Today, however, that once magical number no longer carries the same weight.
Rising costs, longer lifespans and inflation have quietly changed the math. For many Canadians, $1 million may no longer be enough to support the retirement they envision.
Inflation and longevity quietly erode wealth
Inflation is one of the most underestimated risks in retirement planning. The Bank of Canada is targeting long-term inflation of 1% to 3%, and even at the high end of that range the impact is significant. At an annual rate of 3%, the cost of living more than doubles every 24 years. What feels like a comfortable income at age 65 may feel restrictive at age 75.
What makes that problem even worse is the longer life expectancy. According to Statistics CanadaAs of 2023, Canadian men will live an average of 79.5 years, while women will live to 83.9 years.
Many retirees would spend decades drawing down savings, especially if they retire early. A $1 million portfolio now must stretch over a longer timeline, increasing the risk of running out of money if returns don’t keep pace with inflation.
Why $1 million feels smaller in practice
The classic ‘4% rule’ suggests that a $1 million portfolio can generate an annual income of at least $40,000. Even combined with the benefits of the Canada Pension Plan (CPP) and Old Age Security (OAS), that income can feel tight, especially in expensive cities like Toronto or Vancouver. Housing, groceries, property taxes, insurance and discretionary expenses like travel can quickly eat up income.
Healthcare is also becoming an increasingly large expense item as people get older. While Canada’s public system covers essential care, retirees are often faced with out-of-pocket costs for prescription drugs, dental care, supplemental insurance, home care or mobility assistance. These expenses tend to increase with age and must be financed from personal savings, putting further pressure on retirement savings.
Beating inflation with growing income
The solution isn’t necessarily to save a lot more; it is structuring a portfolio designed to grow income over time. Retirees don’t need to panic about depleting their savings, but they do need assets that can beat inflation.
Brookfield Infrastructure Partners LP (TSX: BIP.UN) is a good example of an inflation-proof investment. The company owns and operates a globally diversified portfolio of infrastructure assets, many of which are regulated or contractually indexed to inflation. This structure supports steady and growing cash distributions.
BIP recently increased its distribution by 5.8%, marking its 17th consecutive year of distribution growth. The backlog of capital projects, particularly in data infrastructure, positions the company well for the next two to three years.
At about $51.40 per unit, the stock yields about 4.8%. Assuming a conservative annual distribution growth rate of 5%, long-term returns are approximately 10% per year. The near-term analyst consensus price target also suggests the units are trading at a discount of around 10%, providing additional upside potential over time.
For retirees, holding such income-producing assets in a tax-free savings account (TFSA) can be particularly powerful, because both income and growth are protected from taxes.
Takeaway for retirees
A $1 million retirement portfolio no longer guarantees long-term comfort. Inflation, rising costs of living and longer lifespans have fundamentally changed retirement accounts.
To make their savings sustainable, retirees need portfolios that focus on inflation-reducing returns and growing incomes. High-quality infrastructure companies like Brookfield Infrastructure Partners – especially if managed fiscally efficiently and accompanied by market corrections – can help bridge the growing gap between retirement expectations and reality.
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