What's Your Number? (For Retirement)

[Cappy]

If this thread has done anything it has reminded me the value of health. Not just working out but stretching etc. I already started looking into yoga after seeing some of the health posts on here!

So kudos to all!

[Iggy_12]

This could be an incredibly dumb question, in fact i am sure it is, but what products can you get that would give a 10% annual rate of return? I feel like i have decent savings but my money doesnt work as hard as it should for me.

Ive tried managing my own stocks since im pretty far from retirement and can take on more risk but I have quickly learned i am terrible. I have TFSA and RRSP accounts that are considered "on the side of risky" but im pretty sure on a very good year those bring back 6-8%

[edslunch]

Originally Posted by mrkajz44

Agreed - this is the key. If the money never comes into your bank account and is automatically diverted elsewhere, then it's very easy to live of 90% of your paycheck. Literally the best retirement planning I've done to date is ensuring I get 10% diverted from the paychecks automatically at every job I've had. I've literally never been paid 100% of my salary.

I don’t know if this is typical but my employer gives 4% as a defined contribution pension, then matches 50% up to another 4%, so setting aside 8% of my salary gets me 16% in investments. 8% is not difficult to save since I never see it. The company match is the extra incentive to save - I might or might not save less without it but I wouldn’t save more.

[Lubicon]

Company match or even partial match is huge. I've had that about 1/3 my 30 working year career, the difference in my savings would be significant if I had employers that contributed the entire time.

[I_H8_Crawford]

Originally Posted by Iggy_12

This could be an incredibly dumb question, in fact i am sure it is, but what products can you get that would give a 10% annual rate of return? I feel like i have decent savings but my money doesnt work as hard as it should for me.

Ive tried managing my own stocks since im pretty far from retirement and can take on more risk but I have quickly learned i am terrible. I have TFSA and RRSP accounts that are considered "on the side of risky" but im pretty sure on a very good year those bring back 6-8%

My wife and I stick with TFSAs - avoid individual stocks and they will follow the market.

We have a lower allocation towards bonds than we should, but we are OK with the extra risk in the market as we both have good jobs as well.

[CliffFletcher]

Originally Posted by Jason14h

Is 1 million really out of touch

If you have 30 years until retirement:

Even with an average annual return of 10%, you'll have to save $481 per month to get to $1 million before you retire. At 6%, you would need to save $1,021 per month.

If that 'out of touch' ? $500-$1000 in savings a month? And thats starting with 0$ at age 35 for an age 65 retirement

Average annual income for those working full-time in Canada is $54k. Median is under 50k. At that income yes, saving $500 - $1000 a month is not easy. And a lot of people at that income who do save will be putting the money aside for vacations, cars, furniture, emergency funds, home repairs and improvements. To save for those things and set aside $500 - $1000 a month strictly for retirement requires more discipline and deferred gratification than a lot of people can muster.

The other side of the out of touch comment is how much money people need to retire. Even if you retire at 62 and live to 90 you don’t need anywhere close to a million dollars to live a middle class lifestyle in retirement. OAS and CPP will more than cover the fixed expenses of a typical couple, and $1k - $2k each a month on top of that is plenty for the way most people actually live in retirement.

[HockeyIlliterate]

I’m pretty sure that there was a similar thread to this one a few months back.

Anyway, I’ll just say this:

I originally wanted to retire by 40. I then changed that to just be financially independent. I hit that latter goal.

I got laid off at 43 and I haven’t looked for a job since then. At this point, I consider myself to be temporarily retired.

I may go to work again, or I may not. Who knows?

Anyway, I have a roughly 50/50 stock/bond portfolio (given the recent stock run-up, it is more like 55/45), all in index funds, and I am planning on withdrawing no more than 2.5% a year from the portfolio. I have no debt and have a house. I have been extremely lucky.

What I have found, over time, is that it is a lot easier to say that “I will retire when I have $X” than it is to really do it when you have $X. The “one more year” syndrome is real, but getting laid off is a good way to overcome it!

