Personal Finance

How much is enough for retirement?

  • Last Updated:
  • Dec 27th, 2018 10:53 pm
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[OP]
Jr. Member
Jan 22, 2017
147 posts
110 upvotes

How much is enough for retirement?

Hi everyone,

I'm 36 and I'm questioning myself if my retirement strategies is not overkill.

I have a pension plan with my job which will represent 55% of my 5 last year

I had some buffer for my rrsp tfsa and I was contributing around 25% of my gross revenu to both of these, now I have consume all the buffer that I had.

Now I ran out of buffer, so if I simply max out my RRSP and TFSA it will represent something like 8-10% of my gross revenu.

Do you think simply maxing these is sufficient to have a good retirement?

I'm trying to find the balance between a good retirement and enjoying life right now.

What do you think?
37 replies
Member
Apr 19, 2018
359 posts
273 upvotes
Kitchener/Waterloo, …
ShingoHusky wrote: Hi everyone,

I'm 36 and I'm questioning myself if my retirement strategies is not overkill.

I have a pension plan with my job which will represent 55% of my 5 last year

I had some buffer for my rrsp tfsa and I was contributing around 25% of my gross revenu to both of these, now I have consume all the buffer that I had.

Now I ran out of buffer, so if I simply max out my RRSP and TFSA it will represent something like 8-10% of my gross revenu.

Do you think simply maxing these is sufficient to have a good retirement?

I'm trying to find the balance between a good retirement and enjoying life right now.

What do you think?
It depends on when you were planning to retire. If you go to 65, then the combination of pension (if indexed), CPP, OAS, TFSA and RRSP will be more than adequate to provide you with a comfortable retirement based on your then living patterns. The scenario changes dramatically if you plan on retiring at 55 or want to splurge on world travel or undertake other expensive projects post-retirement. The last thing you want to do in any scenario is skip on any RRSP contributions so as not to lose out on possible tax deductions that let you keep more of your money working for you.

You don't say if your pension is indexed. If it isn't or only partially indexed, then that also changes the scenarios and amounts you need to set aside.

For peace of mind, you could get a financial planner to develop a written financial plan for you that shows precisely what you need to set aside for whatever retirement choice you might make.
Deal Fanatic
Dec 11, 2008
9958 posts
1470 upvotes
What kind of retirement lifestyle do you see yourself in and when do you think you might retire?
Deal Addict
May 12, 2014
2322 posts
1871 upvotes
Montreal
ShingoHusky wrote: I have a pension plan with my job which will represent 55% of my 5 last year
Private or public sector?

How well funded is the plan?

How secure is your job? (Chances of job loss)

Which risk do you want to minimize?
"Risk of missing out in life"
Or
"Risk of running out of money when you're old".
You MUST chose one.
Deal Addict
Jan 2, 2015
1480 posts
485 upvotes
Toronto, ON
Are you married? Do you have children or plan to have children?
Do you own a house (high expenses now, low expenses later) or do you rent (moderate expenses all the time)? If you own a house, will you have paid it off by the time you retire, which might be less than age 65?
Deal Addict
Mar 3, 2018
1400 posts
1314 upvotes
GTA
When planning your retirement consider the income level where OAS is clawed back. Currently around $78K. Having too big an RRSP is not always beneficial when you have to draw it down in retirement and it reduces your OAS.
Jr. Member
Oct 21, 2018
131 posts
40 upvotes
Most people die pretty soon after they retire. Cpp and oas will be sufficient especially if you own house.
You can always move to rural area and live almost free. Money is the least of your worries. The average person keeps increasing their net worth to date of death and then pays 50 percent tax on rrif rrsp.
[OP]
Jr. Member
Jan 22, 2017
147 posts
110 upvotes
Enlgma wrote: It depends on when you were planning to retire. If you go to 65, then the combination of pension (if indexed), CPP, OAS, TFSA and RRSP will be more than adequate to provide you with a comfortable retirement based on your then living patterns. The scenario changes dramatically if you plan on retiring at 55 or want to splurge on world travel or undertake other expensive projects post-retirement. The last thing you want to do in any scenario is skip on any RRSP contributions so as not to lose out on possible tax deductions that let you keep more of your money working for you.

You don't say if your pension is indexed. If it isn't or only partially indexed, then that also changes the scenarios and amounts you need to set aside.

For peace of mind, you could get a financial planner to develop a written financial plan for you that shows precisely what you need to set aside for whatever retirement choice you might make.
My pension plan is not indexed, it's a private plan for a company that is 125 years old, it's very well funded and I have complete confidence that they will be in business in 50 years.

I have a house that should be paid for in about 7 years which bring me 43 years old

I have 2 kids, I max their RESP every year.

My father died of cancer at 58, so I would like to have fun while I'm young but I do not want to sacrifice my retirement completly. If I can have the same lifestyle as I have right now, I would be very happy.

Currently I spend about 50% of my gross revenu for my mortgage + my saving. So if I was living with half the money I make right now but no mortgage and no saving, I would have the exact same purchasing power as right now.

Currently my lifestyle spending fit me and my family perfectly, I mean I do all the thing that I would like to do right now, the only thing is that I try to spend efficiently.

I have a couple of motorcyles, all bought used at very low price, that I maintain myself. Samething with my boat. Most of my house maintenance is done by myself, I bought an inground pool 4 years ago (it's paid) I did all the pavement and landscaping to save maybe 30-40k$. I have a couple of expensive hobby, but I keep the cost down by buying used and doing the maintenance myself.

