How to save $400,000 by age 50

Mark earns a modest income but wants to retire early, like his parents

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From the February/March 2015 issue of the magazine.

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Mark Wade of Belleville, Ont. wants to have $400,000 by age 50 so he can retire early, like his parents did (Photograph by Ash Murrell)

Mark Wade of Belleville, Ont. wants to have $400,000 by age 50 so he can retire early, like his parents did (Photograph by Ash Murrell)

The current situation

Mark Wade, 32, wants to retire at age 50 with $400,000 in savings. As an operations supervisor for a cleaning company in Belleville, Ont., he earns a modest $28,000 a year. But Mark’s a diligent saver and annually deposits $5,100 into his TFSA, $4,000 into his RRSP and $3,000 into a non-registered account. “I don’t like to work so I’m saving more than 30% of my income now to retire frugally at 50 like my parents did,” he says.

Of some concern, though, is the fact that almost all of his investments are in mutual funds with management expense ratios (MERs) of 2.7%. That’s high, Mark realizes, but his portfolio, which is mainly comprised of Canadian equities, has returned 11% annually over the past 16 years—so he’s not too concerned. Mark’s also done some shrewd real estate investing and recently sold an income property he bought four years ago. “I’ll pocket $85,000 from the sale,” he says. All totalled, Mark has $193,600 in assets, which includes a $35,000 cash emergency fund. To live comfortably in retirement, he anticipates needing just $18,000 net annually. “I’ve always lived frugally and don’t plan to ever stop.”

The verdict

According to Vickie Campbell, a certified financial planner with Ryan Lamontagne in Ottawa, Mark is on track to easily reach his goal. In fact, he’ll reach it by age 43. “He has a few advantages,” she says. “Time, the power of compounding and access to tax-sheltered vehicles. Plus, he’s already halfway there.”

Going forward, Campbell wants Mark to continue to put his annual maximums into his TFSA and RRSP but says his portfolio requires diversification. “He needs to add some international and U.S. equities to his mix, as well as a solid fixed-income fund to lessen any risk. A portfolio made up of 60% equities and 40% fixed income will return 4% net annually and get Mark to his goal.” Campbell also recommends Mark forgo the high-fee mutual funds he’s using now in favour of low-cost index funds. If he goes ahead with this low-cost, low-risk strategy until age 50, he’ll have more than $560,000 at that time, says Campbell. Coupled with CPP, OAS and possibly GIS (if he makes withdrawals from his accounts to maximum tax efficiency), “Mark should have no problem making his nest egg last a lifetime.”

Mark Wade

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16 comments on “How to save $400,000 by age 50

  1. Wow.

    On a modest income, setting a realistic goal, and applying impressive discipline, Mark is a fine example of how Canadians *do* have the ability to save and retire comfortably, *if they make it a priority.*



  2. I’d ditch the RSH stock and move my investments out of the high MER mutual fund to index ETFs. 11% is only 8% after your fees, I wouldn’t be so stoked about that.


    • 11% is what he has been earning. That’s after fees, meaning 13.7% before fees. In Canada returns are shown net of fees. Find me an ETF that has returned 11% average for 16 years. You are probably in the idiot group that thinks its all about lower fees. Fees don’t matter in his case where he has found an exceptional fund. I wonder what he is invested in? I see a lot of recommending of ETF’s that return 5-6 % instead of Mutual Funds which return 8-9% (after fees). People tout the fee savings but don’t look at the NET performance. Not all mutual funds are worth the fees, just like not all ETF’s are better.


  3. Did we miss something here?

    While we respect the choices he has made, where does he live? Do we assume he lives with family? If yes, then another personal choice, and offers the opportunity to save and build wealth via said savings

    We do applaud Mark for his savings habits, and his 0 debt load.


  4. I hate these poorly explained articles. Is the $28,000 after taxes, CPP and EI. So Mark lives on $16,000. Does he rent and what are the costs or does he sponge off his parents? In most cities rent would be $12,000, food $2-3000, and that would not leave much for insurance, utilities, travel to work, clothes etc.


    • I strongly agree with you. The article just wants to show people who make less money can still save for retirement and ignores so many things.


      • Also, does not mention the possibility of a family or is he planning to be single his whole life?


