What's Your Number? (For Retirement)

[Macman]

It's easy to save money when you're making double or even triple of what you need to live off. I do have a number as well but it may as well be a billion right now lol..

I like the Dave Ramsay method where he first wants you to become debt free and then save up 6 months living expenses as an emergency fund and then go from there. That's what I'm doing and have steps, plans after that.
I'm in agreement that you need hobbies and interests to have a satisfying life at least and that's where I'm at currently and want to spend money on a few things instead of saving and waiting until retirement to do them.

The best way I've found to save is 10-20% of your net pay and then you can spend everything else. It's the same for your mortgage, do a bi-weekly payment instead of a monthly and you can add a bit extra as well and this will actually take years off a mortgage.
But I also don't think a mortgage is for everyone and it's cheaper to rent. Nobody knows your own situation better than yourself and how much money you make and spend on housing but that's a big one to look at if you're trying to get out of debt and start saving.
Also be aware of predatory lenders like Alpine credits or even credit lines because those are like drains on your money. You have to know and watch where your money is going.

It's a big topic but you have to be happy with interests, learn how to live minimally and not necessarily cheap either, enjoy life and still save.

[you&me]

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.

Ironically, the position of #### you is very close to the OP - $2.5mm.

I love that scene.

[RichieRich]

Financial Post has an ongoing series on personal finance. To be clear nobody knows how they choose their examples however it’s quite clear they usually get to review the finances of above average earning folks who typically receive pension(s). If nothing else they’re good examples of why well paying jobs and pensions are supreme to high retirement incomes. Also they only use a 3% annual return on investments.

https://financialpost.com/category/p...amily-finance/

[Wormius]

Originally Posted by RichieRich

Financial Post has an ongoing series on personal finance. To be clear nobody knows how they choose their examples however it’s quite clear they usually get to review the finances of above average earning folks who typically receive pension(s). If nothing else they’re good examples of why well paying jobs and pensions are supreme to high retirement incomes. Also they only use a 3% annual return on investments.

https://financialpost.com/category/p...amily-finance/

I really dislike those profiles. They are almost always people who will end up with no problems retiring. Occasionally they’ll throw in one basket case who will never retire and probably die poor.

This is how most of them read to me:

“Lets meet a couple we’ll call John and Rebecca, they have a paid off house and a condo they currently rent out, John has a pension that will provide $80k per year in retirement, and Rebecca will continue to work until 68, and brings home $10k a month. They plan to sell the house and move into the condo, but they want to know if they can make retirement work without the extra rental income..”

[MoneyGuy]

Many years ago I freelanced one of those articles. The FP editor told me that most of their subjects volunteer.

[Manhattanboy]

I’m curious as to whether most people hope to retire and be able to live off investment returns rather than encroach on capital.

Obviously the former if you have kids or others to whom you wish to leave a large estate.

[Fighting Banana Slug]

^^Good question. I don't plan on leaving a large estate, so encroaching on capital is fine. The trick is not to run out, of course.

On the FP profiles, while I do think they are mostly the same with those set up well, you do need to consider the audience. The volunteers and readers are almost certainly not the minimum wage earners that will need to rely on CPP and government programs.

Similar to the discussion here, really. While I appreciate that there are many that can't hope to save $1-$2 million, those folks aren't thinking about a "number". Similarly, those with a business or inherited wealth probably don't have a number either. It is those that have been working middle to upper end jobs, who are able to squirrel away RRSP money every year that naturally get to that question. I don't think it is a humble brag situation, but just something that will naturally be questioned later on in your career if you are in that situation, and an answer that doesn't seem to be shared often.

[CliffFletcher]

Originally Posted by Fighting Banana Slug

On the FP profiles, while I do think they are mostly the same with those set up well, you do need to consider the audience. The volunteers and readers are almost certainly not the minimum wage earners that will need to rely on CPP and government programs.

