What if you never buy a house?

As a money coach I  have many clients that believe owning a home is a prerequisite to retiring, either to live in "rent free" or to eventually downsize and use the profit to support your lifestyle. For the many people who feel priced out of the housing market I thought it would be practical to explore what retirement saving might be like in a world where buying wasn't an option.

The last year has been a meteroric year for Canadian housing in many cities. I had the unique experience of purchasing my first home during COVID and while its something I don't ever wish to repeat I did gain some fantastic insight and now that we are settled in I think I have the ability to comment on how this purchase has changed my retirement planning.

A renters world

Let’s imagine Taylor, a person making $55,000. After maxing out their RRSP ($9,900) and TFSA ($6,000) Taylor would be left with $29,500 after tax dollars or $2,458 after tax and registered contributions a month, this is more then enough to lead a decent quality of life in many places in Canada (even Toronto, Numbeo says ~$1,200 for non-rent expenses and Toronto.ca says $1,200 to rent a studio apartment), and Taylor will have some left over at the end of each month. Taylor’s savings rate is 29% of their GROSS pay but they can still afford to live decently well.

If we make the (bold) assumption that Taylors salary is adjusted for inflation and all of their living cost go up with inflation (Ontario rent increases  are heavily regulated and pinned to inflation) then we can project what Taylors investments might grow to over a 30 year period.

$1,325/month contributed over 30 years growing at a real 7% return 

In 30 years Taylor will have an inflation adjusted $1.5MM dollars across their RRSP and TFSA. Using the 4% rule this would be enough money to replace their $55,000 annual income and begin retirement, if we include CPP and OAS (which become available at 65) Taylor has more then enough!

Now you might have noticed a couple things:

  1. We have a very slim budget for discretionary spending like vacations, luxury purchases, and anything not included in Numbeo's calculation
  2. Taylor lives in a studio apartment their entire life which is not optimal
  3. In retirement Taylor is no longer contributing to their income to savings so they don't need to replace $55,000 but rather $44,380 pre-tax income

To adress this lets run the numbers with 20% increased rent (upgrading to nicer accommodations) and budget $2400/year for discretionary spending (ie vacation). This means we will reduce our annual savings from $15,900 to $10,620 and after 30 years our retirement looks like:

$885/month contributed over 30 years at 7% real return

An inflation adjusted $1MM. Using the 4% rule we can nearly replace our entire $44,380 of expenses and assuming Taylor has CPP and OAS down the road, they likely could retire in their mid 50's, nearly 10 years sooner then in the previous example.

*Its worth mentioning if Taylors compensation increases beyond inflation they should consider contributing a portion of that to their savings so that they don't take a income reduction in retirement.

What about a family?

Would the numbers work if you had a family? Lets find out!

Let’s imagine Taylor found a partner “Alex” in a similar situation, their combined income is $110,000 (~$90,000 after tax), they max out their registered accounts ($31,800), and have ~$4,850 after tax and registered contributions each month. Alex and Taylor can rent a decent place for $2,000/month and have $2,850 extra, more on this later. Their retirement will be the same as before, they both will have ~$1.5MM over a 30 year saving period for a total of ~$3MM inflation adjusted, this is enough to replace almost all their $90,000 annual after tax income for an early retirement.

What about kids? Well the unfortunate reality is kids cost money, alot of money. In Toronto having a child will cost on average $1000/month over their life (more at the begining, less as they get older), those costs include lost wages while on maternity/paternity leave, childcare, and general food/clothing/discretionary expenses. The good news is that even Taylor and Alex would qualify for CCB which would work out to around $310/month per child (assuming they had 2 kids) or about 31% of the total cost, the bad news is that they still will need to delay their retirement to accomodate the remaining cost.

That $2,850 per month was more then enough to cover Alex and Taylors expenses but not their 2 future children. If we include the $620 CCB Alex and Taylor have $3,470/month to cover all 4 of their living expenses, Numbeo indicates that they would need $4,447/month for a family of 4 meaning they will need to reduce their retirement contributions by $977/month to make up the difference. The additional cost of living reduces their annual retirement savings from $31,800 to $20,076, lets see what that looks like after 30 years:

$1,673/month contributed over 30 years at 7% real return

When Alex and Taylor become empty nesters they would have annual expenses of $52,000 after-tax or ~$60,000 pre-tax. With their savings of $1.9MM they could have an early retirement in their mid 50's without making any further sacrifice. Having children has required sacrificing some luxuries, maybe moving a little further from the city, and likely delayed their retirement but has likely increased they overall financial stability as they have immediate family to fallback on if belts need to be tightened.

Now back to the real world

In the real world owning is an option and if Alex and Taylor decide after some years that they really would like to own they can; with a huge nest egg in their registered accounts they can choose to use some of toward a down payment. Owning may require relocating depending on what you are looking for but that is for you to choose, as shown above owning a property isn't a pre-requisite for retiring comfortably. Homeownership is a lifestyle choice and doesn't merit going "house-poor" and sabotaging your chance to retire comfortably.

Caveats and considerations

There are alot of assumptions that I made with Alex and Taylor; they had a rock solid median income, it was inflation adjusted, they were always able to find reasonable accomodations within their budget, they saved every month, and never deviated from their plan. I also assumed that they worked and retired in one of the most expensive cities in the country, they had a fully funded retirement with no quality of life changes, and retired significantly earlier than the national average.

Alex and Taylor were the median family, half of Canadians are better off and half are less so. I know an early retirement (or any comfortable retirement) is not an option for many Canadians, for those folks I think we need to have stronger and more flexible support systems in place like low income subsidies for working Canadians and more from programs like GIS for struggling retirees. For the large portion of young Canadians where a comfortable retirement is possible (with or without owning) I urge you to reach out for assistance building a plan.


If there is anything to draw from this it is that the best time to start saving for retirement is 10 years ago, the second best time is now! Finacial planners, advisors, money coaches, etc are services that exist to help consult with an expert and build a plan that will allow you to reach your goals. If this is something that interests you feel free to look around your city for one of these professionals or signup for one of my roadmapping sessions!