How Much Do You Need to Retire?

Posted on: February 13, 2024

By Steve Bridge, BA (Hons.), CFP® 

desired retirement lifestyleRetirement, or financial independence, ranks as one of people’s top financial goals. We’re currently in the midst of “RRSP Season”, and many Canadians are giving at least a passing thought to their eventual retirement.

A January 2024 survey by the National Institute on Ageing revealed that 26% of working Canadians aged 50+ say they are unsure of whether they can afford to retire at their desired time, with another 39% indicating they are not in the financial position to do so. The same survey found that the rising cost of living was by far the most frequently reported financial concern among Canadians 50+ in 2023, with the worry of running out of money in retirement coming in second.

In the face of so many immediate financial pressures, it’s easy to avoid thinking about the future and doing proper retirement planning. You may think you’re too young to be thinking about retirement or you’ve waited too long to plan for retirement, but it’s never too soon or too late to give yourself choices.

As a Money Coach based in West Vancouver, BC, everyday I help clients begin the journey of determining just how much they need to retire.

So where to start?

Step 1: What does retirement mean to me?

Just as it is important to dream and set goals for your current life, it’s important to do the same for your retirement so that you can build a financial plan accordingly. Imagine what retirement will look like for you.

Start with your dreams. Will you travel? Work part time? Is a winter retreat in Whistler, BC something that you envision for you and your family?

Next, set clear, attainable and true retirement goals, and then prioritize them.

Step 2: How much money will I need to live on in retirement?

The next step is to figure out how much money you will need. There is no magic number that works for everyone. Just as visions are unique, the amount you need for retirement is unique.

The easiest way to estimate your retirement spending is to start with what you are spending right now and then think about what might change in retirement. Many of my clients see themselves moving from West Vancouver and living out their retirement years in a lower-cost location. Now is the time to starting thinking about what your life will look like in retirement.

Use the Money Coaches Canada Retirement Lifestyle Expenses worksheet  to help understand your anticipated monthly and annual expenses in retirement.

Step 3: Where will my income come from?

Look at your potential sources of retirement income. Consider employer pensions, government pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS), registered savings (RRSPs and TFSAs), non-registered savings and other income.

Perhaps you see yourself working in a part-time or reduced capacity as you transition into full retirement. What does that look like, and what steps do you need to take now to make that a reality?

Step 4: How much do I have to save now? (otherwise known as Gap Management)

To get an idea of how much you need to save for retirement, download and complete the Money Coaches Canada Financial Freedom Calculator. You will need your estimated annual expenses figures and some of your income and investment information from Steps 2 and 3. The calculator will factor in: inflation, the estimated rate of return on your investments, when you expect to retire, and how long you expect your savings will have to last. It is a good idea to run retirement numbers to at least age 95 to ensure that you don’t outlive your money. Using the calculator, you can see what happens to the numbers when you change one of the many factors.

It is possible that there will be a shortfall or gap between your expected retirement income and your desired retirement lifestyle. Don’t be discouraged if there is a gap in your current plan. For most Canadians, there usually is!

The important thing is that now that you know about it, you need to plan for it and act on your plan. Don’t worry needlessly – get the facts about how much you will need to retire comfortably. Maybe you will need more money than you think. Maybe less! The only way to know for sure is to get clear about your goals and to start crunching some numbers. Get financial advice from someone you trust if you don’t want to go it alone. A financial coach, like a Money Coach from Money Coaches Canada, may just be the right choice. But make a plan today—so you can enjoy tomorrow.

Based in West Vancouver, Steve Bridge is part of the Money Coaches Canada national network of Money Coaches. A Money Coach is a financial professional that helps clients develop a clear understanding of their current financial situation and create a plan that helps them reach their goals. Money Coaches Canada is the nation’s leading, independent provider of advice-only financial planning. Money Coaches do not sell investment or financial products.

This post first appeared in 2016. It has been updated with current data and/or information and republished.

Category(s): Budgeting and Cash Flow, Retirement savings
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