    • Agreed. I’d suppose he will never pay more than 1000$ for his wedding or rely on his wife to pay all expenses. Forget raising kids as well. I don’t know how many can identify themselves to this case.


  5. what kind of annual income can he expect from $400,000 savings with a 4% return? At 50 he will not get much from the government programs yet. Even if he lives frugally, medical expenses etc. could be a big problem on such an income, couldn’t they? 4% gives him about $16,000 per year, which is not a lot to live on even if you are frugal. And living so close to the edge, inflation coud really hurt him since he will be retired for 20-30 years!


  6. This scenario is laughable and offensive to people living on the poverty line. Saving 30% of income plus having an investment property. Does realize the year is 2015 and not 1960.


  7. I’d have to agree with an earlier Post. Another fine example of a poorly explained article.
    However, I am interested in what specific Mutual Funds/Equities yielded 11% annually over the past 16 years.


  8. I have a couple comments to make
    1) Bridget, his 11% return is net of fees. You don’t advertise gross returns. His gross return would be 13.7% if you included his MER.

    2) Depending on which fund companies Mark is investing with, I find that this article didn’t even try to show the savings Mark could experience sticking with mutual funds however moving his investments to the fund companies high net worth version of the mutual funds which would definitely shave quite a bit off his total MER.

    These stories are always great to hear but I believe the CFP’s whom are chosen to comment have biased opinions and don’t show the full story or full set of options for the clients.

    By any means I’m not praising or playing down the cost of MERs, however Mutual funds and ETFs all have their pros and cons.


  9. id like to know where he lives, how much he pays for rent and utilities, how he transports around town, and what his leisure activities include. I don’t know how anyone could live off that little income ($15,900 excluding the amount he puts away in savings).


  10. Personally I would focus on :

    “annually deposits $5,100 into his TFSA, $4,000 into his RRSP and $3,000 into a non-registered account”

    You might not agree with the “Extreme savings model”, but lets say say a couple makes close to a combined $100,000 K between them. This would be 12% of their yearly income and IMO not unattainable with very little discipline involved? Don’t forget the $4000.00 contribution to the RRSP will probably give you a $1200.00 return that you could use for the TFSA. I feel the bigger message here is you could tuck away a pretty good amount of money if you follow the three above steps, but yes, use low cost ETF’s or the TD Index funds.

    There are a lot of “ERE” (early retirement extreme) people out there. Totally agree with everyone on that point. It’s a strange way to live for most but some do it and they usually think the “herd” is strange… Many of those people though, have replacement side careers or “fail to mention”, their wife works and has health benefits that cover the whole family for example, they blog, they find cash work to do, etc. But try to point those points out and prepare for the backlash from their community. “The validity of “ERE” in 2015. I think that is a whole topic for another article.


  11. another dreamer…maybe he expects a large inheritance as described in a previous article…ride the bus…eat in shelters…maybe…reality check…rent… food…entertainment…phone…car…insurances ( medical, furniture , car) clothing…unexpected…advice…keep on working as long as you can…if you like your job and is healthy, why not….


  12. Thank you for all the comments. Allow me to address some of your questions.
    By the way, the photo was taken at a restaurant in Trenton Ontario called Tomassos (excellent food)

    1. The income posted is NET income.
    2. Living expenses–I own a home, in which I rent out 75% of it, I live in a separate part of it. I pay zero rent. The rent I collect from the tenants pays for all utility costs, upkeep and insurances. It generates a very healthy R.O.I. on a monthly basis and I pay ZERO out of pocket expenses for my living costs.
    3. I remain unmarried and have zero children. I will never will get married or have children. I value my freedom, and money too much for that. I go out and have fun when I want without being tied down.
    4. All my accounts (including newly purchased stocks) are invested in DRIP’s. Article does not take into account the DRIP factor.
    5. CPP, OAS and GIS will tally nearly $12,000 per year at an early withdraw based on current calculations. This is in addition to the $16,000 per year at a basic 4% return on current investments for a total of $28,000. My current living wages.
    6. In addition to what is stated in article, I increase my savings every year. This year, an even $20,000 has been put into investments. All $28,000 of my salary is investable, as the rent I collect pays for all living expenses.
    7. The current estimated date for $400,000 is now projected at age 39.

    Thank you all for the comments


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