We are constantly hearing the question of how much will I need in my retirement and will I have enough. The question, though scary for many, is not always easy to answer, there is no one single or correct answer. We have learned that not all people are equal and many of them tend to have very different ideas of what their retirement should or will look like, or will they ever be able to retire. Most are asking us how much to set aside and how long will that last?
- The standard ratio is 70% of annual income times 20 years.
- Income of $100,000.00 would be 100,000 x 0.7=70,000 x 20 =1,400,000 and this can seem unattainable for those trying to raise a family in the world today, especially BC.
- So, we also look at 50% (100,000 x 0.5 = 50,000 x 20 = 1,000,000) and 60% (100,000 x 0.6 = 60,000 x 20 = 1,200,000) and though this is less funds it does afford a very comfortable retirement.
One must ask what they want their retirement to look like, does it include travel each year, live in the same home in the same town, hobbies, health…the list goes on. We assist with the budget and help them to realize their spending habits and how this may or may not change in the future. This exercise is very eye opening and an important step in moving one in the direction of their comfortable retirement.
Having group RRSP’s and Investments with a matching portion from the employer is a great tool for employees to take advantage of. It’s a great step in the planning direction of their retirement, helping accumulate towards the funds they will require in their retirement years. It is a bit of a relief when you know that part of your investment savings is also coming in a matching contribution from the employer. It is a large help. A simple 2% match can make a large impact on those funds.
As soon as one can start taking an honest look at their expenses and income and start a monthly budgeting plan and use it. The sooner they will be able to have a look at their spending habits. Then they may be able to see into the future. The biggest expense is usually the mortgage and all things associated with that, like taxes and maintenance, utilities, home/car insurance and gifts. The question is, will this large expense (mortgage)be paid off by retirement. Usually a difficult question for a younger person to answer. The closer one is to retirement the easier it is to investigate the future and have a better understanding of what those imminent expenses may be. We recommend that starting the planning process can happen as soon as one wants to start, keeping in mind the younger one starts the more likely they will be able to meet those dreams with less stress. We like to keep the planning process going often.
We also recommend getting a handle on any debt is going to aide in the success of your retirement goals. Many people have shared that would like to have a better hold of their finances and many would like to devote more money to the repayment of their debt.
