In a 2010 report released by the C.D. Howe Institute,1 David Dodge, Alexandre Laurin and Colin Busby estimated that Canadians need to save 10% to 21% of their pre-tax earnings each and every year for 35 years to replace 70% of their income from work and maintain roughly the same standard of living in retirement. The higher your income, the more you have to squirrel away. Over $150,000 in income translates into the highest required saving rate of 21%—which, as the authors point out, is more than Canadians are currently allowed to contribute to their RRSPs.
That brings us to Mike and Gary, a couple in their 50s who have high incomes, no debt and significant RRSP savings—but who are still a very long way from sustaining their pre-retirement lifestyle once they stop working. They face a difficult choice: reduce spending now to save more for retirement, or continue to live the high life today and scale back their retirement lifestyle expectations.