How much do you need to retire comfortably?

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How much do you need to retire comfortably?

Many people believe that retirement is the time to start doing what they really like. However the reality is that many don’t have enough saved to retire comfortably and have to push those dreams to a later date. A recent study showed that 32% of Canadians between 45 to 64 don’t have anything saved for retirement and 53% don’t know if they have saved enough.

Retirement is the time when you decide not to receive income from work or self employment and live from saving assets and pensions. When to retire is a difficult decision as not only means that your accumulated assets will start to deplete but new questions arise such as: what would you do with your time? how much retirement activities such as traveling and entertainment would cost you? What if my health starts to deteriorate and I don’t have enough savings to keep us with my standard of living?

The first thing to do when planning retirement is ask yourself, what would you like to do when you retire? Make plans, imagine your ideal retirement , set and prioritize goals.  Once you have a vision of your ideal plans, its time to quantify those plans.  Retirement is about the alignment of money, values and dreams. When deciding if you should retire, determine the type of lifestyle that you want to live and if you can afford it.

What Does Retirement Mean to You?

For some, retirement means simply leaving their current job. These people are fine working, but they want a change, and making a change may come with a pay cut. For others, retirement means a complete exit from the workforce. If you’re married or have others who are financially dependent on you, they should be part of the decision. If you’re single, the answer is likely much simpler.

Some career-oriented people are not suited for retirement. They are used to being “the go-to person” and find they get bored in retirement. If this sounds like you, the answer as to when you should retire might be “never.” Before you retire, give some serious thought to what activities inspire and motivate you.

Start a list of hobbies that you want to pursue or organizations to which you want to contribute your time. From a mental and physical health perspective, stay active. Your body isn’t made to remain still all the time. Part of your retirement planning should include strategies for staying active and mentally challenged.

As an alternative to traditional retirement, look for ways you can try out retirement. Perhaps your current situation offers part-time work or a sabbatical. Maybe you can take a long leave of absence. Retirement is a major life change just like moving, marriage, or a job change, so plan on going through an adjustment period. The more time you spend thinking about and planning for retirement, the more likely you’ll retire at the right time.

Remember that just because you’ve reached retirement age and might be eligible for a pension or for social security/ old age security doesn’t mean you should retire. Maintaining a comfortable lifestyle means different things to different people.

For example, if retiring today could be accomplished, but you would need to downsize your home, car, and overall lifestyle, it may not be ideal for you. For others, it may be perfect. Some people retire, while others prefer to work longer if it means maintaining a higher standard of living in retirement. So, the question is not can you retire, but how much do you need to save to have the kind of retirement you want.

It would be nice if there were a simple answer that would tell you how much savings you need to retire. However, everyone is different, and the right amount for you may be drastically different for someone else. Work through your numbers with the calculators we provide you to calculate the amount that you need to afford your desired retirement.

When are you ready to retire?

There are several steps to determine if you can afford to retire:

  • Estimate your total annual spending, including periodic expenses like dental work and home repairs.
  • Add up all of your potential sources of income in retirement. Be sure to look at how much more income you may receive by claiming government pensions at a later age, or waiting to collect your pension until a later age.
  • Be realistic about how much you can withdraw from personal savings and investments. Withdraw too much, too fast, and you risk running out of money too soon. Be cautious about using academic rules-of-thumb. They don’t always work so well in the real world.
  • Don’t be shy about seeking professional help. Retirement is a big decision, and many of the decisions you’ll make are permanent.

If you go through your financial projections and determine you can’t afford retirement, it’s probably too soon. Instead, explore ways to save more money, or find work you enjoy, so it doesn’t feel like work. Revamping your career may allow you to work longer and accumulate the funds you’ll need.

How much do you need to save for your retirement?

As a rule of thumb you need to have enough savings that will provide you with 90% of your last years income before you start your retirement. Below we provide you with a basic calculator to estimate the amount of retirement savings that you might accumulate by saving every year a portion of your annual income and the number of years that your retirement savings will last. By entering your current age, your retirement age and your current income you can have an idea of the amount needed to save to take your retirement decision and keep the same standard of living.

 At this point you might be wondering how are you going to save the money needed for your retirement. Some of these fuds will come from your company pension, from any government benefits you might be eligible and from your own savings. We can help you explore what is the best investment vehicle to achieve your savings goal according to your level of risk. If you find that you would like additional help in revising your retirement projections we can test your initial assumptions  and help you build a personal financial plan. Feel free to book an online meeting with us:

-alternatively you may contact the author. Call 289-856-8397 or send an e-mail to learn@moneylesson.org

“This article is an expression of the author’s personal opinions. The Company will not be held liable in any way for the opinions expressed herein.”  

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