January 2015 Water Cooler: Are you ready to retire? The top 5 questions to ask yourself

retirement
Retirement?

By Melany Hallam

Do you have a solid financial plan for your retirement?  Yes/No (take the survey here: http://www.careerlinkbc.com/blog.php) 

It’s a new year—a time when we often think of making changes in our lives and setting goals. Is this the year you’ll start thinking seriously about retirement?

If you have looked into retirement even a little bit, you’ll have seen all kinds of conflicting advice. Some advisors say you need to have built up RSPs of almost a million dollars, between contributions and investment interest. Others put the amount closer to half that. Either amount sounds pretty scary to me, but if you’ve still got 15 or 20 working years left, it may not be as hard as it sounds. To give yourself an idea of your own situation, try this quick and dirty retirement income calculator from TD Bank: http://retirement-calculator.tdcanadatrust.com/about-you.html.

 

Here are the top five most common questions and answers for retirement planning:

  1. How much can you expect from government pensions?
    Government pensions are a huge help to people who have been unable to save much in RSPs during their working years. You can get as much as $563.74 monthly from Old Age Security (or more if you qualify for income supplements). Find the full chart here: http://www.servicecanada.gc.ca/eng/services/pensions/oas/payments/index.shtml.

If you were retiring in 2014, the Canada Pension Plan maximum was $607.33 monthly. The full chart is here: http://www.servicecanada.gc.ca/eng/services/pensions/cpp/payments/.

But remember, both of these amounts will change depending on what year you retire. To do your own calculation, see the federal government’s retirement income calculation website here: http://www.servicecanada.gc.ca/eng/services/pensions/cric.shtml.

There’s also a handy video that explains how you can calculate your own income automatically from Service Canada website here: http://video2.servicecanada.gc.ca/video/boew-wet/fegc-gcwu/rpc-cpp-eng.webm

  1. How much will you get as a pension from your current employer?
    If you contribute to a pension plan through your job, it should be providing you with a statement each year. This will include estimated monthly payments based on retirement age and years of service.
  2. How much will you need every month?
    Here’s where you really need to think about what you want to do when you retire. The generally accepted monthly income rule is 70% of your current income. But if you want to spend your time enjoying your home and family, you’ll need less than if you want to spend your time travelling. Here’s a case study of estimated retirement expenses from a real person. This is Part 1 of a series, and links to Parts 2 and 3 are at the bottom of the article: http://www.milliondollarjourney.com/retiring-early-part-1-the-expenses.htm
  3. How much debt will you have?
    The traditional rule of thumb for debt in retirement is to make sure you have your mortgage paid off when the time comes. However, these days, with interest rates at an all-time low, it may make more sense for you to keep your mortgage and put any extra money into a retirement investment account. Even a half decent investment should make more than the 3 or 4 percent you’ll be paying on your mortgage.
  4. How long will you live after retirement?
    Well, that’s the $64,000 question, isn’t it? Most advisors will say to plan for about 30 years of living on retirement income. But this rule may also be outdated, as Canadians are working longer into their 60s and 70s—and not just because they have With life expectancy also increasing, a more realistic retirement age may be closer to 72 years. Read more in this Financial Post article: http://business.financialpost.com/2013/07/24/youre-not-as-old-as-you-think-so-stop-that-retirement-talk/

 

I haven’t yet worked out how all this could apply to me, but I’ve got to admit to feeling a little terrified that I’m going to end up destitute and having to survive on handouts and cat food in my old age. How about you?

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