Sure you love your job, but do you want to be doing it when you're 90?
You keep hearing it, and it's true: it's never too early to start putting money away for your retirement. But how much? Whether you're years from turning in your employee pass card or already making your retirement travel plans, this guide will help you estimate your retirement income and make a savings plan. Excerpted from What Every Canadian Should Know About Family Finance (Canadian Securities Institute, 1999), it will tell you how to trade in your briefcase for your golf bag.
Three steps in retirement strategy
1. Estimate your total retirement income. The first step is to determine how much after-tax income you will get when you retire. Include income from all government programs such as Canada Pension Plan (CPP) and Quebec Pension Plan (QPP), employer-sponsored pension plans, other retirement income programs and other sources such as investment and rental income and part-time employment.
2. Estimate your retirement needs. The second step is to decide how much after-tax income you'll need. This largely depends on your chosen lifestyle and your age at retirement. If you aren't sure what your needs will be, it's best to pick a target based on a percentage of your preretirement income. Although most financial planners suggest a target of 70 per cent, it's probably wise to shoot a bit higher if you can. People are living longer and it's surprising how fast money can go when you have time to spend it.
Generally retirees find certain expenses are significantly reduced, while others are higher.
Once you've had a chance to consider the effect that retirement will have on your living expenses, compare your estimated income and deductions just before retirement with those just after retirement. For example, if your goal is to generate 80 per cent of your preretirement net income and your estimates reveal that you'll need more than that to fund the lifestyle you want, the difference between the two figures will have to come from personal savings.
Page 1 of 3 - Learn why you should start saving for retirement as soon as possible on page 2.