[GGG]

Originally Posted by CliffFletcher

Average annual income for those working full-time in Canada is $54k. Median is under 50k. At that income yes, saving $500 - $1000 a month is not easy. And a lot of people at that income who do save will be putting the money aside for vacations, cars, furniture, emergency funds, home repairs and improvements. To save for those things and set aside $500 - $1000 a month strictly for retirement requires more discipline and deferred gratification than a lot of people can muster.

The other side of the out of touch comment is how much money people need to retire. Even if you retire at 62 and live to 90 you don’t need anywhere close to a million dollars to live a middle class lifestyle in retirement. OAS and CPP will more than cover the fixed expenses of a typical couple, and $1k - $2k each a month on top of that is plenty for the way most people actually live in retirement.

2k extra per month is 600k in retirement savings. Thats certainly in the 1 million dollar ball park.

You do hit the nail on the head Cars, furniture, Vacations and Home Improvements certainly interfere with the ability of people to save for retirements. And I’d argue that because of hedonistic adaptation you can spend wildly varying amounts on those 3 items with the same level of happiness derived from them.

[PaperBagger'14]

57. The day I hit my magic number where I cap out my DB pension im out. Between that, my own RRSP and TFSA contributions plus selling whatever home I'm in at that time ill be in a great position.

[bizaro86]

Originally Posted by Sylvanfan

For me the number one factor for a happy retirement will be good health. For me nothing contributes as much to happiness as good health does.

I'd rather be broke and healthy than be 72 with terminal cancer and 8 million dollars saved up. Good health gives you a lot of potential cost effective activities like Paddle sports and hiking to pass the time. So really I do try and save money so I don't have to hunt crows and collect berries in the wild to eat. But if I'm healthy, I'll be able to do that if I need to.

That's true, but those aren't really opposing choices. The vast majority of things people could do to save money (save via direct deposit, spend less on cars, renos, travel, clothing) don't hurt your health in any way.

Some decisions that are cheaper (walk/bike instead of drive, cook at home vs eating out) are objectively healthier.

[DoubleF]

I think many are severely under estimating what a paid off house means. For many, that's freeing up $30-60K a year in after tax money or 3-5K a month. interest for many on their mortgage is like $10-30K a year. Again that's after tax money. Car payments are also often on many people's minds, but these often don't last more than 5 Years. They seem like small amounts big picture (ie: $500 a month = $6K a year), but on the short term monthly basis, they really stretch some monthly budgets thin.

Perhaps that's a huge difference of the younger and working vs retired, the difference between a need and a want seems much more easily determined when retired.

[RichieRich]

A lot of pontificating and generalizations... I'm "triggered" enough now to provide more tools that may help a bunch of you. This stuff doesn't come in 30mins of reading, you'll need hours and days and consistently pursuing educating yourself. As always, it's not about how much you make (or percentage of you last cheque = some retirement necessity). Rather it's always about how much you spend. And the majority of people blow a lot of money starting young... some never clue in, some eventually, and some are ok on the cat-food-life.

Here are another 3 links to help you do your own calcs:
https://investmentcalculator.io/?ref...veincomeearner
https://engaging-data.com/fire-calculator/
https://engaging-data.com/visualizing-4-rule/
First one is the simplest calculator pretty much. If nothing else run this.
This latter one can be used to test your 4% (or whatever withdrawal) against the Trinity Rule. Well worth doing.
As for investments... careful talking to the man at the bank... or even some investment organizations that can push upon you some high MER low risk "investments". Yes, if you're so-inclined then buy market ETF's can help you buy sectors (which is *much* safer than buying individual stocks which is closer to a gamble). Similarly you *can* actually find some low-MER funds at some banks (look at ATB Financial for some of the lowest MER's and better returns for fund families).


