What's Your Number? (For Retirement)

[Geraldsh]

I retired at age 65, having saved 11 times my annual salary. I withdraw 4% which, combined with cpp & oas , is more than I spend so a bit of cash accumulates in chequing each month.

Eight years have passed and my savings are still within $50,000 of the original amount. That amount is more dependent on the market than on my lifestyle.

[CliffFletcher]

I get a kick out of the real-life financial and retirement planning advice on sites like the Globe and Mail.

She’s a 51 year old health care administrator who earns $130k. He’s a 53 year old engineering consultant who earns $150k. She has $310k in RRSPs and a pension that will pay out $50k a year. He has $240k in RRSPs and $110k in a TFSA. They have two years left until their mortgage is paid down, and owe $25k in car payments and $30k on a line of credit. They want to know when they can retire.

The advice is a little belt-tightening and to keep working for another 6-8 years.

For once I’d like to see an appraisal of a typical Canadian family.

He’s a 56 year old insurance estimator who earns $70k. She’s a 51 year old clerk at the license registry who earns $50k. She has $80k in RRSPs, and he has $60k. They have six more years on their mortgage.

So mister G&M financial advisor, what’s the plan?

[Slava]

Originally Posted by CliffFletcher

I get a kick out of the real-life financial and retirement planning advice on sites like the Globe and Mail.

She’s a 51 year old health care administrator who earns $130k. He’s a 53 year old engineering consultant who earns $150k. She has $310k in RRSPs, he has $240k in RRSPs, and they have another $110k in a joint TFSA. They have two years left until their mortgage is paid down, and owe $25k in car payments and $30k on a line of credit. They want to know when they can retire.

The advice is a little belt-tightening and to keep working for another 6-8 years.

For once I’d like to see an appraisal of a typical Canadian family.

He’s a 56 year old insurance estimator who earns $70k. She’s a 51 year old clerk at the license registry who earns $50k. She has $80k in RRSPs, and he has $60k. They have six more years on their mortgage.

So mister G&M financial advisor, what’s the plan?

Well the thing is no one wants to read that advice. People don’t want to hear that in person, let alone read it in the newspaper.

Years ago though, that scenario might have worked....people would work until 65 and die at 70-75. They were content to spend that 5-10 years doing very little and maybe taking a trip or two. We demand more now though and want to retire earlier and do everything possible during that initial 10-15 years. It’s a different world!

[GomerPile]

I had an interesting debate with my Mom(65) and Dad (70) the other day. They were kind of on how none of the "kids"(30-40yr olds) were engaging in their small towns community groups. That would be the Kinsmen, Lionettes, Lions, Curling Club Board. They were of the opinions that "we" were just users and didn't want to be part of building the community. In the next breath, they started talking about a new food truck in town, and how someone bought the bakery and coffee shop etc etc and it was beginning to feel like the town had life again.

It lead to a long discussion on how building communities has changed. I feel like more and more people are trying to build a job in their late 40's that can take them into retirement and be happy. A job, a hobby business or however you want to frame it. That idea of working for 30-40 years, retiring and joining social clubs is probably going to die with that generation.

This conversation here kind of reinforces that, not one person has really said. I am going to pull the pin and sit in a Florida golf community all winter. Lots of responses see that "busy" as healthy. Its interesting.

[boogerz]

Originally Posted by Fuzz

OK, I choose 200.

At least you know you're getting MAID'd at 200 instead of 72

[CliffFletcher]

Originally Posted by Slava

Well the thing is no one wants to read that advice. People don’t want to hear that in person, let alone read it in the newspaper.

Years ago though, that scenario might have worked....people would work until 65 and die at 70-75. They were content to spend that 5-10 years doing very little and maybe taking a trip or two. We demand more now though and want to retire earlier and do everything possible during that initial 10-15 years. It’s a different world!

That’s all true. But I’m confident that the second scenario is a lot closer to typical for Canadians than the first. The retirement lifestyle we promote and treat as normal is unattainable for half of Canadians.

[troutman]

When my brain gets uploaded, what will be the annual server fees?

[Cowboy89]

Originally Posted by CliffFletcher

That’s all true. But I’m confident that the second scenario is a lot closer to typical for Canadians than the first. The retirement lifestyle we promote and treat as normal is unattainable for half of Canadians.

The average Globe and Mail reader isn't your average Canadian. Also even if it was directed for the average audience, no one wants to hear that their situation is too fargone to retire comfortably, which is essentially the situation you painted.

[GGG]

Originally Posted by CliffFletcher

I get a kick out of the real-life financial and retirement planning advice on sites like the Globe and Mail.

She’s a 51 year old health care administrator who earns $130k. He’s a 53 year old engineering consultant who earns $150k. She has $310k in RRSPs and a pension that will pay out $50k a year. He has $240k in RRSPs and $110k in a TFSA. They have two years left until their mortgage is paid down, and owe $25k in car payments and $30k on a line of credit. They want to know when they can retire.

