How Much Do I Need to Retire?
The Bank of Montreal (BMO) conducts a retirement survey every year. In this survey, they ask people their thoughts on retirement. According to BMO’s latest survey, Canadians currently believe they need $1.7 million to retire. This number is 20 per cent higher than the last survey. My team and I work with retirees every single day. We have seen people retire comfortably with a few hundred thousand in savings and others that require a few million dollars. While I can appreciate that having a single number simplifies the situation and certainly makes for a good headline, it isn’t realistic at the same level. There is no one-size-fits-all when it comes to retirement savings.
Firstly, generating income in retirement is more about just how much money you have saved. Work pension plans have changed over the years. However, there are still some folks that have defined benefit pension plans and will receive a guaranteed income in retirement. If you are fortunate enough to have such a defined benefit pension, you won’t need as much in savings because of the income from your pension. As well, all Canadians are likely to get some income from Old Age Security (OAS) and the Canada Pension Plan (CPP).
The more pension income you collect, the fewer savings you’ll need to have a comfortable retirement. As well, stats show that most Canadians retire in their 60s, which tends to work out because most pensions don’t kick in until that age. The earlier you retire, the more savings you’ll need. A big factor in how much you need to save to have a comfortable retirement is how much you spend during retirement.
Having worked with many retirees myself, I can tell you there’s a wide range in spending – people have different lifestyles, different habits, and different levels of income. A monthly income might seem excessive to one retiree while any less may not be enough for another.
Generally speaking, the lifestyle you lead prior to retirement is pretty close to the lifestyle you can expect to live in retirement. So, often we use the pre-retirement budget as a basic guide to determining the required income in retirement. That number is different for every person. The more you want to spend in retirement requires more retirement savings.
There are multiple factors that have to be considered in a retirement plan, and I’ve only touched on three: pensions, when you retire, and retirement budget. However, even with just three factors considered, I think it's quite apparent that the amount of money required to retire is different for each person. I think BMO’s survey is less about accurate retirement data and is rather a reflection of how people feel. We’ve been through a lot through the last few years from the pandemic, lockdowns, inflation, turbulent markets – it’s been tough. I can understand if folks feel a little down and like retirement is out of reach.
Talk with your financial professionals, they can review your plan and let you know if the amount of money you set aside is appropriate for your specific situation.
CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA
The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability. Tax & Estate advice offered through Canaccord Genuity Wealth & Estate Planning
https://advisorweb.cgf.com/content/uploads/sites/67/Financial-Focus-March-2023.pdf
