Canadians now believe they need $1.7 million in savings in order to retire, a 20 per cent increase from 2020, according to a new BMO survey.

The eye-watering figure is the largest sum since BMO first started surveying Canadians about their retirement expectations 13 years ago. It's also a drastic increase from the $1.4 million in savings Canadians expected to need for their nest eggs just two years ago.

The results reflect Canadians' concerns about current economic conditions, particularly inflation and higher prices, said Caroline Dabu, head of wealth distribution and advisory services for BMO Financial Group.

"If you look at the average Canadian, they're feeling the rising inflation costs," said Dabu.  

“And so, not surprisingly, we are seeing that Canadians are feeling they absolutely will need more to retire."

Canada's annual inflation rate hit a four-decade high of 8.1 per cent in the summer of 2022 and has since fallen to 6.3 per cent as of December 2022. BMO Economics expects the country's CPI to decline to around three per cent by the end of the year. 

The sharp increase to Canada's inflation rate in 2022 exceeded wage gains, eroding purchasing power for most families and heightening fears about the future. The BMO survey found that just 44 per cent of Canadians are confident they will have enough money to retire as planned — a 10 per cent decrease from 2020.

But while the $1.7 million figure may sound overwhelming to working-age Canadians, Dabu said the number says more about the economic mood of the country than it does about real-life retirement necessities.

"Certainly when we’re working with clients, we find that many overestimate the number that they need to retire," she said. 

“It really does have to be taken at an individual level, because circumstances are very different ... But $1.7 million, I would say, is high."

While rising inflation may require tweaks to a retirement plan — such as contributing slightly more to savings each month if you're a young worker, or making cash flow adjustments if you're nearing the end of your working career — Dabu said these changes don't necessarily have to be drastic.

When it comes to retirement planning, Dabu said, knowledge is power. By working with a professional financial advisor and making a plan that encompasses individual circumstances and goals, Canadians can come up with their own retirement savings number.

"In the survey, we note that 53 per cent of Canadians didn't know how much they will need to retire," Dabu said.

"That increased confidence comes from knowing the exact number that I need to save for, and how I’m going to get there."

The BMO survey also found that approximately 22 per cent of Canadians plan to retire between the ages of 60 and 69, with an average age of 62. 

Millennial and generation z Canadians are the most nervous about their ability to save and invest right now, the survey found. However, all age groups — 74 per cent of survey respondents — said they are concerned about how current economic conditions will affect their financial situation, and 59 per cent said economic conditions have affected their confidence in meeting their retirement goals.

The BMO survey was conducted between Nov. 4 and 7, 2022 by Pollara Strategic Insights via an online survey of 1,500. The survey's margin of error is ± 2.5 per cent, 19 times out of 20.

This report by The Canadian Press was first published Feb. 7, 2023.