Are you saving enough for retirement?

[CaptainYooh]

Originally Posted by RichieRich

...at’s the difference between about ~750k (cat food) and ~$2mil+, or $4mil+ (caviar).

$4M tax-free savings (as in non-RRSP) will get you approximately $200,000 of annual income at 5% dividend which is on the high side, actually. If it is sheltered in RRSP, 50% of it will be taken by the Government in taxes. So, you will need to spend the principal to live bigger in your golden years (thus; reduce your dividend income while doing so). If you plan to live to 85 and leave nothing to anybody and spend all of it, that's averaging $200,000 per year after year 65. Not a small chunk of change by any means, but not a caviar-Ferrari-Four-Seasons-living lifestyle either. Now, devalue your $4M savings by rising inflation and that $200,000 per year will likely be closer to $100,000 in today's money power and quickly get you off that caviar train, unfortunately.

P.S. Don't get me wrong, $4M is still a LOT of money. You just need to see it in perspective.

[Wormius]

Also don’t you need to withdraw quite a bit of the principal every year after you convert it to a RRIF? Or is there some way of getting around that and just enjoying the interest you might be making?

[tvp2003]

I agree that saving "enough" for retirement largely depends on what your retirement goals actually are, as I imagine it could range as widely as people's circumstances in order to save for retirement in the first place. Not everyone starts at the same place and I don't think the finish line is the same for everyone either (despite the blanket label of "retirement").

As such, I'm interested to hear what people actually think retirement looks like for them -- whether it's travelling the globe, hanging out with grandkids, part-time working, or all of the above. For me, the thought of being a snowbird sounds really appealing -- being able to stay close to home and family during the summer, while enjoying a nice, warm, quiet existence during the winter. Throw in a bit of travelling (maybe 1 or 2 trips a year) but otherwise keep things pretty simple.

Originally Posted by I_H8_Crawford

We have 2 young kids, so plan on continuing working for now, as they are entering school years. My wife is likely going to quit her job, she hates it and it has a ton of stress, and my paychecks cover all living expenses and then some, so our nest egg keeps growing.

Do plan on doing travel when we can, no issues taking the kids out of school for a couple weeks to go hit up Korea, Japan, Vietnam, France, NZ, etc... I feel that will be better for education for them anyways as opposed to sitting in class learning about different cultures, they can experience it.

When the kids have grown up, would love to live on a beach in a place like Vietnam - enjoy the beach life, amazing food, CHEAP, and come back to Canada for our medical stuff.

Kudos if you're able to pull that off with kids. That sounds amazing.

[MoneyGuy]

Originally Posted by Wormius

Also don’t you need to withdraw quite a bit of the principal every year after you convert it to a RRIF? Or is there some way of getting around that and just enjoying the interest you might be making?

No, but you have to do the minimum annual withdrawal amounts; the amounts are based on your age that year.

[opendoor]

Originally Posted by I_H8_Crawford

Honestly, we are looking 25 years into the future still for that, but my plan would be keep Canada residence, spend winters over there and summers back here.

Yeah, my parents do that (but in the US). You just need to make sure you spend enough time in your home province each year (normally 6 months) to maintain medical coverage. If you are repeatedly out of the province/country for longer than the maximum they can deem you a non-resident and you'd no longer have coverage in Canada.

[Fighting Banana Slug]

I'm approaching my mid-fifties and I had always been really concerned with "the number", both age and $$$. Perhaps weirdly, the closer I get to the number, the less I am concerned with it and really the question is whether I am doing something that I enjoy. At my current station in life, I want to keep working and improving on the nest egg. I don't see much point in retiring until the kids are older and going to work loses its appeal. Obviously it helps that I think I am on the right track to reach my financial goal, but I wouldn't put to much pressure on anyone to strive for freedom 55, 60 or whatever number at an earlier age. Things change, so best to find work that you like, save for the future and don't get too worked up about finishing (relatively) early.

[RichieRich]

Originally Posted by CaptainYooh

$4M tax-free savings (as in non-RRSP) will get you approximately $200,000 of annual income at 5% dividend which is on the high side, actually. If it is sheltered in RRSP, 50% of it will be taken by the Government in taxes. So, you will need to spend the principal to live bigger in your golden years (thus; reduce your dividend income while doing so). If you plan to live to 85 and leave nothing to anybody and spend all of it, that's averaging $200,000 per year after year 65. Not a small chunk of change by any means, but not a caviar-Ferrari-Four-Seasons-living lifestyle either. Now, devalue your $4M savings by rising inflation and that $200,000 per year will likely be closer to $100,000 in today's money power and quickly get you off that caviar train, unfortunately.

