Canadians 'drowning in debt': 47% will borrow to cover costs, survey says

[GGG]

I think you ignore the costs of working and the cost of mortgage when comparing to what they spend today. If you are driving 20km round trip to work and spending 400 a month on parking plus 2k a year on work clothes and $250 per month on lunch your cost of working is $1000 per month. Now some of that is transferred to your expenses while retired but certainly not all. Then account for say 20-30% of after tax income going to a mortgage and 10%-20% of pretax going to retirement savings.

So your retirement expenses are going to be significantly less so if someone is living off of 100k after tax during life there after tax income sans inflation only needs to be something around 64k to have the same lifestyle. I think it’s also reasonable to target savings based on an expected life expectancy then use your house to cover the overages. So cash savings to 85 then House seems like a reasonable way to plan as opposed to 4% save withdrawal rate and never hit capital.


I really appreciate this thread as it made me go look again through retirement planning and budgeting again and make a few tweeks. Also appreciated that MrMoneyMoustache link for a completely different philosophy around how to think about money.

[nik-]

Originally Posted by stone hands

not who you asked, but my retirement income requirement is going to be about 45k a year until my house is paid off, at which point it drops to 24k

You should probably just not retire until your house is paid off. $24000 a year is really meager

[Slava]

Originally Posted by stone hands

not who you asked, but my retirement income requirement is going to be about 45k a year until my house is paid off, to which point it drops to 24k

That might be enough to get GIS? If that's the case I guess you beat the system because you can collect your CPP and OAS, top it off with the GIS and not have to worry.

I just think that's exceptionally low.

[stone hands]

Originally Posted by nik-

You should probably just not retire until your house is paid off. $24000 a year is really meager

oh i'm not going to retire until i get 45k a year in passive income at a 4% withdrawl rate, dont worry

[stone hands]

Originally Posted by Slava

That might be enough to get GIS? If that's the case I guess you beat the system because you can collect your CPP and OAS, top it off with the GIS and not have to worry.

I just think that's exceptionally low.

our current spending as a household that grosses 110k is only 45k a year currently

[Slava]

Originally Posted by stone hands

oh i'm not going to retire until i get 45k a year in passive income at a 4% withdrawl rate, dont worry

So to put that in perspective for people saying you need to save too much. That living the high life retirement sounds like $1.125m in savings.

[nik-]

Originally Posted by Slava

So to put that in perspective for people saying you need to save too much. That living the high life retirement sounds like $1.125m in savings.

And then you tax that at 25%. 1.5 million is a lot of money to a lot of people, but really it's what you need to be comfortable in retirement. Not extravagant, comfortable.

[rubecube]

Originally Posted by Slava

So to put that in perspective for people saying you need to save too much. That living the high life retirement sounds like $1.125m in savings.

Or well under what most people were suggesting would be subject to an inheritance tax.

[GGG]

Originally Posted by PsYcNeT

https://www.compareyourincome.org/in...lity_in_canada

According to this tool, 160,000k+ household before tax has you in the top 10% of earners in Canada.

I believe their dataset is based on Statscan and Pew Research.

There is a pretty large income disparity, not as large as say, Brazil, but definitely not small. And it's growing.

That’s a neat chart.

The one thing I found surprising is it said that an after tax income for a family of 4 of 48,000 would be considered poor. That is a surprisingly high point to call poor.

[Slava]

Originally Posted by rubecube

Or well under what most people were suggesting would be subject to an inheritance tax.

Lol, should an estate tax hit people near the the poverty line? When seniors are qualifying for the Guaranteed Income Supplement its needs based.

[rubecube]

Originally Posted by Slava

Lol, should an estate tax hit people near the the poverty line? When seniors are qualifying for the Guaranteed Income Supplement its needs based.

Eh? That's not at all what I was saying. I'm not even sure why an estate tax on exorbitant wealth is being bandied about as a deterrent to retirement savings. That makes absolutely no sense. No sane person is going to say to themselves "Well I better not save for my retirement because the government is going to take the leftovers when I die."

[GGG]

Originally Posted by nik-

And then you tax that at 25%. 1.5 million is a lot of money to a lot of people, but really it's what you need to be comfortable in retirement. Not extravagant, comfortable.

Depending on situation and your belief in Social Programs you can knock that down significantly. Assuming married 600 in OAS per person and even a vet conservative 600 combined CPP and you have 1800 per month in income which using a 4% SWR is work about 540k.

So 1 million in today’s dollars with today’s social programs and a paid off house is enough to retire comfortably.

[nik-]

Originally Posted by GGG

Depending on situation and your belief in Social Programs you can knock that down significantly. Assuming married 600 in OAS per person and even a vet conservative 600 combined CPP and you have 1800 per month in income which using a 4% SWR is work about 540k.

So 1 million in today’s dollars with today’s social programs and a paid off house is enough to retire comfortably.

If your retirement is staying home, or the odd dinner out maybe. If you want to enjoy your retirement, if you want a trip or two a year, it's really not. It's not now, in 20 years it won't be close.

A lot of people are planning for really miserable retirements and then they'll die quicker because they're literally bored to death.

[rubecube]

Originally Posted by nik-

If your retirement is staying home, or the odd dinner out maybe. If you want to enjoy your retirement, if you want a trip or two a year, it's really not. It's not now, in 20 years it won't be close.

A lot of people are planning for really miserable retirements and then they'll die quicker because they're literally bored to death.

With the health problems I already have, I'm under no illusions that my retirement will be anything but miserable.

[nik-]

I told you that you couldn't just replace cigarettes with asbestos, but would you listen? No.

[rubecube]

It just tastes better!

[nik-]

That's the iron in the blood your lungs are projecting your mouth.

[pseudoreality]

I still think it is reasonable to assume you will die at some point.

[Enoch Root]

Originally Posted by PepsiFree

My only point is that you do not, actually, need that amount of money to live "comfortably" in retirement.

It's this prevalent idea of greed, and "more" that I think is a bit distressing and why people are, overall, very bad with their money. That much money ($150k-$200k, household) is enough to live comfortably with a mortgage, two car payments, and two kids, unless you have a spending problem. If you bought too big a house, or your cars are too expensive, or whatever, it's not a lot, but if you're in that situation you're not saving $4M anyways.

I struggle to understand people who think you need $150k+ for two people to get by comfortably with bare minimum expenses. What are you spending your money on? Break it down for me, and help me understand.

No, you don't need that much money, and no one suggested that you do. However, if retirement is 30 to 40 years, and thus a significant fraction of your life (i.e. about a 3rd of it), it is not unreasonable to hope for, and plan for, a little more than just what is required to get by comfortably.

[nik-]

Originally Posted by pseudoreality

I still think it is reasonable to assume you will die at some point.

Sure, with that attitude you will.