How much money will you spend in retirement?

How much money will you spend in retirement?

How much money you need to save to retire is in part a function of how much money you will spend – and for how long.

Let’s try to identify some parameters for determining your retirement budget.

Statistics Canada

According to Statistics Canada, the average Canadian household spent $62,183 in 2016, an increase of 2.8% from 2015. Statistics Canada updates its Survey of Household Spending annually and maintains historical records.

Nobody really lives in an “average” Canadian household and retirees have unique spending differences from the general population. Perhaps a better glimpse into spending occurs if you focus in on the Statistics Canada data for couples without children or one-person households, both of which may be more relatable to retirees.

Average household spending for these two groups was $87,459 and $45,725 respectively, although spending net of income tax, insurance and pension contributions was only $65,086 and $36,339. These latter figures may be a better gauge of average spending on goods and services for retired couples and single seniors, although even then, couples and singles of all ages are included in these survey results.

I would suggest on that basis that average spending on goods and services for a retired couple of $65,086 and for a single retiree of $36,339 are likely on the high side. It’s no doubt though that many Canadian retirees will be well above or below these averages.


Sun Life did a study in 2016 called the Sun Life Retirement Now Report. They spoke to a good sample size of 2,006 Canadian retirees to determine how much less they were living on in retirement and most importantly, if they were happy. They also compared the retirees to 2,004 working Canadians.

They found that working Canadians spent, on average, $41,172 on food, housing, healthcare and taxes, compared to retirees who were only spending $31,332. These figures were a consolidation of both married and single respondents. As a result, the averages may be on the high side for single retirees and on the low side for married retirees.

This survey finding suggests a 24% decline in spending in spending in retirement, though because these figures include income tax, I find it can be a bit deceiving. If we back out income tax, the decline in spending on good and services was only 16%. I think even the 16% decline may be a bit overstated, given working Canadians often have children who drive up their cost of living.

You’ll note that the annual spending figures are significantly less than the Statistics Canada household spending figures above, mainly because the Sun Life housing costs only include utilities and property taxes, but not mortgage payments, condo fees, insurance, rent, renovations, repairs, etc. that are more extraordinary and personalized in nature. As a result, the Sun Life survey may provide a good starting point for retirees, but don’t forget to add home ownership costs beyond utilities and property tax to these figures to get a truer representation of retirement spending.

It’s also worth noting that the study found that 90% of married retirees surveyed felt positively about life in retirement, compared to 85% of divorced, separated or widowed retirees and 84% of single retirees. This may suggest that the retirement spending data obtained is indicative of a “happy” retirement for most retirees surveyed.

Trends during retirement

David Blanchett of Morningstar Investment Management wrote an article in the Journal of Financing Planning in 2014 called Exploring the Retirement Consumption Puzzle. In it, he notes the existence of what he calls the “retirement spending smile”, whereby spending tends to decline in the first half of retirement before rising in the second half (on an inflation-adjusted basis). As a result, the spending pattern may resemble the shape of a “U” or a smile.

The increased spending in the later years tends to arise, not surprisingly, from increased medical expenses, but also transportation costs, help around the house and other outlays that are directly related to aging.

I wrote about this as well in a 2017 article in the Financial Post called Why You Should Think ‘Smile’ When Planning Your Retirement Spending Path.

Real estate

Real estate is a huge consideration when it comes to retirement spending planning. There are a couple of reasons.

If you own an older home, obviously part of your budgeting needs to include ongoing repairs and possibly renovations. Whether you like it or not, large capital costs will factor into your retirement spending particularly when you own an older home.

If you own a vacation property like a cottage or a place down south, hopefully retirement means you can spend more time enjoying these properties – if you so choose. But if you spend less time, either because the cottage is tougher to get to or maintain or you’re travelling instead of wintering in Florida, a point comes where the financial cost of maintaining a valuable, though mostly empty piece of real estate needs to be weighed against the usage. Renting a cottage or vacation home may be better financially, although capital gains tax implications and family attachment to a secondary home need to be considered before selling.

Obviously, a home downsize or a sale of a second property can also inject capital into your retirement assets and potentially allow you to scale up retirement spending.

And if you rent instead of owning your home, that makes a big difference in terms of your long-term retirement spending. Owning a home can create a safety net for funding expensive long-term care costs in your 80s and 90s that doesn’t exist if you’re a renter.

Life expectancy

We often hear about the average Canadian life expectancy, currently 79 for men and 83 for women in Canada as of 2017 according to Statistics Canada. But these ages are simply representative of the average age at death across the Canadian population. This means Canadians who die at a younger age skew life expectancy downwards as compared to the age to which a retiree is expected to live.

