Personal Finance

How much money do you need to retire?

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  • Sep 10th, 2006 10:23 am
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Deal Fanatic
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Apr 6, 2003
8451 posts
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How much money do you need to retire?

Simple question.

I'm wondering how much money you think you will need to survive (well) when you retire? How much income?

Let's talk in todays dollar to, not the inflation one.

While I do plan to have a rental property or two before I retire for the sake of this arguement I want to assume you have ZERO income besides your savings and investments. You should however assume you have no mortgage payments or car payments.

So, how much do you need?

I am thinking in order to maintain a healthy outgoing level of life, I would want $30,000k income.

Thoughts? I realize it's kind of a vague question and depends on many factors, but I wanted to see what you would think.
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30 replies
Banned
Jun 19, 2006
9349 posts
57 upvotes
What about healthcare? Paying for a hip replacement, for instance, or for a doctors appointment or hospital visit?

Can we assume that the Canadian healthcare system will be sustained, in its current form?

I would definitely want enough that I didn't have to suffer for 2 or 3 years in the 'public' healthcare system for a hip replacement, if I needed one. So this means, at the very least, my portfolio would have to be capable of withstanding at least 1 or 2 one-time $100k hits, without substantially altering the magnitude of my future income stream.

Also in Canada, we have a system that provides government services based on our income, and in the future, probably also our net worth. If you have a $60k/year income, you have to pay for all your prescriptions. If you have a $20k/year income, you don't have to pay for many of your prescriptions. Seniors housing is far cheaper too if you don't have much income.

Having said that, I could probably live on $20k tax-free. But that wouldn't provide much savings to ever replace the car, do any home renos, or do much travelling.
Deal Addict
Sep 19, 2005
2838 posts
48 upvotes
If I was retiring today,,,, I would collect a pension of about $50000

with no debts, that will do us fine,,,, in addition, I would have my and my spouses rrsp to bring income higher
Sr. Member
Jun 27, 2004
861 posts
41 upvotes
Kitchener
Retiring today (in today's dollars), I'd probably want in the neighborhood of $80k of income. I'd probably feel ok at roughly 1.5 million in investments - assuming no rental properties and no outstanding debt. I'd be looking at "reasonably safe" investments, with a bit of play money!

Unless you hire someone to service your rental properties, I'm not sure that I'd consider myself "retired" - ie, if I had to service the properties, I'd still be working, no?
Deal Addict
Mar 18, 2005
4423 posts
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Mississauga
I would say 2-3 million. my father retired at age 55 as an engineer. He has i think 35 rental properties. He also has a large stock portfolio.
Deal Fanatic
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Apr 6, 2003
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TinyTank wrote:I would say 2-3 million. my father retired at age 55 as an engineer. He has i think 35 rental properties. He also has a large stock portfolio.
I meant more per month.
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Deal Addict
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May 5, 2005
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R. Hill
The amount needed is different for every person, because every leads a different life and has different expectations. If my wife and I have no debt, nor a mortgage, we could probably live comfortably with 40k annually. That said though, I'd want to have additional funds for any emergencies.
Deal Addict
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Apr 2, 2006
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I'm shooting for 4.3M to retire with 50K/yr for 35 yrs plus having some excess cash leftover for emergencies/inheritance etc

/edit oops.. miscalculated
Deal Addict
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Aug 16, 2004
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Toronto
http://www.cbc.ca/retirement/retirement_calculator.html


Google 'retirement calculator' and pages from Canada.

You should have an idea of how much income you'll need (annually) when you retire and for how long.

The recommended numbers are:

- 60% of your middle age income (let's say that's $100,000), so that would be $60,000 per year before taxes at retirement.

- How long you expect to live after retirement. If you retire at 65, and average life expectancy is 80, then 15. But I use 25 because of my current lifestyle and the belief that medical advances will extend my life.

It's usually around $1.5M to $2.0M
Deal Expert
Aug 2, 2001
18946 posts
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circa76 wrote:I'm shooting for 4.3M to retire with 50K/yr for 35 yrs plus having some excess cash leftover for emergencies/inheritance etc

/edit oops.. miscalculated

I think your number is a little high.

With $4,300,000 you would be able to get $215,000/year in interest at 5% (Which in itself is most likely doable in the future with a very conservative investment).

Even with inflation, I don't think that $50,000 of today's dollars will be worth $215,000 in 20-30 years.
Deal Fanatic
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Jul 18, 2003
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Etobicoke
Why bother doing the calculation? There are so many unknown factors that may happen between now and the time you retire.