P.S. Don't get me wrong, $4M is still a LOT of money. You just need to see it in perspective.

On one of the previous pages I had a couple of links that would help you figure out if you have enough and input a number of options including inflation, rates of return, other income (CPP, etc), etc. one even allows you to manage your budget within a set percentage of some number (ie if markets are bad that year the program will replicate a spending reduction of x%.
For probably at least 95% (WAG on my part) of people we will never see $4MM as our net worth, never mind total invested.
$200k/yr in retirement, assuming house and cars and all debts are paid off, should be more than enough for a fairly lavish lifestyle IMO.

[GGG]

Originally Posted by CaptainYooh

$4M tax-free savings (as in non-RRSP) will get you approximately $200,000 of annual income at 5% dividend which is on the high side, actually. If it is sheltered in RRSP, 50% of it will be taken by the Government in taxes. So, you will need to spend the principal to live bigger in your golden years (thus; reduce your dividend income while doing so). If you plan to live to 85 and leave nothing to anybody and spend all of it, that's averaging $200,000 per year after year 65. Not a small chunk of change by any means, but not a caviar-Ferrari-Four-Seasons-living lifestyle either. Now, devalue your $4M savings by rising inflation and that $200,000 per year will likely be closer to $100,000 in today's money power and quickly get you off that caviar train, unfortunately.

P.S. Don't get me wrong, $4M is still a LOT of money. You just need to see it in perspective.

200k split between two people is 100k. At 100k you pay 23k in taxes (less actually because of the age amount). If you have 4 mil between the the two of you are likely getting at least 12k in CPP. You are also still below the OAS full repayment and I assume you have a paid off house.

So you would have 166k in after tax income or 14k a month or roughly $500 per day. That’s a few ounces of caviar per day without noticing.

And that’s without depreciating principle.

Caveat being we are all talking in todays dollars

[Slava]

Originally Posted by GGG

200k split between two people is 100k. At 100k you pay 23k in taxes (less actually because of the age amount). If you have 4 mil between the the two of you are likely getting at least 12k in CPP. You are also still below the OAS full repayment and I assume you have a paid off house.

So you would have 166k in after tax income or 14k a month or roughly $500 per day. That’s a few ounces of caviar per day without noticing.

And that’s without depreciating principle.

Caveat being we are all talking in todays dollars

Well the other factor (which is enormous) is that all retirement years aren't equal. At the outset, and say until about age 75 people might spend as much as they did while working, sometimes more. But things change. Around age 75, the spending slows. Around 85 it moves to a passive retirement situation where people aren't traveling much (if at all), and aren't doing as much in general. Planning for retirement shouldn't be just a "4% rule" or things like that. It's fine for a super basic guideline, but that's about it in my opinion.

[bizaro86]

Originally Posted by GGG

200k split between two people is 100k. At 100k you pay 23k in taxes (less actually because of the age amount). If you have 4 mil between the the two of you are likely getting at least 12k in CPP. You are also still below the OAS full repayment and I assume you have a paid off house.

So you would have 166k in after tax income or 14k a month or roughly $500 per day. That’s a few ounces of caviar per day without noticing.

And that’s without depreciating principle.

Caveat being we are all talking in todays dollars

For sure. $4MM retires in comfort at any age, imo.

But the number at 65 is a lot different than 45, because you can draw down principal and have less years of inflation, but also because you have less high spending years.

If I had no time restrictions I'd want to travel at least 3-4 months/year. That would cost a few bucks and the present value is different if its 10 years vs 40.

[RichieRich]

You can’t say that hey $4M today isn’t worth much in 30years cos of inflation. That’s really only true if you either keep it in cash or worse put it into GICs. Statistically the markets have returned over 7% annually (some argue 10%) for about 100 years.

[btimbit]

Just hit 30, not much of a retirement plan other than paying into a pension and a small RRSP that I started a few years ago. If inflation and wage stagnation doesn't change then my retirement goals sure will still as I'll need that money now just to get by. Unless I give up the pension and go back to my old industry which paid well, but was unrewarding and I was miserable all the time.

