How much money is good for retirement

[Radio_Shack]

I am aware that is a very hard question to answer but given a few factors is there some calculator out there that can ping the #'s down a bit:

1) Assume retirement starting at 60 (in about 8 yrs from now)
2) Assume Normal yearly expenses around $60k/yr + 20k/Yr travel budget/yr = $80k/yr withdrawels from #3
3) Drawing from RRSPs + Cash investments + Business Retain earnings + TFSA cash + any Govt pension (There will be some investmnets interest, perhaps $20k/yr)
4) Assume live til 84? That's a hard one.
5) No mortgage or other debt
6) Keep hobbying under control, maybe once a month.

The strategy appears to be to pull money from the Non-Registered accounts first and defer withdrawel from the Registered Accounts as long as possible.

So given those few factors we need about 24 years of money x 80k/yr = $1.92Million + inflationary items, lets say $2Million?

Does that sound about right or is there other things I am missing?

 

[pusher69]

What are you planning to spend $60K (is this amount just for you or more as you mentioned "we") annually on if your house is free and clear (paid in full)???
It should be half of that amount unless you are paying over $20K in carrying costs to maintain your residence.

Don't forget that you will be taxed for any RRSP withdrawals.
Keep in mind the spending amount should dwindle down as you age unless you plan on going out with a bang and spend to you hearts content

 

[bazokajoe]

There is no real answer to this question.You ask 1000 people and you get 1000 differant answers.To many variables.

 

[Roger Thorpe]

Im having my fun now and gonna be a burden on society later:thumb:

 

[nottyboi]

Im having my fun now and gonna be a burden on society later:thumb:

that is a good plan, no matter how rich you are, being old will suck. Live for the day!!!

 

[nottyboi]

I am aware that is a very hard question to answer but given a few factors is there some calculator out there that can ping the #'s down a bit:

1) Assume retirement starting at 60 (in about 8 yrs from now)
2) Assume Normal yearly expenses around $60k/yr + 20k/Yr travel budget/yr = $80k/yr withdrawels from #3
3) Drawing from RRSPs + Cash investments + Business Retain earnings + TFSA cash + any Govt pension (There will be some investmnets interest, perhaps $20k/yr)
4) Assume live til 84? That's a hard one.
5) No mortgage or other debt
6) Keep hobbying under control, maybe once a month.

The strategy appears to be to pull money from the Non-Registered accounts first and defer withdrawel from the Registered Accounts as long as possible.

So given those few factors we need about 24 years of money x 80k/yr = $1.92Million + inflationary items, lets say $2Million?

Does that sound about right or is there other things I am missing?

Yes you are assuming your investments will not be earning any rate of return and you will not get CPP. If you need 80K/year.. (which is a LOT when you are and old geezer and don't have energy to travel) assuming you are a couple, take 20K off for CPP, so you are down to 60K. If you want to end up at $0 when you reach the end of line, then you need about 15X that which would be about $900K, if you do not want to consume your capital and prefer to leave it to your kids to spend on hookers and blow, then you will need 22x which would be about $1.32M

 

[Richard.TO]

I am aware that is a very hard question to answer but given a few factors is there some calculator out there that can ping the #'s down a bit:

1) Assume retirement starting at 60 (in about 8 yrs from now)
2) Assume Normal yearly expenses around $60k/yr + 20k/Yr travel budget/yr = $80k/yr withdrawels from #3
3) Drawing from RRSPs + Cash investments + Business Retain earnings + TFSA cash + any Govt pension (There will be some investmnets interest, perhaps $20k/yr)
4) Assume live til 84? That's a hard one.
5) No mortgage or other debt
6) Keep hobbying under control, maybe once a month.

The strategy appears to be to pull money from the Non-Registered accounts first and defer withdrawel from the Registered Accounts as long as possible.

So given those few factors we need about 24 years of money x 80k/yr = $1.92Million + inflationary items, lets say $2Million?

Does that sound about right or is there other things I am missing?

What about your health and possibly your partners health? Do your parents have longevity and are they free from major diseases like cancer, Alzheimer's etc? Do you have long term care insurance? What about beneficiaries? Are you planning to leave anything for children, charities etc? Are your numbers post tax or pre tax?

 

[Bobzilla]

Im having my fun now and gonna be a burden on society later:thumb:

This is step 1 of my retirement plan. Step 2 involves buying an extra can of cat food each week & stockpiling it for later. :thumb:

 

[needinit]

You need to calculate your Financial Independence number (FIN) - here is a link to a short form of that: http://www.investingincanada.org/financial-planning/whats-your-financial-independence-number

PS Where did you get living to age 84? - an unusually precise number (usually 85 or 90 now! as a standard/cautionary measure)

 

[TeasePlease]

Retained earnings is not a cash account; you can't draw down on it.

 

[oil&gas]

If 1--2 million is what is needed for a good retirement what is life
going to be like for those in their 40s and 50s who live from paycheck
to paycheck which means a lot of them? The median net worth of Canadian
household is probably less than a quarter of a million. If a million is needed
I am afraid a lot of people will have to worry more about surivival than living
a good life upon retirement.

