Former Bank of Canada boss urges workers to set aside 10 to 21 per cent of pre-tax income
Canadians need to start saving more money earlier if they want to be able to retire comfortably, according to former Bank of Canada governor David Dodge.
Workers need to start saving between 10 and 21 per cent of pre-tax earnings, every year for 35 years, if they want to maintain their pre-retirement lifestyle, according to a C.D. Howe Institute report on savings, co-authored by Dodge.
The fraction is likely higher than most Canadians realized they needed to save and is higher than what is set aside in most employer-based group retirement savings plans or defined contribution plans, said Dodge.
Even workers with employer-sponsored defined benefit plans probably don't have enough savings to make it comfortably through retirement, he said.
Canadians over the age of 35, who have put off saving for retirement or haven't been putting enough away, will have to put aside far more than 20 per cent of their gross pay or work well past age 65, said the paper.
The findings of the paper are based on the assumption Canadians would want 70 per cent of their pre-retirement income when they retire at age 65. But even with only a 60-per-cent income replacement at a later retirement date, savings still need to be substantial.