Here's a link to "getting started with investing"... sounds like some ya'll may benefit:
https://www.finiki.org/wiki/Getting_started

This next site has lots of good stuff for DIY investors:
https://www.canadianportfoliomanagerblog.com/

If you *really* want to go down the rabbit hole of FIRE then here's Canada's greatest... lots of reading, lots of angsty language, but a ton of advice and perspective:
https://www.millennial-revolution.com/start-here/

[RichieRich]

Originally Posted by Iggy_12

This could be an incredibly dumb question, in fact i am sure it is, but what products can you get that would give a 10% annual rate of return? I feel like i have decent savings but my money doesnt work as hard as it should for me.

Ive tried managing my own stocks since im pretty far from retirement and can take on more risk but I have quickly learned i am terrible. I have TFSA and RRSP accounts that are considered "on the side of risky" but im pretty sure on a very good year those bring back 6-8%

DEFINITELY not a silly question. I think that's the magic question everyone asks, including major investment leaders and organizations. There's a reason most printed-guidance out there suggests to assume a lower 4-5 or maybe up to 6% annualized return.



Well since you asked... My 10-year annualized ROR for the RESP is just shy of 10% and we've had that in some blend of the ATB Compass portfolio of Growth and Max Growth. Yes there are other tools out there such as preferred but those get more complicated. Most folks don't have guts to or the time to try to ride all those.

The biggest key is to *stay in the market* regardless of gyrations. The biggest "losses" are actually missing the BEST performing days, not so much missing the worst performing days. Go figure eh? It also means pivoting some of your funds during major market weaknesses into more aggressive areas. For example... last March 2020... how many people added money to their portfolio? or shifted from more conservative to more aggressive?

It's a small percentage of stocks that drive the markets, but the odds of actually having those stellar stocks *at the right time* are very slim, hence buying a group (ie ETF or fund). Look at how the FAANG stocks have driven the markets this last year. You want to "ride the herd without becoming one of them".

Lastly, it's about being consistent with your savings and re-allocations. Starting young and having time in the market taking advantage of those compound returns is super important - hence the phrase "money makes money". But also "Bulls and bears make money, but pigs get slaughtered". In other words don't look for the home runs.

[SeeGeeWhy]

People think about the big number too much.

Focus on getting one month of living expenses in a cash ladder at a time. If you’re consistent, you’ll have 3, 6 and then 12 months in relatively short order. That’s “##### you” money, which means you can afford to say what you want to who you want even if it means your job. Better than retirement.

[GGG]

Nm

[Slava]

Originally Posted by SeeGeeWhy

People think about the big number too much.

Focus on getting one month of living expenses in a cash ladder at a time. If you’re consistent, you’ll have 3, 6 and then 12 months in relatively short order. That’s “##### you” money, which means you can afford to say what you want to who you want even if it means your job. Better than retirement.

Is that actually better than retirement? I know people are going to say I’m biased here, but I think retirement is a pretty great goal. Saying whatever you want to people (effectively being able to tell anyone to pound sand, I guess?) doesn’t seem all that appealing. But I’m just not that kind of person, lol.

[CliffFletcher]

Originally Posted by GGG

2k extra per month is 600k in retirement savings. Thats certainly in the 1 million dollar ball park.

I just redid the pension planning exercise on my plan’s website. To have a household income of $80k starting at age 62, we need to have $515k in savings set aside. Total, for the two of us.

[Doctorfever]

Originally Posted by CliffFletcher

I just redid the pension planning exercise on my plan’s website. To have a household income of $80k starting at age 62, we need to have $515k in savings set aside. Total, for the two of us.

That seems like a realistic goal for lots of people.

I have a question that I hope you don’t mind answering. Does the $80k number include two full CPP numbers? And two OAS?

[Red]

Originally Posted by CliffFletcher

I just redid the pension planning exercise on my plan’s website. To have a household income of $80k starting at age 62, we need to have $515k in savings set aside. Total, for the two of us.

The 80K income, does it include the CPP/OAS or is it just the investment income?

[CliffFletcher]

Originally Posted by Doctorfever

That seems like a realistic goal for lots of people.

I have a question that I hope you don’t mind answering. Does the $80k number include two full CPP numbers? And two OAS?

Yes. Which accounts for something like $35k a year.