It’s hard to watch someone you love approach retirement with almost nothing saved, especially when that someone is your parent.
Let’s say your dad is 54, earns $70,000 a year working as a contractor and owns a home worth $400,000 outright. He’s debt-free, but he doesn’t have an RRSP and has just $10,000 saved in a high-interest savings account. He’s starting to think about retirement, and you’re starting to panic. Is it too late for him to catch up? Can you help?
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It’s not a great spot to be in, but he’s far from alone. A recent IG Wealth Management survey shows that 56% of Canadians delayed or stopped saving altogether, citing a range of pressures, including debt, housing and childcare (1). Meanwhile, Canadians believe they will need about $1.54 million saved to retire comfortably in 2025, according to BMO (2).
With your dad’s retirement savings sitting at $10,000, he’s far behind where many Canadians believe he should be. Still, all is not lost.
With a steady income, no debt and a valuable home, he has some advantages others might not. The key now is using the next 10-to-15 years wisely. Here’s how your family can help him turn things around.
Where does he stand?
There’s no getting around that your dad has fallen behind on his savings. Some financial advisors recommend having around seven times your salary saved by age 55, which means he should have $490K in his retirement account.
But he should take solace: The 2023 median retirement savings amount for Canadians between the ages of 55 and 64 is only $120,000 (including all funds saved in RRSPs, RRIFs and LIRAs), according to Statistics Canada (3).
But your dad has some things going for him. First, he owns his home. Second, he’s debt-free, something that only 34% of Canadians aged 55 or older think they’ll never achieve, according to an Ipsos poll. Plus, at his age, he’s likely got several years left to work and save money (4).
To help your dad, you can start by considering when he could retire. If he’s in good health, he may have 10-to-15 years left of full-time work. If he can put off claiming his Canada Pension Plan (CPP) benefit until age 65 or later, he can maximize those monthly cheques and continue to invest money for his retirement.
It’s also important to make sure he has a financial cushion to cover any short-term emergencies. Creating an emergency fund can help — as it can provide a safety net for any unforeseen expenses. This way, he won’t have to dip into retirement savings or go into debt in the event of an emergency.
Your dad can earn up to 3% APY on every dollar he saves for his emergency fund with EQ Bank’s Personal Account, if he sets up a recurring direct deposit of at least $2,000 per month. That’s about six times the average interest rate offered by big-name banks.
EQ Bank supports free ATM withdrawals and no account fees or minimum balance requirements — making it easy for your dad to build his savings without worrying about hidden costs.
Even better, deposits of up to $100,000 are insured by the CDIC, ensuring his money stays safe while it grows.
Next, you can try to estimate your dad’s expected living expenses in retirement. If he stays debt-free, that’s a major advantage, since there’s no monthly loan payments or lingering bills eating into his budget.
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Where should he start?
Once you’ve got a clear picture of his financial foundation, it’s time to focus on the next step: helping him invest for the future.
Your dad’s first moves might include opening a TFSA, perhaps using some of that $10,000 savings. After opening the TFSA, consider setting up automatic investments of $500-$1,000 each month. With compound interest, that amount could grow significantly between now and retirement.
Make sure that he starts saving ASAP. If he contributes $7,000 a year into his TFSA from now until age 67, with an average 6% annual return, he could build a nest egg that tops over $92,000. If you double those contributions — $7,000 in the TFSA and $7,000 in an RRSP — your father could save more than $184,000 in just 10 years. Add to this his CPP benefit and, potentially Old Age Security payments, and he should be able to cover his needs.
To put that plan into action, your dad could open a TFSA and RRSP account with a discount brokerage like CIBC Investor’s Edge.
Unlike traditional brokerages, CIBC Investor’s Edge keeps costs down by charging a low commission rate as well as no account maintenance fees, provided he maintains at least $10,000 across registered and non-registered accounts.
Active investors — those who make at least 150 trades in a quarter — can enjoy a discounted $4.95 commission on each trade.
He can also get expert insights from industry titans on when to buy, hold and sell stocks and other securities, which can be instrumental in growing net worth. CIBC also offers real-time news and stock alerts as well as powerful research tools.
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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.
Investor’s Group Wealth Management: Annual IG Wealth Management Retirement Study: Rising Costs and Competing Priorities Challenge Canadians’ Retirement Readiness (1); BMO Retirement Survey: Over Three Quarters of Canadians Worry They Will Not Have Enough Retirement Savings Amid Inflation (2); Statistics Canada: Assets and debts held by economic family type, by age group, Canada, provinces and selected census metropolitan areas, Survey of Financial Security (3) Ipsos: 43% of Canadians Need Debt Help: Exploring the Gaps in Financial Literacy During Debt Literacy Month (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.