The advice is a little belt-tightening and to keep working for another 6-8 years.

For once I’d like to see an appraisal of a typical Canadian family.

He’s a 56 year old insurance estimator who earns $70k. She’s a 51 year old clerk at the license registry who earns $50k. She has $80k in RRSPs, and he has $60k. They have six more years on their mortgage.

So mister G&M financial advisor, what’s the plan?

I think your 1st couple is far worse off. They have a combined income of 280k and only 600k in assets. So essentially have been spending 140+ per year after tax and are no where close to the 2.5 million+ they need to support that spending.

Your second couple will get about 3000 per month in CPP/OAS which replaces 1/2 of there likely after tax income right now. They will have a paid off house reducing there monthly expense by 1500 per month so may only need to draw $1500 per month from retirement funds.

So they need to target about 450k in retirement account of which they have 140k and one doubling period left. So in the next 10 years they need to save an additional 12k per year which is less than 10% of their income.

[CaptainYooh]

Originally Posted by GGG

I think your 1st couple is far worse off. They have a combined income of 280k and only 600k in assets. So essentially have been spending 140+ per year after tax and are no where close to the 2.5 million+ they need to support that spending...

That's the whole point of this thinking exercise though. Should families' goal be saving for some hypothetical future spending level in retirement at the expense of not living life to the fullest now while you still can?

[GGG]

Originally Posted by CaptainYooh

That's the whole point of this thinking exercise though. Should families' goal be saving for some hypothetical future spending level in retirement at the expense of not living life to the fullest now while you still can?

It’s weird that it’s pitched as a trade off between living life to the fullest means not saving for retirement. It’s essentially saying that not buying a 60k truck and 40k trailer is less fulfilling then a 10k truck and a 5k trailer.

There is certainly a point where increased spending money increases happiness I just don’t think most people have thought about where that point is.

[Winsor_Pilates]

I'm planning as if I'll retire at 45 (just turned 37).
My financial goals, annual savings and strategies are based off that.
I know I'll still want to work at that age and much longer, but I'm giving myself that target to have full financial freedom to keep doing what I'm doing, change things up or do nothing for a while.
My target numbers are not far off the OP.

We don't have kids yet so things can change quickly, but for now this is enough of a plan to keep my focused and have goalposts.

[Sylvanfan]

If I'm fortunate enough to stay employed or be employable until I'm 67, I'll stop work at that point in time regardless of how much money I have or don't have and adjust my retirement to suit that. When I first went out on my own 25 years ago, I made $10 an hour and had to live pretty lean. But it wasn't that bad, and if I have to revert to that in retirement so be it. Even if I had what I have in savings today with CPP and OAS, plus the pension my wife should have at that time, I'll have more than I did than.

There's always the old fashioned way to wealth too...inherit it. Inlaws have a few dollars and my Sister in law with her Qannon boy friend is pretty much writing herself out of their will every day...

[DoubleF]

Some of these numbers seems really high to me. I think people think they need way more money than they think they do in retirement. ?


If my house was paid off and I had 1.5 million to my name and I earned 3% a year on it in let's say... dividends by dumping it all into Canadian bank stock, I think my wife and I could essentially retire comfortably (but not luxuriously) without touching the principal and both of us are not even 40 yet. I've plugged it into tax software to see what the outcome would be.

With $45K in dividends in a tax software split 50:50 for a couple, due to personal tax brackets and dividend tax credit, no taxes owing. That's essentially $45K straight into the pocket and it doesn't take into account the ability to use TFSA or any changes to the value of the investment. Plus we still pick up the child tax benefit with that income range.

With a paid off house, you're looking at what, like maybe $1,000 max in utilities/property tax etc. a month? If the income earned is basically no taxes taken off at $45K, that's $3,750 a month straight into the bank and like $2,750 a month for everything else.

And if #### really hits the fan, you have a paid off house which qualifies as a principal place of residence so you can cash it out tax free for whatever it is worth. That's also not even bothering to contemplate other things like pulling a HELOC on your house or a LOC and just paying interest for convenience sake (because you can) or tapping into the principal of the 1.5MM bank stocks.


Or I approached it this way too. If I had 1.5MM today and drew $60K a year, and then the remaining earned 3% a year, I could do this for 40 years. I'd run out of cash from the 1.5MM in my 70s (I am not yet 40). This isn't including my paid off house I can still leverage/sell and whether I even use up the full $60K. In my 60s, I can get OAS and CPP, so it's not like running out of that 60K a year at the end makes me derelict.

1.5MM in a high interest savings account (0.05%) would mean it would take 25 years to draw that amount to zero at $60K a year.