For perspective, a retiree husband and wife, both aged 65, have a 50% chance that at least one of the two will live to age 94 and a 25% chance that at least one will live to age 97. The life expectancy of a 65-year old man is 89 and of a 65-year old woman is 91.

It’s not only how much you’re going to spend in retirement that matters for retirement planning purposes, but also, for how long. An earlier retirement or a longer life expectancy will both increase how much money you need to retire and be financially independent.


Nobody is average, but everyone is looking for some perspective. Take the above with a grain of salt.

Statistics Canada data suggests that spending on goods and services was $65,086 for couples without children and $36,339 for one-person households in 2016, but this includes Canadians across all age groups. Sun Life’s study suggests average retirees in 2016 spent $31,332 per year on good and services, though this excludes any housing costs beyond utilities and property taxes. It’s also a consolidation of married and single retirees, suggesting the figures should be higher for couples and lower for singles, while adjusted by both to reflect additional home ownership costs or rent.

The Sun Life study found a 16% reduction in spending as workers moved into retirement, but other global studies have been found to show more modest declines in spending.

Spending may decrease in the early years of retirement, but those who live a long life may not only have more years of retirement to fund, but are also exposed to the risk of incurring long-term care costs as they age.

Retirement planning is more art than science, but at least with some reasonable sense of what to expect with your retirement spending, you can develop a long-term retirement plan. I feel it’s prudent to budget to replace 100% of your pre-retirement basic living expenses, but some people will spend more or less depending on their personalized retirement and financial goals.


  1. Ian Murray

    I’m assuming these spending numbers are after tax spending?

    • Jason Heath

      Hi Ian,

      That’s correct. All after-tax dollars out the door.

  2. P Duchaine

    I prefer the analysis on spending in retirement in “Real Retirement” written by our Fed minister of finance(Morneau) when he used to work for Sheppel. It is based on Canadian, US and German data.
    It shows a decrease of spending as age increases due to lower mobility and activity (GO-GO phase to Slow-Go phase to NO-GO phase).
    He makes the argument that most people should get more than sufficient funding based on 50-55% of working income – while investment advisor would like you to aim for 70% (they get more fees that way).
    I am actually starting retirement in 11 weeks. I will be short by 4 year of my pension – so I will defer my pension -but will cash up my RRSP as needed – before the pension, Q/CPP and OAS (eventually) kick in – that way I will save on tons of taxes, avoid clawback at 71 and will travel while the health is there.

    I know I would be much richer to stick around (on my best paid years + increase pension), but this is not a game of monopoly – I have enough $, I reckon, so we made our choice.

    • Jason Heath

      I’d agree that some of the rules of thumb that suggest you need 70% of working income may be high. In retirement, you don’t have CPP/EI contributions to make, taxes tend to be lower, no retirement savings contributions and so on.

      The biggest problem is since most people have a combination of pension income and investments, it’s hard to figure out exactly what sort of income their retirements “assets” will produce.

      It’s important to take stats like Morneau Shepell’s, the ones I’ve shared here and any others with a grain of salt. Every retiree is different. Discussions like this are helpful, but everyone needs to consider their own situation.

      Good on you for retiring when it felt right. Lots of people stick it out until their pension is unreduced or until some sort of arbitrary age just “because”. Happy retirement!

  3. Dave

    Could you please provide the source of your information that a 65 yr old male is expected to live to 89 and a female to 91. Various online estimates I have seen say 82 for a male aged 65 and about 84/85 for a female.


    • Jason Heath

      Hi Dave. The source is here: Refer to the chart on page 9.

      This is from the Financial Planning Standards Council (FPSC) 2017 Projection Assumption Guidelines. You’ll note they quote the source as the 2014 Canadian Institute of Actuaries Canadian Pensioners’ Mortality Report.

      • Dave

        Thanks ! Some more reading!

    • Kelly

      Good article, however, I have never accepted the premise of pre retirement income, in most cases it has no basis on “what you will need” in our case we both have very well paying jobs but chose to live well below our means saving the rest,
      Plus ones entire lifestyle will change, kids, work related expenses, food consumption, post retirement hobbies, travel, the list goes on,
      Personally planning for early retirement we are starting by tracking our core expenses to “exist” over a rolling year, from there we build in a budget for unexpected expenses “car, house, repairs”, then the fun part the dreamers budget, “hobbies, travel, etc,”
      It’s a bit of work but eye opening, and exciting,
      What we have learned, core expenses to get by are less than you think, and due to free time and not having to travel in a two week “vacation” pattern but longer trips your fun money goes a long way;) and finally the only expert that can give you sound advice is you, the rest is general guidelines to be taken with a grain of salt but helpful non the less as they are in the ball perk.
      Best advice I got while “interviewing” retiree friends,,,, plan and dream, but it’s ok to change everything it’s your retirement!