Something that help us a lot, is that me and my wife don't drink alcool or cofee, smoke and we spend almost zero on clothing and cosmetics
Deal Addict
User avatar
Dec 24, 2007
1219 posts
1285 upvotes
BC
With a pension plan giving you 55% of your best 5 years, you're already well covered for your retirement. Although you will receive only 55% of your gross on retirement, your net pay doesn't fall by 45% as people forget to account for the CPP, EI, and pension contributions they don't have to pay once retired plus the lower tax rate if you can split the pension with spouse. So, your net pay might only drop by 20%.

Even without a pension plan, most Canadians forget that they will be receiving CPP and OAS at 65, which will cover most of their basic living needs (about $15,000 each if you contributed the max). So, how much savings you will require is more dictated by your lifestyle and when you retire. If you retire at 55, then you have to cover 10 more years without the CPP and OAS payments. Since you are already well covered on retirement with a pension plan, CPP, and OAS, I would probably just focus more on saving enough to cover 10 years of no CPP and OAS (if you retire at 55) and just enjoy life.

We are too often bombarded with advice from south of the border where their safety net is pitiful and there they really need to save for their retirement.

For a really good article on the reality of retirement in Canada read this MoneySense article
Deal Expert
Aug 2, 2001
16376 posts
6551 upvotes
Honestly you sound like we're in similar positions where we have concerns about "over saving". It's hard to talk about with friends and family because...well...the average person does not save enough to begin with.

My advice is to map out what you expect your expenses to be in a couple different scenarios (retire @ 55, retire @ 60, retire @ 65 - whatever ages work for you). Then you'll have an idea of what income you may require. Once you have that work backwards and figure out how much you need to save to make it there.


Without even knowing those numbers and reading only your posts in this thread you talk about an ideal world being that you maintain the standard of living you have now. The standard of living where you are currently spending only 50% of your income (outside the mortgage). I think it's reasonable to say that, based on you potentially requiring 50% of your income levels, that going forward with the idea of maxing out TFSA/RRSP while contributing to your company defined benefit pension plan will give you MORE than you need in retirement.

The question is more do you want to retire early - that's where an increase in savings may be needed as a bridge before your pension / cpp / etc. kick in. But it realistically sounds like if you retirement with full pension you will already have enough income, it's more a matter of what you want to save in addition to deal with the non-indexed risk of your pension and the risk of your pension defaulting.


You're in a great spot, keep up the good work. And remember - you can save too much. It's all about what your goals are.
Sr. Member
Nov 16, 2013
573 posts
121 upvotes
GTA
JeffH60919 wrote: The average person keeps increasing their net worth to date of death and then pays 50 percent tax on rrif rrsp.
Can you please elaborate?
Deal Addict
User avatar
Jul 29, 2013
1052 posts
675 upvotes
ShingoHusky wrote: My pension plan is not indexed, it's a private plan for a company that is 125 years old, it's very well funded and I have complete confidence that they will be in business in 50 years.

I have a house that should be paid for in about 7 years which bring me 43 years old

I have 2 kids, I max their RESP every year.

My father died of cancer at 58, so I would like to have fun while I'm young but I do not want to sacrifice my retirement completly. If I can have the same lifestyle as I have right now, I would be very happy.

Currently I spend about 50% of my gross revenu for my mortgage + my saving. So if I was living with half the money I make right now but no mortgage and no saving, I would have the exact same purchasing power as right now.

Currently my lifestyle spending fit me and my family perfectly, I mean I do all the thing that I would like to do right now, the only thing is that I try to spend efficiently.

I have a couple of motorcyles, all bought used at very low price, that I maintain myself. Samething with my boat. Most of my house maintenance is done by myself, I bought an inground pool 4 years ago (it's paid) I did all the pavement and landscaping to save maybe 30-40k$. I have a couple of expensive hobby, but I keep the cost down by buying used and doing the maintenance myself.

Something that help us a lot, is that me and my wife don't drink alcool or cofee, smoke and we spend almost zero on clothing and cosmetics
So sorry to hear that your Father died so young and missed his retirement years and the joy of watching you and his grandchildren growing up.

One strong plus for you is that your wife and you have the same frugal lifestyle.
Deal Addict
Jul 27, 2017
2180 posts
932 upvotes
OP, on your question. its not all that difficult to figure out "how much" IMO

consider that you are mortgage free & empty nesters, a lifestyle of all yearly expenses/bills paid + add on 10% of all those yearly expenses for travel ... that will be your retirement budget

so basically all-in expenses 100% + 10% for travel budget

or

mortgage free, 2-kids still at home that you will put through university & pay for all their stuff till they are age 23, factor those costs into the expenses on top of what I said above
Deal Addict
Aug 20, 2007
1899 posts
679 upvotes
Kitchener
vivmk20 wrote: Can you please elaborate?
RRSP's and RIFF's are liquidated in the year of death. So if you have 300,000 in an RRSP when you die, your income on your taxes will have this 300k plus any additional income you earned in the year. Considering our tax brackets, this puts most, even with relatively low amounts in their RRSP with a huge tax payout meaning less for your beneficiaries.
Deal Expert
Aug 2, 2004
31544 posts
5674 upvotes
East Gwillimbury
You can neve save too much money.

You have two kids. Assuming their education is covered. What happens when they get out into the work force and they want to buy their first house? Do you help with the down payment? Two kids?

What about their weddings? Do you plan to help with that?

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