Starting to Invest Later Can Still Result in a Comfortable Retirement

I’ve written a lot about investing and how combining an early start and compound high interest can really make you wealthy.

But for many, just graduating from post-secondary education and just starting a career at a moderate salary, big savings is not really an option.  Especially when you combine housing costs, debt payments, vehicle payments.

While expenses never really go away, they shift depending on your stage of life.  In your 20’s, as previously mentioned, you are just getting on your feet.  In your 30’s, you may be looking at a mortgage, marriage, and perhaps children.   Nowadays, many people in their 40’s are raising young children, but it’s also a time when their career starts to grow. In your 50’s, debt winds down, kids are a bit older, and you’re likely hitting peak career salary.  Then your 60’s is when you start to wind down for traditional retirement.

Not everyone will follow that template, but it’s a pretty common story.   We veered a little from the common path and had a focus on building wealth at an early age.

But nowadays, most people are really only starting to save and think about retirement in their 40’s and 50’s – and that’s ok!  We all have different goals, and if planning to retire at age 65 and you’re a bit late getting started, you are better off than you think.

Why There’s Time to Catch Up

Choosing a regular retirement in the 60-65 age range puts much less strain on your personal finances.  Why? Because of government senior programs.  The average senior benefits payout for a couple (age 65) that has lived and worked in Canada all of their lives is about $30,000.  That’s $30,000 before dipping into any of your investment accounts like your RRSP, TFSA etc.

If you spend your money efficiently and your family expenses are in the $50k range (after removing debt), that would leave you with a $20k income gap.  This could be made up with income sources such as a defined benefit pension, building your own pension with an annuity (approx $330k for a $20k/year benefit), part-time work, and your investment accounts.

If depending only on your investment accounts, you would require approximately $500k to generate $20k/year for 30 years based on the 4% rule.

Starting at 40

Let’s start off with an example!  Say a couple in their 40’s who has focused on paying down the debt and now ready to get serious about investing.


  • 40 years old
  • 25 years left until retirement
  • 4 % return (after inflation)
  • 40% marginal tax rate
  • Able to save $500/month or $6,000/year, increasing with inflation annually
  • All RRSP contributions reinvested


As a side note, it’s important to reinvest your RRSP tax refunds to take full advantage of RRSP compound growth.

  • RRSP value after 25 years without reinvesting the RRSP tax refunds: $319,872
  • RRSP value after 25 years reinvesting the RRSP tax refunds: $501,394

As previously mentioned, $500k based on the 4% rule can generate around $20k/year from ages 65-95.  Assuming that debt is paid off, add that to CPP and OAS, and you’ll have a comfortable retirement.

Starting at age 50

In your 50’s, your career is taking off resulting in increased income.  If you lived in a modest house that you purchased in your mid-late 20’s, the mortgage may even be paid off.  With the extra cash flow, you can afford to invest $1,000/month or $12,000/year.


  • 50 years old
  • 15 years left until retirement
  • 4 % return (after inflation)
  • 40% marginal tax rate
  • Able to save $1,000/month or $12,000/year, increasing with inflation annually (assume 2%)
  • All RRSP contributions reinvested


  • RRSP value after 15 years reinvesting the RRSP tax refunds: $434,810

If the 50-year-old investor can boost his/her savings by a couple of thousand to $14,000/year, that would boost their nest egg up to $500k by age 65.  Again, when combined with government benefits should provide for a comfortable retirement.

Final Thoughts

As you can see from the examples above, it’s not too late to start saving and investing for traditional retirement.  A couple in their 40’s who can save $500/month, and using conservative assumptions, can build a nest egg of $500k in their RRSPs (assuming that tax refund are reinvested) by age 65.  To build the equivalent nest egg, the couple in their 50’s would need to contribute about $1,200/month.

$500k to cover retirement may not seem like a lot, but it can go along way when you account for government benefits.  For a working couple who has lived in Canada all their lives, the average CPP and Old Age Security (OAS) is around $15,000/person/year or $30,000/couple/year.  Combine that with sustainable $20k/year withdrawals from a $500k portfolio would result in $50k/year retirement income.   To put that in context, that’s about the amount our family spends (2 adults and 2 children) in a year (without debt).

To finish, to show the power of aggressive savings and compound interest, if the 40’s couple managed to save $1,200/month until retirement at age 65, they would have a nest egg of around $1,170,000.  This would result in a sustainable $46,800/year withdrawal from RRSP/RRIF until age 95.  Combine this with government benefits results in a very comfortable household retirement income.

Normal caveats apply to this post as a number of assumptions were made. Also, this post assumes that only RRSPs are used, which may not be to the most tax efficient strategy to use.  Here is a post that explains the optimal ways to withdraw from your retirement accounts.

Also, if you do start investing within your RRSP, here is a list of lowest cost RRSP brokers in Canada.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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2 years ago

Just to clarify, is it $500/month in the 40’s and $1200/month in the 50’s PER SPOUSE or PER COUPLE?

melissa hunter
2 years ago

what about those of us in our late 50’s, started in the housing market late and still have a mortgage? I have 4 years to retirement but still have 8 years left on the mortgage. We live in a pricey area, so downsizing will not reduce our housing costs enough to justify the costs of moving.

2 years ago

We are raising young kids in 40s and 50s. We are aiming at retiring within 4 years from now, few years before 60.

Actually, being young and no kids should give people a good chance to save money as I later realized kids are the most expensive items in a household. Of course, given one has the good habit to live within their means and balance current enjoyment with future financial security.

For us, one advantage to have kids late is that we were financially established already. Far away from ready to retire, but at least able to pay all kids expense with ease. I recommend people to have kids early though, as the most demanding thing for raising kids is time and energy.

No matter starting early or late, I think the most important thing is you have to invest the money. The biggest mistake we made is that we saved but not invested well. Otherwise I think I should be able to retire at this moment.

2 years ago
Reply to  FT

Living within means is kindly of natural for us. We maxed out RRSP, TFSA, RESP every year. For us, it’s the investing part coming quite late. That’s why one of my children raising goal is to teach the kids the importance of investment and how compounding works.

I have convinced both of my kids to invest their saved allowance into stocks. Each of them right now have two shares of TD and dripping.

2 years ago

Thanks for sharing! You make a great point about waiting to retire. While I respect everyone who is working towards FIRE it is just as good a goal to buy a house, travel, and raise kids while you are yonge and have that push back your retirement age. There are benefits to both appraches. Thanks for showing that the math works out if you save later.