  4. Deziner


    Well retired since 2001. We have no pension plans only personal savings 50 / 50 in RRSPs and free.

    We own our home and are basically debt free.

    I decided to do the numbers based on total spend.

    Canada $171.00 per day. would equal $62,415 a Year

    However we spend 5 months annually in Mexico. Way less

    Mexico $57.00 per day. Total spend.

    $114.00 day saving x 150 days = $17,100 per year.

    Thus our total spend nets out at $45,300 in a 12 month year.

    These numbers include all costs, Travel, Taxes, Health insurance property taxes.

    New car every 10 years, second car must make 20 years we only buy Toyota and drive a Prius travel 22,000 Kms year and fly
    to Mexico.

    4 Kids and 7 grand kids, Both over 70.


    • Jason Heath

      Thanks for sharing, Doug. It’s also helpful to hear about real life experience.

      I had lunch with someone recently who retired to Mexico from Canada and went into great detail on some of their costs. I was amazed at how much lower the cost of living was in Mexico.

      It looks like Mexico was # 2 on International Living’s 2018 list of the Best Places to Retire:

      International retirement isn’t for everyone, but I think it’s a viable option to consider, especially for those who want to stretch their retirement dollars.

  5. N. Fairfield

    What are your thoughts on supplementing your income through CHIP?

    • Jason Heath

      I don’t have a lot of clients who need to do so, but I know there are a lot of Canadians who have minimal retirement income and plenty of home equity for whom this is a consideration.

      In some cases, I think it’s a viable alternative, albeit hopefully a last resort. Reverse mortgages interest rates are high, so I’d rather see someone use traditional borrowing if possible.

      Before considering a reverse mortgage, it’s important to consider alternatives (drawing your investments, traditional financing, downsizing, selling and renting, selling and moving to a retirement home, etc.).

      I read a good article by Rob Carrick of the Globe & Mail on reverse mortgages recently:

  6. Patricia Castello

    I’m interested to know what type of health insurance people can get if they are spending 5 months in Mexico. Perhaps Doug would be willing to share what the cost is and what company he uses.

  7. fbgcai

    I’m with Patricia in finding out about health insurance!

  8. Mark Tayti

    You won’t know how much you need until you actually retire. I have been retired for eight years and I have more than enough. I won’t be eligible for my pension from the government for 5 more years but I took my CPP at 60, earlier this year. My advice: Pay off your house when you are young, take that money you would have been paying on your mortgage and bank it. Live within your means and stop measuring success by your neighbors standards or what you see on TV. You can always make more money if you have to but you can’t make more time. You are right. Retirement is more of an art than a science. Don’t be afraid to colour outside the lines.

    • Christine Piette

      Thank you for sharing. Great thoughts!

  9. Ganesh

    I have been keeping track of my expenses and we spend $72,000 a year for 2 adults + 2 teens. That is $6000 a month. This includes a mortgage payment of $1300 which will be over soon. That’s $4700 a month. We never think twice before spending on anything, but my wife and I are frugal and so turned out to be the kids. We eat well , play well, travel well. $72,000 expense doesn’t include $24,000 we stash away for RRSP and $34,000 we pay in taxes. I don’t see why we would need more than $4000 a month if house if paid off and don’t need 2 cars (and insurance, we never had car payments ever). And I wasn’t born rich, came to USA with $800 for Masters and ended up in Canada. We enjoy cooking so no eating out, we enjoy camping, picnics, hikes , bikes and SUP etc and spend very little on recreation. I am not sure why people need so much money. I will trade 50% of my salary for 50% more free time. I don’t think it will change my standard of living. Just curious if there are people like me in this world or I am a lone freak.

  10. Geraldine Beauchamp

    I read all the happy well planned retirements above and here I lie in bed at noon on a sunny day depressed because I do not know where to place my Rrif which has travelled from online to TDWealth to my home bank to Edward Jones ans finally to Meridian Credit Union where it rests in state earning a pitiful 0.45%. It had had 4 payments taken from it with no growth only losses and now sits a$139999. What to do? I fear this market at present. GICs .?


      I obviously do not know your financial situation but it almost sounds like you have too many people advising you on where to put your money. They “always” have a better place than the one where you are at present.
      Time to get out of bed and take your own future in to your own hands. You need to figure out what is best for you.


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