Are you saving enough for retirement?

[Slava]

Originally Posted by Iggy_12

Im 33 plan to retire between 60-65
I contribute 1750 a month into RRSPs/TFSA growth accounts (plan on increasing this each year with salary increases)
Current savings around 100K
Im 3 years into a 490k mortgage
Married no kids, my wife saves very little as she doesnt make as much as me
My household income is around 160k pre tax
Retirement goals are to downsize the house to a small condo and potentially buy something in Arizona/palm springs, lots of golf and travelling

For the experts, am i saving enough to realistically reach my goals?

It will depend on what the anticipated costs of that retirement are.

[Jason14h]

Originally Posted by Iggy_12

Im 33 plan to retire between 60-65
I contribute 1750 a month into RRSPs/TFSA growth accounts (plan on increasing this each year with salary increases)
Current savings around 100K
Im 3 years into a 490k mortgage
Married no kids, my wife saves very little as she doesnt make as much as me
My household income is around 160k pre tax
Retirement goals are to downsize the house to a small condo and potentially buy something in Arizona/palm springs, lots of golf and travelling

For the experts, am i saving enough to realistically reach my goals?

Based on a 6% average RoR at 65 you will have.....

$3,232,559

If my math is right (Well the calculator I plugged it into - I like Sunlifes for ease of use)

https://www.sunlife.ca/en/tools-and-...gs-calculator/


This doesnt include you OAS or CPP

[DoubleF]

Originally Posted by Samonadreau

I am 36 with 4 kids and almost $250k saved and another $400k in home equity. Trying my darndest.

I hear after 3 kids, you basically have to rely on child labour (ie: training the oldest early to do things for you) to survive. Damn. Good on you.

Also, I find it kinda hilarious how the last few pages have gone. It's a little bit along the lines of, "It's survivable/not detrimental and not poverty line (based on an anecdote) for a yearly income of approx $40K." vs "Nah, that ain't for me. I need like 3-5x that for my retirement."

This is why I think some of the retirement calcs are super messed up. I don't get how so many of them are usually around 3-5x difference (and not always are the discussions at $40K, it's often higher). Yes, different circumstances for different people, but I don't think the average pre-retirement arguments for lifestyle are in the 3-5x wages range let alone post retirement. I don't understand how this disconnect constantly permeates almost all these calculations. I could maybe see expectations of income up to 2.5x range, but once it hits 3x+ it starts to get crazy IMO.

[you&me]

Originally Posted by Samonadreau

I am 36 with 4 kids and almost $250k saved and another $400k in home equity. Trying my darndest.

Kids, man...

They say the average cost to raise a child to adulthood is somewhere around $250k. Those two additional kids (over the Canadian family average) are half a million dollars, and that's without even accounting for time value of money, etc

And I wouldn't be surprised if the costs are even higher for additional kids above the average. There are a number of things that are just easier (read: cheaper) for a family of 4 to do, compared to a family of 6 - hotel rooms on vacation, size and type of vehicle, etc, etc... I'm just praying one of my kids is successful enough to take care of my old ass

[Strange Brew]

Originally Posted by you&me

Kids, man...

They say the average cost to raise a child to adulthood is somewhere around $250k. Those two additional kids (over the Canadian family average) are half a million dollars, and that's without even accounting for time value of money, etc

And I wouldn't be surprised if the costs are even higher for additional kids above the average. There are a number of things that are just easier (read: cheaper) for a family of 4 to do, compared to a family of 6 - hotel rooms on vacation, size and type of vehicle, etc, etc... I'm just praying one of my kids is successful enough to take care of my old ass

You could blow that entire amount on private college if you wanted to.

[you&me]

Originally Posted by Strange Brew

You could blow that entire amount on private college if you wanted to.

Don't remind me

[CliffFletcher]

Originally Posted by DoubleF

Yes, different circumstances for different people, but I don't think the average pre-retirement arguments for lifestyle are in the 3-5x wages range let alone post retirement.

Agreed. It would be odd hearing that some people only need $60k a year to be comfortable in their working years, but some need $240k or $300k to have a decent lifestyle. Like you say, beyond 2-3x median income people recognize we’re no longer talking about average or need.