Hopefully the cost of living goes back down or I'll have some big decisions in the next few years about sacrificing my retirement just to get by. Still not over the death of my wife but it sure feels like I need to start dating again just to have a dual-income household, going this alone is rough.

[Fighting Banana Slug]

$4mm would be a massive retirement fund. It will still generate a return while retired, so long as you don't have it buried in the back yard. Encroach on the capital in the really late years and there would still be a tonne left over after you are gone, if you are into that sort of thing.

[CliffFletcher]

For context, it’s worth keeping mind that the average Canadian has $184,000 saved at retirement, and those numbers are skewed by the high end. 30 per cent of middle-aged Canadians have no savings and 20 per cent have less than $50k saved.

The median after-tax income in Canada for households headed by an individual over 65 years old is $61k. Single individuals over age 65 have a median after-tax income of $27,500.

If you plan to have $750k saved at retirement, you’ll be doing very well compared to most other retirees.

[Slava]

Originally Posted by CliffFletcher

For context, it’s worth keeping mind that the average Canadian has $184,000 saved at retirement, and those numbers are skewed by the high end. 30 per cent of middle-aged Canadians have no savings and 20 per cent have less than $50k saved.

The median after-tax income in Canada for households headed by an individual over 65 years old is $61k. Single individuals over age 65 have a median after-tax income of $27,500.

If you plan to have $750k saved at retirement, you’ll be doing very, very well compared to most other retirees.

Well, maybe, but it does depend on what you plan to do in retirement and where you live and that sort of thing. It's really varied, and I'm not sure that a relative comparison is the way to go about things. If you want, say $3000/month after tax and have $750k saved, you're essentially withdrawing 10% a year. You almost definitely have a longevity risk issue there.

And yeah, people will get CPP/OAS and such to help with their retirement, but it will depend on their contributions there as well.

[IamNotKenKing]

I have 3.5 year-old triplet daughters. I shall never retire.

[I-Hate-Hulse]

Originally Posted by CliffFletcher

For context, it’s worth keeping mind that the average Canadian has $184,000 saved at retirement, and those numbers are skewed by the high end. 30 per cent of middle-aged Canadians have no savings and 20 per cent have less than $50k saved.

True, but you also have to consider if they have DB pensions or not. It's weird talking about retirement with a friend of mine in the BC Government system where both him and his wife have DB pensions....and nothing in savings.

Though they get to "enjoy" working in government organizations until they're 65 so there's that.

[CliffFletcher]

Looking at those figures, it seems CPP/OAS are the foundation of most Canadians’ retirement. I’d guess the average senior collects around $1k/mo between the two programs, accounting for almost half of the $61k median household and $28k individual retirement income. So having enough savings to provide another $1k/mo would just about bring you to the median retirement income.

Just trying to point out that in a lot of these retirement threads (and media advice columns) the ranges presented are from the wealthiest 30 per cent of Canadians to the wealthiest 5 per cent. They’re far from how typical Canadians do and will retire.

[I_H8_Crawford]

Originally Posted by IamNotKenKing

I have 3.5 year-old triplet daughters. I shall never retire.

You are a man amongst men.

I struggle with 2 kids 3 years apart - couldn't image 3 babies at once.

One of my fears with pregnancy was the "its twins (or more)"

[CaptainYooh]

Originally Posted by CliffFletcher

Looking at those figures, it seems CPP/OAS are the foundation of most Canadians’ retirement. I’d guess the average senior collects around $1k/mo between the two programs, accounting for almost half of the $61k median household and $28k individual retirement income. So having enough savings to provide another $1k/mo would just about bring you to the median retirement income.

Just trying to point out that in a lot of these retirement threads (and media advice columns) the ranges presented are from the wealthiest 30 per cent of Canadians to the wealthiest 5 per cent. They’re far from how typical Canadians do and will retire.

This is true. My in-laws have retired about 15 years ago with practically no savings. Sold their house in 2007 on the high, bought a small duplex villa in a condo complex with the difference going into their only retirement nest egg. Live on $3,000 in total income from CPP, OAS and senior's benefit. No travel, no discretionary expenses whatsoever. But at the same time, they can afford food, small car, utility bills and condo fees, a dog. So, yeah, you don't need a million to survive in retirement.