Mastering the keys to saving

There are three keys to saving successfully for retirement: Contribution + Time + Investment return.
Let’s look at each key.

Saving the right amount

Even small amounts add up over time, so it’s important to balance today’s needs with tomorrow’s goals.

It is usually recommended to replace about 70% of your salary keeping in mind your retirement income will likely come from a combination of three sources:

  • Government programs (Old Age Security, Canada or Quebec Pension Plan)
  • Your group savings and retirement program
  • Your personal savings (real estate, other savings plans or other income)

How much?

Based on age and desired retirement income, the table below shows you how much you’ll likely need to save every month to make up your portion through your group program and your personal savings.

First, see how much you will need from your personal savings:

If this is the retirement income you want$28,000$42,000$56,000
This is approximately what you can expect from the Government (CPP/QPP and OAS)$16,000$19,000$19,000
This is approximately what will have to come from your group & personal savings$12,000$23,000$37,000

To reach that amount, this is how much you need to contribute:

How much
to save
per month

Desired annual retirement income

The examples above are provided for illustration purposes only and are not guaranteed. Retirement incomes assume a level income from age 65 to 90 and a net 5% rate of return. All amounts are pre-tax and are indexed at 2% for inflation, up to retirement. For more information on government benefits and the maximum amount you are allowed to contribute, go to

Time matters

Saving a little bit over a longer period of time is an effective way of maximizing your savings while keeping your efforts to a minimum.

See how time works for you

Time matters
Assuming a 5% net rate of return, look at the difference a smaller monthly contribution makes over a longer period of time!
40 years $148,856 Contribute $100 at the beginning of each month over 40 years between age 25 and 65 ($48,000 total)
20 years $81,492 Contribute $200 at the beginning of each month over 20 years between age 45 and 65 ($48,000 total)

How much will it take?

The table below assumes you’re starting from scratch and that you’re saving enough to get 70% of your salary as retirement income when you’re 65. How much do you need to save assuming a 5% rate of return?

Say you start saving at age:% of your salary you
need to save
20-something5 to 11
30-something8 to 18
Early 40s13 to 26
Late 40s17 to 34

What this means…

  • The later you start, the more you’ll have to put away to reach your goals.
  • Starting earlier makes it easier to contribute without putting a big dent in your budget, and you’ll end up saving more over the long term.
  • Even if you only save $50 a month, after 40 years you will have saved $74,428 (assuming a 5% net rate of return).

The third key involves choosing your investments carefully. And the most important thing to remember is to choose a balanced investment mix.

Why? Because every investment bears a certain degree of risk. But a balanced mix will help you manage risk and return over the long-term.

It can also help you take advantage of a strategy called Dollar Cost Averaging.

Here’s how Dollar Cost Averaging works

You invest a certain amount of money regularly (such as $100 monthly) in a particular investment or portfolio consisting of market-related funds.

With market-related funds, unit values fluctuate, so you buy more units when unit values are low and fewer units when unit values are high. This lowers the total average cost per unit of your investment, giving you a lower overall cost for the units purchased over time.

Let’s take a look at dollar cost averaging in action:


You see that after 3 years all the funds end up at $20 per unit, but each took a different path to get there.

  • Fund A made a profit of $1,429, with 251 units purchased at an average cost of $14.32.
  • Fund B made a profit of $222, with 191 units purchased at an average cost of $18.84.
  • But fund C is way ahead with $6,981 in profits, and 525 units purchased at an average cost of $6.86.

Your $100 can buy more units when the unit prices are low, so any small positive movement of the fund translates into greater returns than if fewer units were purchased at a higher price.

So as you can see, it’s not just about whether the fund grows, but how it got there, because occasional negative returns can help lower costs and increase profits.

On the other hand, if you withdraw from a fund when its unit value is down you cannot fully benefit from Dollar Cost Averaging.

Dollar Cost Averaging also takes the guesswork out of “when” to invest. If you were to invest your money all at once, you’d risk investing it at the wrong time.

What this means…

  • Choose a diversified mix of investments to help you manage risk and return over the long-term.
  • Contribute a small amount regularly, rather than one large sum all at once.
  • Stay the course! If you had dropped Fund C when it was at its lowest point, you would have missed out on a hefty profit.

For more on risk and market-related funds (PDF, 182 kb)

Now that you know the three keys to successful saving, let’s look at how you can save more.