Retirement – How much is enough?

Aug 26, 2013

More than ever before, Canadians seem to be concerned about whether they will have enough money to retire. Given the uncertainty about the economy, interest rates, and stock market, many are questioning their original retirement expectations. Even when we are retiring is changing.  The tradition of retirement at age 65 is a thing of the past, and mandatory retirement at any age is now prohibited in every province of Canada. Following the trends set by the private sector, we now have to wait a little longer for government-sponsored programs like Old Age Security which now are delayed until age 67.

Combined with the fact that we are living longer and the money has to last longer, do you know much is enough now?

Coming up with a figure is personal and based on each person’s specific needs and retirement criteria. Each person has different financial circumstances so a one-size fits all approach doesn’t work for everyone.  Many planners will recommend a certain percentage of pre-retirement income as the target such as 70 or 80%.  The good news is, it is not overly difficult to determine what is best for you. There are two steps. First, you need to figure out how much your anticipated lifestyle during retirement will cost on an annual basis – in other words what will your income needs be during retirement. Only then can you determine how much you will need to generate that annual income.  There are a number of good retirement calculators available online that can help get you started.

Once you have determined how much you need during retirement, you simply determine how much you need to save in a systematic, and hopefully tax effective way, in order to reach your personal target. A recognized principle of retirement planning is to start early and make consistent regular contributions to take advantage of compound growth in your savings account.

 It is never too early to start the process of retirement planning.  Planning early provides you time to adjust if you need to increase your savings, or cut down on your current costs so that you can live more comfortably on retirement.

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