We are experiencing a silver Tsunami. The leading edge of the Boomers turned 65 six years ago. On average, 1,250 Canadians turn 65 years old every single day. Most Boomers were born between 1961 -1965. That’s why you feel everyone has been turning 50. And people are living longer, much longer.
With all of this happening, it’s small wonder that the media, politicians and the financial services business are all talking about retirement. That kind of focus may be good, because of what it means for savings habits.
However, there are a lot of myths we have to be wary of if we want to ensure we have an adequate retirement income that lasts a lifetime.
What you need to know
Myth #1 – Retirement planning is just for older people
The definition of retirement is changing and even though it may seem like a long way off, use that to your advantage. Much like dieting and exercising, starting a plan and sticking to said plan are the hard parts.
Every little bit of savings helps and will make it easier, if you start early enough. Harness the power of compound interest where planning and saving a little now on a regular basis can let money work for you: 24 hours a day, seven days a week…for decades.
Every year you delay means you’ll need to save more money and perhaps take on more investment risk in order to reach your goals.
Myth #2 – You need 70 to 85 percent of your current income level in retirement.
Relying on rules of thumb for your retirement planning can be dangerous. For example, the rule of the thumb that you will 70 to 85 percent of your current income in retirement, will be too high for some individuals and not enough for others. You see, the focus should be on consumption dollars, what you spend on yourselves and your own lifestyle. For most Canadians, that excludes mortgages, child rearing costs and saving for retirement – things you wouldn’t necessarily be spending money on during retirement. You will need 100% of your consumption dollars and some extra money in the early, active years of retirement for those special trips and experiences you have dreamed about for years. Your actual replacement income goal will depend on your marital status, whether you own a home, whether you have children, how much money you earn, and most important your lifestyle in retirement. The range can vary widely and depends on your individual circumstances and retirement vision.
Myth 3 – I need $500K, $1M, $2M to retire
The fact is that your “number” can vary greatly depending on your personal situation and goals, how long you expect to live, whether you will be single or with a spouse/partner and when and where you will retire.
Consider trying some of the tools available from trusted sites produced by large financial institutions. And don’t forget government benefits like the Canada or Quebec Pension Plan (CPP/QPP) and Old Age Security. If you want to maintain the same lifestyle before and after retirement, your number is tied to how much income you will need to provide the same consumption dollars. That’s the money you normally spend on your own lifestyle. Add some extras to that bucket list of yours.
The best way to know your “number” is by developing your personal retirement plan with the help of an experienced financial planner. Working with an experienced financial planner trained in the unique field of retirement income planning can prove greatly beneficial in order to work out what you need and what you want to do throughout the various phases of your retirement.
Wondering what’s your “number”? Email us or phone us at (416) 875-9113 to get started on your retirement income planning.