How much will you need for your retirement?
Whether you are 5, 10 or 15 years away from retirement, it isn’t always easy to determine just how much you will need to live happily ever after.
Beware of generalities
Many myths exist about how much you should be setting aside to live comfortably in your retirement. You have probably already heard a few different guidelines, like that you would need $1 million in your bank account, or that you will need 70% of your gross income to maintain your lifestyle throughout retirement.
One problem is that these rules do not consider inflation, which will have a direct impact on your purchasing power. Your life expectancy will also affect the length of your retirement, as will your lifestyle, which will surely not be the same at 65 as at age 85.
To determine how much you will need for a comfortable retirement, you must first ask yourself the right questions.
What lifestyle will you have in retirement?
Have you ever thought about what you will do during your retirement? Are you active or are you a home body? Are you planning to travel the world or are you planning to do your favorite activities like gardening, sports or reading? Would you like to swap your big house for a condo? And by the way, will you have finished paying off your mortgage? Defining your projects as accurately as possible will help you calculate the costs and help you start determining how much you will need.
How long will your retirement last?
Other parameters like the age at which you want to retire will also be a factor. While some people decide to stop working early, others prefer to stay in the workforce to continue to earn an income or to pass on their knowledge. This means you will need more savings if you stop working at age 55 than at age 70. Now all this still has not considered life expectancy, estimated in Quebec at about 86 years for men and 89 years for women, according to Retraite Quebec; a factor that can weigh heavily in the balance.
Although this exercise is not always easy, estimating the length of your retirement will also help you assess your future financial needs.
Budget your retirement lifestyle
Once you retire, you may have less expenses related to your work (clothes, transportation, restaurants), and less taxes and contributions to pay, but you will certainly pay more for travel, entertainment, and health care as you age.
The best way to get the right pulse on your retirement lifestyle is to make a budget. By comparing your current and retirement expenses, you will see if the estimated cost of living is realistic and if you are on the right track. The Saskatchewan government has provided this budgeting worksheet to help.
The secret: planning for retirement
Between the estimated retirement age, life plans, health status and inflation, planning for the golden years presents many challenges.
Assessing your future needs and costs will help you determine how much you need to accumulate to live a comfortably in retirement, from a financial perspective. This will also allow you to determine if the different sources of income you can count on will be sufficient to financial all your future projects.
To put all the chances on your side, do not hesitate to call on an advisor from our team. They will be able to provide you with support through this new stage of life by tailoring your investment strategy to suit your financial goals.