According to Statistics Canada, the nation’s population is now comprised of more millennials than baby boomers.
But as boomers age out of the workforce, the country is facing what Stats Canada is calling a “looming wave of retirement.”
So this month on Money Tips Monday, it’s Part 2 of Global Okanagan’s retirement planning segment.
How much money you’ll need to retire with is a complex question with a complex answer. Because the answer is: It depends.
“That’s such a tough question to answer because the answer changes for every person,” said Spencer Tantardini, a wealth-planning specialist at Valley First, a division of First West Credit Union.
It’s not so much about how much you need to save for retirement; rather, it’s more about how much you think you’ll be spending in retirement.
If the plan is to travel the world, you’ll need more money than staying home and enjoying time with the grandkids.
You’ll also want to factor in life expectancy and inflation.
So there’s no magic formula, as it differs from individual to individual, but a good, general rule of thumb is to plan on having 80 per cent of your pre-retirement income available to you each year.
The Canadian Retirement Income Calculator (CIRC) is a great resource for figuring out how much you’ll need to save to achieve that 80 per cent.
Available online, the CIRC is a federal government number cruncher that provides retirement income estimates from Old Age Security (OAS) and the Canada Pension Plan (CPP).
With CPP, how much you get depends on how much you put in and at what age you apply for it.
“You can take it as early as 60 years old,” said Tantardini. “And for every month you take it before your 65th birthday, you reduce it by about 0.6 per cent.”
He said you can also delay it up to age 70, and for every month you delay it after your 65th birthday, you gain 0.7 per cent.
With OAS, most Canadians between the ages of 65 and 74 will receive a monthly payment of $713.34, or $8560.08 annually. At age 75, it increases to $784.67 monthly, or $9416.04 annually.
Factoring in all potential income sources, like CPP, OAS, pensions and other savings can go a long way into making retirement a reality rather than a dream.
Tantardini said there have been cases where they’ve sat down with members “and reviewed their financial retirement plan and it turns out the members were able to retire quite comfortably.”
“They were surprised that they could technically could go to their boss next week and retire and live off retirement income,” he said.
“They didn’t have $1.7 million in the bank, but what they did have was a work pension plan, CPP and OAS that they could rely on.
“They also had a portion of their savings so that they could draw down through their retirement years and live the lifestyle they wanted.”
That illustrates why after having a plan in place, a good financial planner can be one of the best assets you can have when it comes to navigating the ins and outs of retirement.