Building a $1,000,000 RRSP Starting in your 30’s, 40’s, and 50’s.
I recently wrote about how you can build a comfortable retirement lifestyle even if you start a little late.
The article included a couple of examples of an investor who starts in his/her 40’s and 50’s and still result in a comfortable middle-class retirement. But what if you want a little more during retirement? What if you want to travel more than the average and/or want to maintain a higher lifestyle?
A person in who is age 40 in a 40% tax bracket, contributing $6,000/year (increasing annually for inflation) and reinvesting their RRSP tax refunds, would have a $500k RRSP balance when they turn 65 (assuming 4% return after inflation).
While the $500k can produce $20k/year for 30 years with high certainty (96% probability), you can add another $15k (or $30k/couple) in seniors government benefits assuming s/he has lived and worked in Canada all their lives.
Putting it all together, the couple would have a retirement income of $50k/year. With no debt, $50k/year is about how much our family of 4 spends to live comfortably (not including travel).
So instead of a $500k portfolio at age 65, what if you want to be an RRSP millionaire instead? This would give you $40k/year from your portfolio until death, then government benefits added on top. Using the couple example above, it would result in a heftier retirement income of $70k/year.
While these are before tax numbers, taxes can be further reduced with income splitting strategies like contributing to a spousal RRSP (I’m in the process of opening a spousal RRSP account with Questrade).
Higher income sounds ideal in retirement, but how much would you need to save in your 30’s, 40’s and 50’s to reach that millionaire portfolio milestone?
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Starting at 30, Millionaire at 65
Assumptions:
- 30 years old
- 35 years left until retirement
- 4 % return (after inflation)
- 35% marginal tax rate
- Increase savings/year with inflation (assume 2%)
- All RRSP contributions reinvested
Results:
I built a simple spreadsheet that models a steady return and reinvesting the tax refund generated by the RRSP contribution. Based on the assumptions above, for a 30-year-old who wants to have a million dollar RRSP by age 65 would need to save $7,000 per year ($585/month), adjusting for inflation annually. If the 30-year-old makes a higher income and in the 40% tax bracket, s/he will reach millionaire status a year earlier.
| Year | Cash Contribution | Tax Contribution | Refund | Balance | |
| 1 | 2019 | $ 7,000.00 | $ 7,000.00 | $ – | $ 7,280.00 |
| 2 | 2020 | $ 7,140.00 | $ 7,140.00 | $ 2,450.00 | $ 17,544.80 |