But for some reason, retirement is presented as a stage in life where expectations and needs will vary even more than in the rest of life. Which seems dubious. It might be true of early retirement, when some people travel a lot, buy new cars, remodel their kitchen, dine out all the time, take up boating, etc. But I’d wager that by their 70s, the monthly spending of average and wealthy seniors actually converges.

Stuff that people over 70 no longer spend money on:

Mortgage
RESPs/RRSPs/TFSAs

Stuff that they probably no longer spend money on:

Home renos (house hunt in older neighbourhoods of the city for evidence)
New furniture (see above)
New cars

Stuff they likely spend less on than when they were 55:

Clothes
Driving
Travel
Restaurants

So even if Canadians have dramatically different (4-5x) spending habits at age 55 or 60, that gap will narrow substantially over the next two decades. Fixed expenses like property tax, utilities, insurance, and groceries don’t vary that much between households. So it’s hard to see how the remainder of discretionary expenses that 70 and 80 somethings have can require massive differences in savings.

[Hemi-Cuda]

Originally Posted by Sliver

Did I lowball it? I had to do my roof in 2009 and it was $7k or something on a ~1500sf bungalow. I was just going off of that.

Edit: Okay, just looked back in my spreadsheet and yeah, that would have been low even back then. Actual price was $7700 and I bought the shingles myself direct from a supplier and paid a roofer guy I knew cash for the installation. I didn't even cheap out on the shingles...they're really nice and beefy looking.

We just had our roof redone last summer (2300 sqft 2 storey) through Epic Roofing and it was almost 10k exactly

[Slava]

Originally Posted by CliffFletcher

Agreed. It would be odd hearing that some people only need $60k a year to be comfortable in their working years, but some need $240k or $300k to have a decent lifestyle. Like you say, beyond 2-3x median income people recognize we’re no longer talking about average or need.

But for some reason, retirement is presented as a stage in life where expectations and needs will vary even more than in the rest of life. Which seems dubious. It might be true of early retirement, when some people travel a lot, buy new cars, dine out all the time, take up boating, etc. But I’d wager that by their 70s, the monthly spending of average and wealthy seniors actually converges.

Stuff that people over 70 no longer spend money on:

Mortgage
RESPs/RRSPs/TFSAs

Stuff that they probably no longer spend money on:

Home renos (house hunt in older neighbourhoods of the city for evidence)
New furniture (see above)
New cars

Stuff they likely spend less on than when they were 55:

Clothes
Driving
Travel
Restaurants

So even if Canadians have dramatically different (4-5x) spending habits at age 55 or 60, that gap will narrow substantially over the next two decades. Fixed expenses like property tax, utilities, insurance, and groceries don’t vary that much between households. So it’s hard to see how the remainder of discretionary expenses can require massive differences in savings.

No, you're totally right! The problem is two-fold though. First, you have people earning say $100k a year at age 60, and living their life. Those people aren't going to suddenly drop to a $40k/year lifestyle. they might in their 80's, but no way that is happening at 60. There are a lot of people who spending more in those initial years of retirement because they're doing whatever it is that they have waited to do. YOLO and all that.

Then in their 70's things start to wane. They spend less on travel and things like that than they were in their 60's, but not zero. In their late 70's early 80's the spending ratchets down further as there is less they can do and less they want to do.

They also might end up paying for care, paying rent in a facility that provides extra care or a combination of these things.

[Geraldsh]

When I got serious about my retirement savings goal I was advised to save 11 times my annual income. An income of $80,000 translates to $880,000 in the kitty. I was a bit over the mark at age 65 retirement. It’s been 8 years and the kitty is still almost full and very little has changed in my lifestyle expenses.

Mortgage and vehicles paid off before retirement.

[Lubicon]

Originally Posted by Strange Brew

You could blow that entire amount on private college if you wanted to.

Or elite level sports for your kids so they can get a scholarship and 'free' education.

[flamesfever]

I recall about 30 years ago, the amount one needed to live comfortably in retirement was 70% of your normal working income. At that time the amount was $35,000. for the average couple. However, with inflation, change in spending habits, and insensitivity to debt, I believe nowadays the average person is going to need a lot more assistance from the government to live normally, especially if they are not going to receive an adequate inheritance.