Similar to the discussion here, really. While I appreciate that there are many that can't hope to save $1-$2 million, those folks aren't thinking about a "number". Similarly, those with a business or inherited wealth probably don't have a number either. It is those that have been working middle to upper end jobs, who are able to squirrel away RRSP money every year that naturally get to that question. I don't think it is a humble brag situation, but just something that will naturally be questioned later on in your career if you are in that situation, and an answer that doesn't seem to be shared often.

That still leaves a huge excluded middle. Yes, 30 per cent of Canadians will have little more to retire on than CPP and OAS. And the only questions about the highest-earning 20 per cent (the kinds profiled in the FP and G&M) are how early they’ll be able to retire and how much they intend to leave their kids. It’s everyone else - people who will be able to set aside money for retirement, but nowhere near $1 million - who are being overlooked. The average Canadian has $184k set aside at retirement. That’s not nothing.

This goes for public discourse in general. The educated class of professionals earning $100k+ and married to someone else who earns $100k+ have deluded society - and maybe themselves - into believing they’re typical middle-class Canadians. They’re not.

[Fighting Banana Slug]

Originally Posted by CliffFletcher

That still leaves a huge excluded middle. Yes, 30 per cent of Canadians will have little more to retire on than CPP and OAS. And the only questions about the highest-earning 20 per cent (the kinds profiled in the FP and G&M) are how early they’ll be able to retire and how much they intend to leave their kids. It’s everyone else - people who will be able to set aside money for retirement, but nowhere near $1 million - who are being overlooked. The average Canadian has $184k set aside at retirement. That’s not nothing.

This goes for public discourse in general. The educated class of professionals earning $100k+ and married to someone else who earns $100k+ have deluded society - and maybe themselves - into believing they’re typical middle-class Canadians. They’re not.

I am not sure why you are reading these posts as "everyone needs $1 million to retire". It is that person's personal number. If the question is what the typical middle-class Canadian has saved for retirement, fill your boots.

[Slava]

Originally Posted by CliffFletcher

That still leaves a huge excluded middle. Yes, 30 per cent of Canadians will have little more to retire on than CPP and OAS. And the only questions about the highest-earning 20 per cent (the kinds profiled in the FP and G&M) are how early they’ll be able to retire and how much they intend to leave their kids. It’s everyone else - people who will be able to set aside money for retirement, but nowhere near $1 million - who are being overlooked. The average Canadian has $184k set aside at retirement. That’s not nothing.

This goes for public discourse in general. The educated class of professionals earning $100k+ and married to someone else who earns $100k+ have deluded society - and maybe themselves - into believing they’re typical middle-class Canadians. They’re not.

I don't think that those people are overlooked though. Maybe their stories aren't in the newspaper or part of the studies talking about how poor people's retirement appears to be, but there's a lot of focus on that area in the financial planning community. Frankly, a lot of those people need the most help. They need to make sure that things are properly structured and accounted for, to make sure that their savings last and meet their needs.

[Lubicon]

Originally Posted by Manhattanboy

I’m curious as to whether most people hope to retire and be able to live off investment returns rather than encroach on capital.

Obviously the former if you have kids or others to whom you wish to leave a large estate.

For us it's likely drawing down capital. We don't expect to receive a significant inheritance either. Neither of our sets of parents will have much to pass down despite both being what I would consider middle class and have defined pensions.

Unless I come into a large amount of money I've always been a believer that the last cheque you write, the one that takes your bank balance to zero is your funeral. Our kids will be looked after but they won't be getting a big inheritance.

[CroFlames]

Originally Posted by Lubicon

For us it's likely drawing down capital. We don't expect to receive a significant inheritance either. Neither of our sets of parents will have much to pass down despite both being what I would consider middle class and have defined pensions.

Unless I come into a large amount of money I've always been a believer that the last cheque you write, the one that takes your bank balance to zero is your funeral. Our kids will be looked after but they won't be getting a big inheritance.