| 3 | 2021 | $ 7,282.80 | $ 9,732.80 | $ 2,499.00 | $ 28,419.66 |
| 4 | 2022 | $ 7,428.46 | $ 9,927.46 | $ 3,406.48 | $ 40,824.78 |
| 5 | 2023 | $ 7,577.03 | $ 10,983.51 | $ 3,474.61 | $ 53,951.48 |
| 6 | 2024 | $ 7,728.57 | $ 11,203.18 | $ 3,844.23 | $ 68,145.24 |
| 7 | 2025 | $ 7,883.14 | $ 11,727.36 | $ 3,921.11 | $ 83,147.47 |
| 8 | 2026 | $ 8,040.80 | $ 11,961.91 | $ 4,104.58 | $ 99,104.56 |
| 9 | 2027 | $ 8,201.62 | $ 12,306.19 | $ 4,186.67 | $ 115,952.56 |
| 10 | 2028 | $ 8,365.65 | $ 12,552.32 | $ 4,307.17 | $ 133,770.39 |
| 11 | 2029 | $ 8,532.96 | $ 12,840.13 | $ 4,393.31 | $ 152,564.52 |
| 12 | 2030 | $ 8,703.62 | $ 13,096.93 | $ 4,494.04 | $ 172,392.68 |
| 13 | 2031 | $ 8,877.69 | $ 13,371.74 | $ 4,583.93 | $ 193,288.47 |
| 14 | 2032 | $ 9,055.25 | $ 13,639.17 | $ 4,680.11 | $ 215,304.77 |
| 15 | 2033 | $ 9,236.35 | $ 13,916.46 | $ 4,773.71 | $ 238,487.43 |
| 16 | 2034 | $ 9,421.08 | $ 14,194.79 | $ 4,870.76 | $ 262,890.44 |
| 17 | 2035 | $ 9,609.50 | $ 14,480.26 | $ 4,968.18 | $ 288,566.84 |
| 18 | 2036 | $ 9,801.69 | $ 14,769.87 | $ 5,068.09 | $ 315,574.09 |
| 19 | 2037 | $ 9,997.72 | $ 15,065.81 | $ 5,169.45 | $ 343,970.91 |
| 20 | 2038 | $ 10,197.68 | $ 15,367.13 | $ 5,273.04 | $ 373,819.29 |
| 21 | 2039 | $ 10,401.63 | $ 15,674.67 | $ 5,378.50 | $ 405,183.40 |
| 22 | 2040 | $ 10,609.66 | $ 15,988.16 | $ 5,486.13 | $ 438,130.36 |
| 23 | 2041 | $ 10,821.86 | $ 16,307.99 | $ 5,595.86 | $ 472,730.00 |
| 24 | 2042 | $ 11,038.29 | $ 16,634.15 | $ 5,707.80 | $ 509,055.13 |
| 25 | 2043 | $ 11,259.06 | $ 16,966.86 | $ 5,821.95 | $ 547,181.59 |
| 26 | 2044 | $ 11,484.24 | $ 17,306.19 | $ 5,938.40 | $ 587,188.40 |
| 27 | 2045 | $ 11,713.93 | $ 17,652.33 | $ 6,057.17 | $ 629,157.88 |
| 28 | 2046 | $ 11,948.21 | $ 18,005.37 | $ 6,178.31 | $ 673,175.78 |
| 29 | 2047 | $ 12,187.17 | $ 18,365.48 | $ 6,301.88 | $ 719,331.42 |
| 30 | 2048 | $ 12,430.91 | $ 18,732.79 | $ 6,427.92 | $ 767,717.86 |
| 31 | 2049 | $ 12,679.53 | $ 19,107.45 | $ 6,556.48 | $ 818,432.02 |
| 32 | 2050 | $ 12,933.12 | $ 19,489.60 | $ 6,687.61 | $ 871,574.86 |
| 33 | 2051 | $ 13,191.78 | $ 19,879.39 | $ 6,821.36 | $ 927,251.53 |
| 34 | 2052 | $ 13,455.62 | $ 20,276.98 | $ 6,957.79 | $ 985,571.53 |
| 35 | 2053 | $ 13,724.73 | $ 20,682.52 | $ 7,096.94 | $ 1,046,648.94 |
Starting at 40, Millionaire at 65
Assumptions:
- 40 years old
- 25 years left until retirement
- 4 % return (after inflation)
- 40% marginal tax rate
- Increase savings/year with inflation (assume 2%)
- All RRSP contributions reinvested
Results:
Based on the assumptions above, for a 40-year-old who wants to have a million dollar RRSP by age 65 would need to save $12,000 per year ($1,000/month), increasing with inflation annually.