 

[wpgguy]

If 1--2 million is what is needed for a good retirement what is life
going to be like for those in their 40s and 50s who live from paycheck
to paycheck which means a lot of them? The median net worth of Canadian
household is probably less than a quarter of a million. If a million is needed
I am afraid a lot of people will have to worry more about surivival than living
a good life upon retirement.

I see that starting to happen now. My parents are in their 70's and in good financial shape but I'm amazed by how many of their friends are not.

 

[Radio_Shack]

Replying to teaseplease "Retained earnings is not a cash account; you can't draw down on it. " - I will take Dividends from the Retained earnings in my Corporation when i have no other income. Tax will be much less since I already paid the Corp tax and just will pay the difference in personal rates. The calculation is a little complicated but trust me on that one or don't, doesn't matter

 

[Radio_Shack]

What are you planning to spend $60K (is this amount just for you or more as you mentioned "we") annually on if your house is free and clear (paid in full)???
It should be half of that amount unless you are paying over $20K in carrying costs to maintain your residence.

Don't forget that you will be taxed for any RRSP withdrawals.
Keep in mind the spending amount should dwindle down as you age unless you plan on going out with a bang and spend to you hearts content

I don't care about leaving a legacy for anyone to use as I have no kids. It's just me and the wife. If I have zero at age 84 doesn't matter, I will just roll my wheelchair off niagara falls.

 

[Anynym]

How much variability do you see in your spending?

Online financial calculators assume a steady rate of earnings on investments, and a steady rate of spending throughout retirement.

Reality is very different: if you earn less - or spend more - during one of the early years of retirement, you probably won't have time to make up the difference as your investment income in later years is based on a smaller pie. Simply "averaging" out the numbers doesn't make up the loss.

So build a significant cushion into your planning.

 

[NiceShoes]

OP, you're also assuming the market won't suffer any big down turn in that 8 yrs time . . .

 

[Imperius]

I am aware that is a very hard question to answer but given a few factors is there some calculator out there that can ping the #'s down a bit:

1) Assume retirement starting at 60 (in about 8 yrs from now)
2) Assume Normal yearly expenses around $60k/yr + 20k/Yr travel budget/yr = $80k/yr withdrawels from #3
3) Drawing from RRSPs + Cash investments + Business Retain earnings + TFSA cash + any Govt pension (There will be some investmnets interest, perhaps $20k/yr)
4) Assume live til 84? That's a hard one.
5) No mortgage or other debt
6) Keep hobbying under control, maybe once a month.

The strategy appears to be to pull money from the Non-Registered accounts first and defer withdrawel from the Registered Accounts as long as possible.

So given those few factors we need about 24 years of money x 80k/yr = $1.92Million + inflationary items, lets say $2Million?

Does that sound about right or is there other things I am missing?

Given the assumptions above and some other "worst case" assumptions, that sounds about right.

If we were to assume (in the worst case):

- all income is fully taxable (i.e. comes from an RRSP/RRIF)
- all income is taxed in the hands of one tax payer (i.e. no incoming splitting of any kind)
- minimal rate of return of 1.5% over the 24 years (such as a high-interest savings account)

To generate $80K after tax would need (at today's tax rates in Ontario) about $112K pre-tax (of fully taxable income).
To draw $112K per year for 24 years with a 1.5% annual return and draw down to $0 over that time would require $2.25 million at retirement age 60.

Again this is a worst case scenario. You've already indicated that:

- your income would come from a mixture of fully taxable (RRSP, govt pensions), preferentially taxed (dividends, non-registered investments), and non-taxable (cash, TFSA) sources
- you are entitled to a govt pension (CPP/OAS), so some of that $112K gross annual income is taken care of
- you will likely earn more than 1.5% on your existing capital

Also:
- you will be entitled to various tax credits based on age and pension income, etc
- you and your wife will likely be able to income split to some extent
- as others have mentioned, your expenditures will likely decrease over the course of your retirement (unless your health care costs increase rapidly or there is some other rampant inflation... which is possible)

So, if you aren't facing the worst case scenario, you will be fine with $2.25 million, and will probably need substantially less. (How much less is the complex part... consult your financial planner for the nitty gritty specific to your situation.)

FYI, I normally run retirement income projections to age 95, but if you can guarantee you won't last past 84, all the better for you... I think...

 

[TeasePlease]

Replying to teaseplease "Retained earnings is not a cash account; you can't draw down on it. " - I will take Dividends from the Retained earnings in my Corporation when i have no other income. Tax will be much less since I already paid the Corp tax and just will pay the difference in personal rates. The calculation is a little complicated but trust me on that one or don't, doesn't matter

It's called the Theory of Integration, and you're right (for the most part). Overall, taxes are not "less"; it's just that you will pay it in two installments (corporate and personal).

As for retained earnings, yes, you can pay dividends from retained earnings. But, how will you take those dividends? Presumably, you will want to take it in cash? Humour me and compare your retained earnings balance to your cash and investments balance? I'll bet they are not the same. In fact, unless you're a farmer, your retained earnings balance is probably very different from the cash you have on hand at any given time.

 

[Plan B]

Why is it that people always wait until they retire to start "living"? Always saving and short changing themselves while they are healthy and then passing away from cancer at 68.

 

[oil&gas]

If you don't start saving and moderate your spending habits chance is
you would want to end your life at 68. You can of course live your
preferred lifestyle if you are already sitting on a huge stash of cash in
your 30's.