[sa226]

^^^^
This isn't a shot at you or anything, just musing. I've never liked those "70 percent of yearly earnings before you retire " because it's not even scratching the surface of anything. It's just seems arbitrary.

The "11 times your annual salary " I at least find interesting because I wonder how you arrive at that.

Are you drawing from a pension? Investments only? How are you Invested in retirement? Have you got 2 million in dividend stocks just paying you a quarterly salary?

Personally, I think we're doing OK, but with the pandemic and kids we've had some income disruptions that have derailed us a tad, but we're getting back on track.

I'm comfortable and happy with how we're Invested and how we save. What I have a hard time with in my own projections is figuring out future dollars and wondering what our preferred lifestyle would and will be.

[puckedoff]

I like this strategy and it will be what I try to instill in my kids when they are older. (Basically start saving early, to take advantage of compounding). The best part is really that you create good habits and financial discipline, which is better to learn early and carries through later in life.

https://ofdollarsanddata.com/go-big-then-stop/

[stone hands]

The way I look at it, he only rule of thumb you need to know for retirement is:

1. What is my yearly spending
And
2. What is amount of passive income from my investments

When those 2 numbers are the same, congratulations! You can now retire

[Geraldsh]

The “11 times” is a ballpark figure that has some relation to the amounts you are accustomed to. The assumption is that you will invest wisely and have a good return to draw from. In my case the cpp&oas + the amount withdrawn = before retirement income without reducing my principal.

[flamesfever]

As I see it, as far as investing is concerned, most people will expend as much time and effort needed to be the best they can be in their job, and then spend next to no time learning what to do with the money they earn in that job. IMO investing wisely, over a life time, involves a life time of learning.


One of the first books I sent my son, while in University was "The Wealthy Barber". I considered it a good place to start in his investing journey.

[Slava]

Originally Posted by stone hands

The way I look at it, he only rule of thumb you need to know for retirement is:

1. What is my yearly spending
And
2. What is amount of passive income from my investments

When those 2 numbers are the same, congratulations! You can now retire

Sure, and as long as those two numbers are static, you shouldn't have an issue.

[MoneyGuy]

Originally Posted by stone hands

The way I look at it, he only rule of thumb you need to know for retirement is:

1. What is my yearly spending
And
2. What is amount of passive income from my investments

When those 2 numbers are the same, congratulations! You can now retire

They don't need to be the same. Don't forget about government income sources such as CPP and OAS - also any employer incomes (although maybe you're including that in #2). Also, many people (like me) do some part-time or consulting work. It's much more complicated that your simple rules of thumb.

[Enoch Root]

Originally Posted by bizaro86

One of the reasons for skepticism here is that there is an entire industry around retirement savings. An industry where professionals both provide advice AND have higher earnings when their clients save more. All those freedom 55 ads weren't because life insurance companies deeply care about people, they were because they want you to save more into their products so they earn more fees.

The median income for a senior in Canada is $30k, or $60k for a couple. 40k is tight but possible, especially with a paid off house. Lots of people live on less. That's not what I'm planning for, because I like both nice things and a buffer.

But I think many people don't even try to fund retirement because they hear conversations like the one upthread about, "is 4 million really enough" and decide the whole thing is impossible.

And that is valid - there is certainly some reason for skepticism, and there are certainly some advisors who put their own interests first (though I think a big part of the disconnect is that advisors work mostly with people who have significant savings, so that can skew their view of the landscape).

The flip side is that there are also a lot of people providing 'advice' who shouldn't be. The reason there is an entire industry serving this need is because there IS a need. And it is a lot more complex than simple rules of thumb. It is also very important to get good advice, to do it right. and to err on the upside. Because the alternative, not having enough, is a pretty awful way to spend your retirement years.

When you've gone through the exercise with hundreds of families, you see trends, you see mistakes, and you learn where many misconceptions lie. One of the first things you notice is that the vast majority of people under-estimate their requirements. That isn't self-serving, that's a fact.

So while I understand your skepticism, I find all the free, non-professional advice to be a much bigger problem.