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Plan now, play later. How much will you need to retire comfortably?


Planning for a comfortable retirement can seem somewhat intimidating, but these three steps will put you on the right track.

1. Determine your sources of income
Most Canadians have four primary sources of retirement income: government benefits, company pension plans, registered retirement savings, and other savings and investments. Although they vary slightly by province and income level, government benefits generally consist of Old Age Security (OAS) and Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) payments. Your registered retirement savings include the amounts you’ve saved in a Registered Retirement Savings Plan (RRSP), Registered Pension Plan (RPP), Pooled Registered Pension Plan (PRPP) or Tax-Free Savings Account (TFSA). When you retire, you’ll generally transfer your RRSP, RPP and PRPP assets to a Registered Retirement Income Fund (RRIF) and draw income from your RRIF. Your other savings and investments can be anything from a basic savings account to stocks, bonds and real estate holdings.

2. Draft a post-retirement budget
You can get a rough estimate of your annual spending needs by looking at your current budget. First, eliminate all the items you won’t have to pay for in retirement. This might include a mortgage, paying for your children’s education, or the money you’re currently putting away for retirement. Next, think about new costs that could come up, such as caring for an aging parent or higher health care costs. This should give you a sense of how much you’ll need each year in retirement. For some people, 45% of current expenses is enough in retirement. For others, it may be closer to 70% of their current annual costs.
 
3. Estimate your nest egg
Work out how much you might receive in government and company pension benefits. According to Service Canada, the average combined CPP and OAS benefit is about $14,500 per person per year. Visit Service Canada’s website to see an estimate based on your situation. If you have a company pension, look through your plan documents or place a call to your company’s human resources department to determine the amount you’ll receive from that pension.
 
Finally, identify your savings gap by taking your estimated annual spending needs and subtracting your potential government and company pension benefits. Multiply that figure by the number of years you’ll be retired: on average, 19 years for men and 22 for women.* That’s the amount you’ll want to have saved for your retirement.
 
Please contact our office today and let our team help you determine the amount you’ll need to enjoy a comfortable retirement.
 
* Source: Statistics Canada, 2011.
 
 

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