And yet, another way to look at it is this way. What kind of life can you live with $4,000 a month? I chose this number because it'd be basically dual income CERB lifestyle and maybe many have seen examples of what many couples were able to do with $4K cash a month. $48,000 per year for 30 years drawing down a 1.5 MM chequing account earning nothing. This is also excluding value of home. Also, at what point of that 30 years are you also starting to supplement that $48K a year with CPP and OAS?

[nieuwy-89]

Originally Posted by marsplasticeraser

I really like this thread, and it reminds me of a discussion I had with a professional coach who worked with business people, many of whom were senior execs.

I thought I'd share some insights of his, that I felt were really interesting.

He said that retirement is incredibly hard for virtually all his clients, and they struggled a lot as they retired. There were four main reasons, and in fact many dealt with all four issues!

1. They were used to everything being perfect for them - life was easy. A good example is that their assistants would call ahead and make sure everything was just how they liked whenever they travelled / went out to eat. Once they retired they were just a regular senior citizen at hotels/airlines/restaurants.

2. They struggled not being important on a day-to-day basis. Before they were 'celebrities' in their business, important people that the rest of the company and others wanted / needed to know. The day they retired they lost almost all that value and importance. It was a huge ego hit and their social network dried up.

3. Related to #2, they often put their energy into work and relationships with colleagues and clients. When they retired they had weak relationships with family/spouse. Many reflected they wished they had spent more time with their spouse and children and they'd never have the relationships they wanted to have.

4. Finally, they didn't know what to do with the time. They were so one-dimensional and work focused that they had no real interests. They'd golf a bit, travel a bit, but it didn't really bring any joy. They felt it hard to get interested in a new hobby at 60 or 70.

Ultimately, many of them reflected that they would have done things differently and dramatically lessened the energy they put into their careers if they did it over again.

TLDR: Focus on your family, friends, your own interests and don't let your career be how you define yourself.

Great post. One of my big fears is losing my social network when I retire.

[Sr. Mints]

I retired three years ago. Apparently.
<Laugh track>

[Samonadreau]

I feel like I have been saving like crazy and only have about 200k in TFSA and RSP.

At 35 years old can I accumulate another 2M in the next 25 years through savings and interest? (Recently self employed). Seemed unlikely.

So i used this online tool

https://www.getsmarteraboutmoney.ca/...st-calculator/

initial investment - 200k
$600 monthly additions (tfsa)
8% annual return

= $1.9M

Good enough!

[Manhattanboy]

^^ is an average 8% annual return realistic from age 35 to 60?

Seems high but I would take it.

[CliffFletcher]

The amount of money some people expect they’ll need seems excessive to me too.

I recently took over my parents’ finances as they succumbed to dementia. Their fixed expenses at age 75-80 are less than $3k a month for the two of them. That’s property taxes on a fairly typical Calgary home, utilities, insurance, and operating a seven year old Toyota Camry. That’s all covered by CPP and OAS.

So savings have to cover the rest. Grocery bill are less than $800 a month. Dining out maybe $600 (or was pre-covid). Clothes and misc shopping maybe $400. And for home maintenance and unexpected expenses, let’s throw in a liberal $500. So we’re at less than $3k a month total for the two of them needed from savings.

Travel was two trips a year at $5k each. So call it another $1k a month.

So $4k a month total (or $2k each) beyond CPP and OAS affords a retired couple what I consider a comfortable retirement. And that number will drop by age 80.

[Slava]

The numbers people put might seem excessive, but frankly it depends on how they live before retirement and what they want to do. Let’s say you’re retiring at 60. People have touched on needing to do things, and let’s be honest most of those things cost money. I also think that if you have a household income pre-retirement of say $150k, to suggest you would spend nearly that from age 60-70 isn’t insane. Not many people would retire at 60 and dial back from the $150/yr to say $50/yr and be thrilled with that. Could you do that? Sure. Would you plan to though? Unlikely.

Generally, retirement planning should consist of three main stages. The first is active retirement and that goes up to about age 70-75 (these things are somewhat nebulous), and in that stage people aren’t really reducing expenditures and many increase their expenses. They’re doing the things they always wanted to do and doing it while they can. In the next stage, which is semi-active, they’re spending less and doing less. This goes until roughly 85. Less travel and activities, but not nothing. Finally after around 85 years of age we have passive retirement. People stop traveling and aren’t able to do as much for activities.

Financial plans are ever changing and evolving though. Our circumstances change fairly quickly and I’m sure that for most of use if you look at your life and position in 2010 and today there are enormous changes. Some of those changes are planned and prepared for and some force you to adapt and adjust as they happen. A good financial plan does that with you; it’s not set in stone and says “you’ll live on this figure forever because that’s it”, and I’d imagine a lot of planning completed that way would fail.