| Year | Cash Contribution | Tax Contribution | Refund | Balance | |
| 1 | 2019 | $ 12,000.00 | $ 12,000.00 | $ – | $ 12,480.00 |
| 2 | 2020 | $ 12,240.00 | $ 12,240.00 | $ 4,800.00 | $ 30,700.80 |
| 3 | 2021 | $ 12,484.80 | $ 17,284.80 | $ 4,896.00 | $ 50,004.86 |
| 4 | 2022 | $ 12,734.50 | $ 17,630.50 | $ 6,913.92 | $ 72,439.41 |
| 5 | 2023 | $ 12,989.19 | $ 19,903.11 | $ 7,052.20 | $ 96,180.03 |
| 6 | 2024 | $ 13,248.97 | $ 20,301.17 | $ 7,961.24 | $ 122,085.85 |
| 7 | 2025 | $ 13,513.95 | $ 21,475.19 | $ 8,120.47 | $ 149,469.08 |
| 8 | 2026 | $ 13,784.23 | $ 21,904.70 | $ 8,590.08 | $ 178,717.12 |
| 9 | 2027 | $ 14,059.91 | $ 22,649.99 | $ 8,761.88 | $ 209,600.46 |
| 10 | 2028 | $ 14,341.11 | $ 23,102.99 | $ 9,060.00 | $ 242,321.63 |
| 11 | 2029 | $ 14,627.93 | $ 23,687.93 | $ 9,241.20 | $ 276,838.39 |
| 12 | 2030 | $ 14,920.49 | $ 24,161.69 | $ 9,475.17 | $ 313,283.42 |
| 13 | 2031 | $ 15,218.90 | $ 24,694.07 | $ 9,664.67 | $ 351,693.67 |
| 14 | 2032 | $ 15,523.28 | $ 25,187.95 | $ 9,877.63 | $ 392,178.36 |
| 15 | 2033 | $ 15,833.75 | $ 25,711.37 | $ 10,075.18 | $ 434,810.78 |
| 16 | 2034 | $ 16,150.42 | $ 26,225.60 | $ 10,284.55 | $ 479,695.58 |
| 17 | 2035 | $ 16,473.43 | $ 26,757.98 | $ 10,490.24 | $ 526,925.62 |
| 18 | 2036 | $ 16,802.90 | $ 27,293.14 | $ 10,703.19 | $ 576,608.98 |
| 19 | 2037 | $ 17,138.95 | $ 27,842.15 | $ 10,917.26 | $ 628,851.80 |
| 20 | 2038 | $ 17,481.73 | $ 28,398.99 | $ 11,136.86 | $ 683,769.20 |
| 21 | 2039 | $ 17,831.37 | $ 28,968.23 | $ 11,359.60 | $ 741,478.58 |
| 22 | 2040 | $ 18,188.00 | $ 29,547.59 | $ 11,587.29 | $ 802,104.02 |
| 23 | 2041 | $ 18,551.76 | $ 30,139.05 | $ 11,819.04 | $ 865,773.80 |
| 24 | 2042 | $ 18,922.79 | $ 30,741.83 | $ 12,055.62 | $ 932,622.30 |
| 25 | 2043 | $ 19,301.25 | $ 31,356.87 | $ 12,296.73 | $ 1,002,789.09 |
Starting at 50, Millionaire at 65
Assumptions:
- 50 years old
- 15 years left until retirement
- 4 % return (after inflation)
- 40% marginal tax rate
- Increase savings/year with inflation (assume 2%)
- All RRSP contributions reinvested
Results:
There is less time until retirement for a 50 year old which results in less compounding over time. Never the less, strong earnings combined with high savings can still result in a wealthy retirement. Based on the assumptions above, for a 50-year-old who wants to have a million dollar RRSP by age 65 would need to save $28,000 per year ($2,333/month), increasing with inflation annually.
You may notice that $28k is above the RRSP contribution limits but can be mitigated in a couple of ways. Chances are if you are starting your RRSP at 50, you have a ton of unused contribution space. If that gets used up, and you have a spouse, consider the $28,000/year a team effort split between two RRSP accounts.
| Year | Cash Contribution | Tax Contribution | Refund | Balance | |
| 1 | 2019 | $ 28,000.00 | $ 28,000.00 | $ – | $ 29,120.00 |
| 2 | 2020 | $ 28,560.00 | $ 28,560.00 | $ 11,200.00 | $ 71,635.20 |
| 3 | 2021 | $ 29,131.20 | $ 40,331.20 | $ 11,424.00 | $ 116,678.02 |
| 4 | 2022 | $ 29,713.82 | $ 41,137.82 | $ 16,132.48 | $ 169,025.29 |
| 5 | 2023 | $ 30,308.10 | $ 46,440.58 | $ 16,455.13 | $ 224,420.06 |
| 6 | 2024 | $ 30,914.26 | $ 47,369.39 | $ 18,576.23 | $ 284,866.98 |
| 7 | 2025 | $ 31,532.55 | $ 50,108.78 | $ 18,947.76 | $ 348,761.18 |
| 8 | 2026 | $ 32,163.20 | $ 51,110.96 | $ 20,043.51 | $ 417,006.60 |
| 9 | 2027 | $ 32,806.46 | $ 52,849.97 | $ 20,444.38 | $ 489,067.75 |
| 10 | 2028 | $ 33,462.59 | $ 53,906.97 | $ 21,139.99 | $ 565,417.14 |
| 11 | 2029 | $ 34,131.84 | $ 55,271.83 | $ 21,562.79 | $ 645,956.25 |
| 12 | 2030 | $ 34,814.48 | $ 56,377.27 | $ 22,108.73 | $ 730,994.64 |
| 13 | 2031 | $ 35,510.77 | $ 57,619.50 | $ 22,550.91 | $ 820,618.57 |
| 14 | 2032 | $ 36,220.99 | $ 58,771.89 | $ 23,047.80 | $ 915,082.85 |
| 15 | 2033 | $ 36,945.41 | $ 59,993.21 | $ 23,508.76 | $ 1,014,558.49 |
Summary
Becoming an RRSP millionaire is not out of reach for higher income people with aspirations of a comfortable retirement.
