How much should you actually be saving?

"Save 10% of your income" is advice that ignores your age, your existing balances, your retirement date and your spending — which is to say, everything that determines the answer. The number is derivable, and the derivation runs in the opposite direction.

Why the rules of thumb cannot work

A savings rate has to reconcile four things: what you already have, how many years of contributions remain, what those contributions will grow into, and what you want them to fund. A single percentage cannot encode four variables.

Consider two people who both earn $100,000 and both save 12%. One is 30 with nothing saved; the other is 55 with $900,000. The same rate is wildly insufficient for one and probably unnecessary for the other. The rule has not been *approximately* right for either of them — it has been silent on the only thing that mattered.

Working it backwards

The derivation runs from the retirement you want to the contribution that gets you there:

1. Start with annual spending in retirement, in today’s dollars. This is the anchor and the input worth the most care.
2. Subtract what arrives without your portfolio — CPP, OAS, and any pension. These are often larger than people assume, and they are inflation-indexed for life.
3. The remainder is what the portfolio must produce, every year, for as long as the plan runs.
4. Project what you already have forward to your retirement date without any further contributions. Compounding on an existing balance does a surprising share of the work.
5. The gap between those two is what contributions have to close. That, divided across your remaining working years, is your number.

Step four is the one that changes people’s minds most often. Someone in their fifties with a substantial balance may find that existing savings compound into most of the target on their own — the contributions are closing a smaller gap than the anxiety suggests. Someone in their thirties will find the opposite, and will also find that they have far more years to work with.

What five more points buys Priya

Priya — 54, Ontario, single. $118,000 salary, $410,000 in her RRSP and $88,000 in her TFSA, planning to retire at 63.

Priya puts 10% of her $118,000 salary into her RRSP — $11,800 a year — and her plan already funds $58,000 a year of retirement spending to 90, leaving $422,378. Her question is not "am I saving enough?" It is "what would saving more actually do?"

Raising her contribution to 15% — an extra $5,900 a year for the 9 years she has left, about $53,100 in total — adds $109,487 to her estate.

The interesting part is what it does not change. Her retirement spending is the same in both plans — she set it, and both versions fund it. The extra saving does not buy her a better retirement; it buys a larger estate, and a bigger buffer if things go worse than projected.

Whether that is worth nine years of a smaller paycheque is a question about what she wants, not a question about arithmetic. The projection’s job is to make the trade legible, not to make it for her.

The two levers that outrank the savings rate

Running a plan repeatedly makes something plain: contributions are rarely the most powerful dial. When you stop working moves a plan further, because it changes both sides of the equation at once — more years of contributions and growth, fewer years of withdrawals. And what you spend in retirement sets the target the whole plan is measured against.

That is not an argument against saving more. It is an argument for checking which dial you are turning before you turn it hard, and for testing the answer against your own numbers rather than a percentage from an article.

Next: marginal versus average tax rate — the single number that drives nearly every decision in the rest of this series.

GlidePathEngine is an educational planning tool — not financial, investment, tax, or legal advice.