How Much Is Enough?

Oh, Canada

We live in country that most financial experts believe has a sound and sustainable retirement program. While fewer than 40% of working Canadians have employer pensions, all Canadians will have a mix of government pensions like CPP/QPP (Canada Pension Plan/Quebec Pension Plan) and OAS (Old Age Security) when they hit retirement age (whatever that may be). Additionally, if your income is low, you're eligible for GIS (Guaranteed Income Supplement). That's part of the reason you've been paying taxes all your life (cue the political discussions).

General info about the pros and cons of different types of retirement vehicles.

Three Legs Good

More than 60% of Canadians actively save for retirement using investment 'tools' like RRSPs or TSFAs. Some economists refer to three legs of retirement support: government pensions, employer pensions, and private savings. That doesn't mean three are needed, just that it makes for a more stable financial footing. While the Covid pandemic has almost certainly changed the calculus to a degree, the basics remain the same.

In Come and Out Go

So what is "the number", the amount you need to retire? The short - and unsatisfying - answer is: it depends on you. A slightly longer answer is: anywhere from 50% to 100%, depending on how you want to live your life (not "lifestyle", which has more to do with adopting the latest trend or fashion, because it's.. the latest trend or fashion).

There are other questions: what impact does age, residency, divorce or separation have on pension? Forty-three percent of 65 year-olds are single; how does that affect the timing of their retirement? Can two live (almost) as cheaply as one? What's the importance of RRSPs and TSFAs leading up to and during retirement? All of that leads to…

The Bottom Line

Companies selling financial services tend to suggest that you need from 70% to 80% of your pre-retirement income to live comfortably in retirement. A more realistic figure may be lower. A survey by Sun Life  concluded that Canadian retirees are living on 62% of what they previously earned. Other financial analysts suggest that most retirees can comfortably live on between 50% and 60% of their pre-retirement income.

Take A Snapshot

If you want a snapshot of what retirement might look like financially, track your expenses for a year. Part of that exercise lets you see what you spend on work-related expenses. Some people are amazed at how much they spend week to week at work. Most of that goes poof when you retire. (Of course, other living expenses then appear-  which is the reason to track your expenses).

Talk To People

There are many of sources of information about the financial side of retirement, but don't forget one of the easiest sources to tap: people you know. Talk to people who have retired, or who are retiring. See what they're doing, ask about mistakes to avoid, ask what worked and what they might do differently