes he may not reach the average life expectancy for men.
Still, he might eventually need long-term care. Out of over 860,000 Canadians aged 85 and over, 28% live in long-term care facilities (4).
In Canada, private home care rates vary by province and territory. Public-subsidized care can range between $880 to over $3,500 a month, and private care can cost upwards of $3,500 to over $9,700 monthly. Some specialized care facilities can charge over $20,000 monthly for full-time care (5).
Longevity plays a big role in determining how much you need to save, and a financial advisor can model different scenarios to help you find a realistic target.
A common rule of thumb is that you’ll need about 60% to 70% of your pre-retirement income to maintain a similar quality of living in retirement — however you must factor in housing, outstanding debt and your spending preferences (6). However, if you are a low-income earner, you may need the full amount of your income to live in retirement comfortably. You can also tap into the Guaranteed Income Supplement (GIS).
If you’re worried about outliving your savings, it’s important to remember that you’ll have income sources that last the rest of your life, such as CPP, OAS, a traditional pension or a lifetime annuity sold by an insurance company.
And if you don’t live to 90, your money won’t go to waste — it’ll go to a named beneficiary or your estate, as long as that’s clearly stated in your will.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Statistics Canada (1), (2), (4); Nasdaq (3); SeniorSite (5); Canada (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.