- Starting at 30, with conservative assumptions, saving $585/month (increasing with inflation annually) and reinvesting the RRSP tax refund will result in a $1M portfolio in 35 years.
- Starting at 40, with conservative assumptions, saving $1,000/month (increasing with inflation annually) and reinvesting the RRSP tax refund will result in a $1M portfolio in 25 years.
- Starting at 50, with conservative assumptions, saving $2,333/month (increasing with inflation annually) and reinvesting the RRSP tax refund will result in a $1M portfolio in 15 years.
While this article talks about the levels of savings required based on conservative assumptions, it doesn’t get into “how“. Sometimes, investors can be their worst enemy, buying high and selling low. Best bet would be to build a mostly hands-off globally indexed portfolio that will give you the assumed returns in this article over the long-term. Here are some easy ways to index your portfolio. Also, make sure to keep your investment fees low by choosing a low-cost discount broker.
Happy Investing!
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Just a small quibble…
You indicate that the contributions are made monthly but when you calculate the first year investment return it is on the full contribution amount for that year…same with proceeding years. This makes a difference in the total amounts since the returns would not be on the full contribution amount for that year but only a portion of that amount. Obviously you generally benefit more the sooner you ‘get your money in the market’ which will make a difference.
Ex: 7000 * 4% = $280
Assuming ‘smooth’ market returns you would not be receiving 4% on the full $280 but only on a small amount at first and ONLY in month 12 will you get it on the full $7000 amount at 1/12 of 4% – I think the actual balance after year one would be around $7,171. This will affect you grand total amount when you hit 65.
Also: This is the assumption that your returns are ‘even’ which they usually are not from that which may also affect your totals (CAGR). I think it still shows the dramatic affect of having your money in early to allow for compounding.
40% rate of return is a hefty yearly salary. Tough to do.
We were late starters in the investment world, almost 50. That was a time when “Growing the size of the pile” was our investment objective, but as with most we were floundering, playing the market, buying and selling, looking for new stocks and even owning Mutuals.
Thankfully, we found The Connolly Report and switched to “Growing our income”. Our goal was to generate more income than we needed in retirement, then later to having the income exceed $100k, and now we just enjoy the continuing growth. We hardly ever look at our net worth or the value of our holdings and really don’t care whether the figure is up, down or the same. Why would we?
Congrats on your financial success Henry. Are you open to sharing some of your top positions?
I’ve posted that I now only own 12 Cdn stocks, though several of the same stocks in different accounts. 5 Banks, 2 utilities, 2 communications and 3 pipelines, so it would not be too difficult to pick most of them out. I don’t list them as I don’t want people to assume they should buy them. I rather they do their own research and pick stocks they like, not ones I own.
Of course $1,000,000 in 2054 will be worth less than $1,000,000 in 2044, which will be worth less than $1,000,000 in 2034. So in fact the 30 year old and 40 year will need to invest a bit more in order to have the same buying power at retirement as the 50 year old.
Thanks for this article! But retirement for anyone born after 1959 is now aged 67, no?
no, that didn’t go through
Wife and I have done pretty well with our RSPs. As of this morning I have $650k and she is at $578k. Ages 49/47. We also have $180k combined in our TFSAs and $500k combined non registered. And too much in real estate but that’s another story.