Just put away as much as you can. Budget well so you are living comfortably but not extravagantly. Everything else goes to retirement savings.

You can never have too much money. Only too little. Especially when it comes to retirement because if you still have lots of money left over when you die, your children will definitely appreciate some inheritance.
Deal Expert
Aug 2, 2001
18946 posts
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eelfliw wrote:Why bother doing the calculation? There are so many unknown factors that may happen between now and the time you retire.

Just put away as much as you can. Budget well so you are living comfortably but not extravagantly. Everything else goes to retirement savings.

You can never have too much money. Only too little. Especially when it comes to retirement because if you still have lots of money left over when you die, your children will definitely appreciate some inheritance.

I don't necessarily agree with this method.

Ever since I started working my 2 jobs, making great (At least I consider it) money for doing so, I'm slowly realizing that there are other things in life besides money, making money, and keeping your money.

What I'm getting at is that, you can have too much money when you retire. What good is having $3,000,000 when you retire? (Which is easily within reach for most people with a proper savings plan) Sure, you can travel, buy a vacation house, gifts for the kids, medical treatment, etc..... But you'll never put a dent into that $3,000,000 because even with it earning only 5%/year you'll draw $150,000/year. There are not many retirees that could spend that amount of money without just blatently giving it away.

So why not, when you're younger, focus on retiring with a certain goal in mind and enjoy the rest of your money rather than the other way around?
Deal Addict
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Sep 5, 2004
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Guelph, ON
Don't forget to enjoy life in the meantime. No good if your cheap and saving everything for retirement and don't make it there.

Trust me, I know quite a few poeple who have lost loved ones in their 40's or 50's for that matter.
Deal Expert
Oct 6, 2005
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sixer wrote:Don't forget to enjoy life in the meantime. No good if your cheap and saving everything for retirement and don't make it there.
Moderation in life is the key :)
Deal Fanatic
Feb 1, 2006
9645 posts
911 upvotes
Muskoka
Keep in mind that virtually all of all the retirement calculators out there make the assumption that you will want to preserve your capital! I think that is what gives the scary sounding numbers that frighten people into thinking they wil be eating cat food shivering in the dark during retirement if they don't put evey penny aside and live like a monk till retirement.

It's much more realistic for most people to assume that you will take your gains as well as a bit of capital every year when you retire, slowly drawing it down. Why die with a million plus? Obviously, you want to try to plan it so you don't actually draw ALL of your capital before you die, but most people also own a house that can have the equity tapped as well if this situation does occur.

For us, $500k in todays dollars, if we were 65 now, would easily allow us to maintain a good lifestyle and live a long time without worry of having to eat cat food. That would give us $35k per year before taxes, and assuming a 5% return, and factoring in inflation, by 80 we would still have $220k of capital left. Plus the house, assuming we didn't downsize. Using that number, if we have $100k saved at 30 years old, and we never put another penny into savings, we'd hit our target by 65 (assuming inflation adjust 5% return of the period).

In short, put away as much money as you can, but don't sacrifice your quality of life now to do so. 'Quality of life' obviously means very different things to different people, so everyone will have to work the numbers for themselves.
Deal Addict
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Apr 2, 2006
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TrevorK wrote:I think your number is a little high.

With $4,300,000 you would be able to get $215,000/year in interest at 5% (Which in itself is most likely doable in the future with a very conservative investment).

Even with inflation, I don't think that $50,000 of today's dollars will be worth $215,000 in 20-30 years.
Actually, 50K today assuming inflation at 3% will be about 145K in 36 years. If I plan on living another 35 yrs after that, it comes out to about 5M. So 4.3M isn't really that far off.
Jr. Member
Feb 15, 2006
107 posts
Bullseye wrote:Keep in mind that virtually all of all the retirement calculators out there make the assumption that you will want to preserve your capital!
Mackenzie Financial has a really good calculator:

http://mackenziefinancial.com/rrspcalculator

It takes inflation, years to retire, years to draw from, interest pre/post retirement, etc into account.

Ideally you die with $0 in your bank account. :)
Deal Fanatic
Feb 1, 2006
9645 posts
911 upvotes
Muskoka
AlexH wrote:Mackenzie Financial has a really good calculator:

http://mackenziefinancial.com/rrspcalculator

It takes inflation, years to retire, years to draw from, interest pre/post retirement, etc into account.

Ideally you die with $0 in your bank account. :)
Thanks for that, that's the first calculator I've seen like that online. And on a financial services site, unbelievable! Big finance has a vested interest in making people think they need to preserve their capital till death (so they make more money off of you), I'm surprised to see this offered.

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