My kids are really young, and so far my plan is to take care of the educations for them via RESP, and MAYBE some downpayment help on their first home/apartment. The rest I plan on spending on myself in retirement. But if I'm as well off as OP for instance, then I would happily do things like take my adult children and their families to nice dinners and pay, or the odd vacation together etc.

When I pass, they can sell the family home and split the money and that can be their inheritance.

That's the plan anyway, of course who knows what will happen in reality.

[CliffFletcher]

Yeah, our kids will be getting maxed RESPs, and our house when we pass on. Not planning on leaving a cash inheritance.

IIRC, the average Canadian receives a $150k inheritance. Probably not a coincidence that’s the average value of a house in Canada (before the recent insanity in Toronto and Vancouver) divided by the average family size 50 years agp.

[The Yen Man]

I'm honestly not really worried about my financial health at all when I retire. For my lifestyle, if I were to retire today, I'd really only need about 3K per month of my own money at most, supplemented by OAS / CPP. I feel like I'd honestly have an excess amount of cash that I won't probably ever spend before I die.

I'm way more worried about my physical health, so more of my efforts are geared towards making sure I'm always exercising and eating properly while I'm still young, to ensure I have the best chance of good health when I get older.

[pseudoreality]

Originally Posted by Macman

It's easy to save money when you're making double or even triple of what you need to live off.

You would think, but the number of high earners that don't save is shocking. What is that stat on NFL players, 75% are bankrupt four years after retirement.

Even for less extreme cases, people's definition of what they need to live off can vary significantly. There's the FIRE group that rents rooms, take the bus, and eat bulk noodles because their only goal is early retirement. And then there's the YOLO group that wants to enjoy life now and accept poverty in their old age. For me, the key is to recognize that you are making the decision, one way or another.

[RichieRich]

A senior family member started their retirement with about ~$300k roughly 15years back, and has relied on OAS and CPP as well, and same with their spouse, and live in a paid-for house. They're careful with their money and don't live like a pauper and have slowly used some of their capital (they're down about 1/3 from starting point). They seem to be doing quite well and, until Covid, had travelled 1-2x yearly domestically, maybe internationally every 2-4yrs, and have a decent standard of living but certainly have to watch their expenditures. Overall they seem to be slightly above "normal" and within the realm of what most people should be happy with.

[Dan02]

I think there is 2 very different answers to this question.

First how much would i need to retire today, being 38 and potentially supporting myself for 50+ years basically I'd need to generate enough return not to draw down capital. the number is probably 2 million at a minumum but i'd rather do it with 3+ for extra security.

If i were to be retiring at 65 with CPP and OAS and need to support myself for 25 years, 1 million probably gets the job done.

[Mr.Coffee]

You can have an RRSP but it’s pre-tax. I wonder if OP is indicating the pre or post tax number?

[GGG]

Originally Posted by Mr.Coffee

You can have an RRSP but it’s pre-tax. I wonder if OP is indicating the pre or post tax number?

With 2.5mm it’s unlikely to be just RSPs so it would be a combination of pre and post tax. You would assumed maxed out TFSAs and RRSPs and a healthy after tax account.

If you are married you can reduce taxes to almost 0.

With 80k per year and 10% of your total in TFSAs you’d have 72k income split between two earns is 36k. The personal deduction is 13.3k plus another 7600 for the age amount leaving paying tax on only 15k of income which is $2250. For provincial tax the combined age and persona is 25k leaving paying $900 of provincial tax.

So combined on an 80k income you only pay about $6300. We do not tax old people enough. So at numbers in the 1MM range it doesn’t make too big of a difference.

[SeeGeeWhy]

Originally Posted by Slava

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.

I wouldn’t say better, but every single one of us could leave this earth right this instant. I believe it is important to have the option to walk away from a situation you resent at any age because tomorrow is not promised and that’s no way to use the time we are gifted. Fretting too much about a far off someday keeps too many people trapped in terrible “right nows”, so I think it is important to consider and fight for your personal freedom at any age.