Will we have taxable income in retirement that reduces OAS? Yes for sure but honestly I couldn’t care less and in fact view it as a sign of success. Will likely add seven figures to non registered before I retire and expect total portfolio well over $5m by that time. Wife retired a few years ago.
No rocket science for us, just maxed RSPs every year since mid 20s and always make our TFSA contributions on January 1st along with RESP contributions.
Hello FT,
I have been a regular follower of your journey and teachings since many years. Many congratulations on your journey.
I was just wondering on a retirement portfolio – If we invest in a foreign account ( like India – where most of public banks will give 6 – 8 % fixed interest on your portfolio) . Is that a good option ? I am a Canadian citizen with an active bank accounts in India. What will be pros and cons of this investment approach. Your feedback will be much appreciated. Thank You
I will need to dig into this a little further. However, I would assume that any foreign interest would be taxed like salary in Canada – similar to if you owned a US bond in a non-registered account. The ideal case would be to have that foreign account in a tax-sheltered account, but I do not believe this is possible.
Nice article! @Dave his returns assumption is inflation adjusted.
FT did the calculation with the annual contribution inflation adjusted and the returns inflation adjusted
But the end number is an arbitrary $1,000,000.
The issue is that 1 million today, has significantly different purchasing power than 1 million in 10/20/30 years from now
Never mind I think I am only partially understanding this
FT is accounting for the inflation by using a 4% return on investment, when the actual return might be 6% with 2% inflation
I think what threw me off is he stated the annual contribution would increase by 2% and then actually used those numbers in the table.
Perhaps I just don’t understand it properly, but by using an ever increasing annual contribution don’t you have to inflation adjust your 1million goal as well?
Hi Dave, yes, I reduced the return to 4% to account for 2% inflation. In the model that I chose, savings should increase annually, I chose the amount to arbitrarily be inflation.
Good article, shows the power of saving early even small amounts. One thing to consider is the effect of inflation on your final savings though
For example, 1 million dollars today is equivalent to 2 million dollars in 35 years assuming 2% inflation. So if you want the purchasing power of a million of today’s dollars, that 30 yr old will need to save twice as much
Love this article Frugal Trader, thanks to showing all these numbers. :)
Given that you need to convert RRSP to RRIF and the mandatory withdrawal rate, does it make sense to have $1M in your RRSP?
Really depends on when you want to retire and how much is the expense, I think.
A couple years ago we achieved $1M in RRSPs as a family. We continue to max out RRSPs each year. We want to retire before 60, hopefully three years from now. We don’t have any pension, rent and don’t plan to have side hustles or part time jobs in retirement. Once we retire, we will delay CPP/OAS and deplete the RRSPs first.
Sorry I wasn’t clear earlier. What I meant is that having $1M in your RRSP is totally awesome but for most people I think you’d need to look into early withdrawal so you aren’t hampered by the mandatory withdrawal percentage with RRIF once you turn 71.
Got your point. I went to taxtips RRSP/RRIF withdrawal calculator to see what happened when there is $1M for a couple at 71. Looks like OK. I assumed $60K withdrawal with inflation 2% and before inflation increase 6% a year. The account will be gone at 98 and not any year the couple will be forced to withdraw more than necessary. Of course the actual situation will vary depends on lots of things.
However, if we continue to contribute for another 3 years and then retire (current plan), we have to withdraw more than $60K before 71 in order to have only $1M in today’s money in RRSPs at 71.
Withdrawal strategy requires lots of consideration and planning when retirement time comes I guess.
May, you might want to try financial planning software to run your numbers. But it sounds like you have retirement financial planning well under control. Check out the link I sent to Tawcan about withdrawal strategies during retirement.
Hey Tawcan, thanks for the kind feedback. As May mentioned, it really depends on your lifestyle needs. But yes, the RRIF mandatory withdrawal there are pros and cons of having a large RRSP balance in your 70’s. More here: https://milliondollarjourney.com/how-i-plan-to-withdraw-from-my-accounts-to-fund-early-retirement.htm