Personal Finance

Retirement Income Target

  • Last Updated:
  • Nov 19th, 2019 1:28 pm
Sr. Member
Feb 1, 2018
959 posts
1091 upvotes
Montréal
oasis2002 wrote: Not. I mean today's dollars - so would be different when you retire of course. Its like, as if you were to retire tomorrow.
Gotcha. Just pointing it out 'cause a lot of people forget to factor that into their retirement planning. If I plan to retire in 25 years, then I need to account for 25 years worth of inflation in my calculations, and adjust my investment returns accordingly.

Anyway, in today's dollars, we'd probably actually expect to want to retire with a similar or even higher income to what we earn today. Retirement -- if we're healthy -- should afford us lots more time to travel and enjoy life, which costs more money than sitting at a desk all day. If we're not lucky enough to have our health, we'd want to be able to afford any necessary healthcare or caregiver expenses.
Deal Fanatic
Nov 24, 2013
6142 posts
2897 upvotes
Kingston, ON
"70%" is a number often pushed by people with a vested interest in you investing your retirement nest egg with them. People have been questioning it as you are now for a very long time. Here's a 2010 piece on the subject,
https://www.theglobeandmail.com/globe-i ... le4328155/
and a 2015 piece on the same subject,
https://business.financialpost.com/pers ... ome-target

As others have said, % of income isn't really what's important. It's covering your retirement expenses. If you're grossing $100k, netting less than $70k, putting $24k of that to the mortgage, and saving a chunk of that in RRSP or TFSA, your actual "spending" could be well under 50% of your gross salary. Even once you consider tax on the retirement income, between the progressive tax code and various tax breaks for pensioners and those 65+, you don't necessarily have a high tax burden on retirement income.

The money I need to live off of is going to go way down once my mortgage is paid off. It's such a huge chunk out of each paycheque, unless I increased my spending significantly, I'd be able to retire in my late '50s pretty soon after it's paid off. I feel a lot of Canadians are in the same boat.
Deal Fanatic
Nov 24, 2013
6142 posts
2897 upvotes
Kingston, ON
I chose the $50k to $75k bracket. Looking at what we bring in each month and backing out the mortgage P&I (which will be paid off before retirement) and our retirement savings, we'd maintain our current lifestyle with $5,000/mo, or $60k annually. If we can hit higher than that, great, but that's the "need."

Fortunately my wife's DB pension alone will pretty much put us there, so I think we'll be over once we add in my RRSP & TFSA portfolios, and then another bump of OAS when we hit 65.
[OP]
Sr. Member
Sep 16, 2009
646 posts
436 upvotes
Mike15 wrote: I chose the $50k to $75k bracket. Looking at what we bring in each month and backing out the mortgage P&I (which will be paid off before retirement) and our retirement savings, we'd maintain our current lifestyle with $5,000/mo, or $60k annually. If we can hit higher than that, great, but that's the "need."

Fortunately my wife's DB pension alone will pretty much put us there, so I think we'll be over once we add in my RRSP & TFSA portfolios, and then another bump of OAS when we hit 65.
That sounds great!
Deal Addict
Mar 3, 2018
1557 posts
1504 upvotes
GTA
Mike15 wrote: I chose the $50k to $75k bracket. Looking at what we bring in each month and backing out the mortgage P&I (which will be paid off before retirement) and our retirement savings, we'd maintain our current lifestyle with $5,000/mo, or $60k annually. If we can hit higher than that, great, but that's the "need."

Fortunately my wife's DB pension alone will pretty much put us there, so I think we'll be over once we add in my RRSP & TFSA portfolios, and then another bump of OAS when we hit 65.
What I found in talking to retirees on DB pensions is that they are comfortable until a big cost comes up. Like a new car is needed or the roof, furnace needs to to replaced. Unless you have some nice savings tucked away this eats into your retirement lifestyle.

$75K to $100K seems to be the sweet spot to cover off these ongoing large expenditures while still being able to travel and enjoy life. Can be lower if you also have significant savings over $100K that can be used as needed.
Member
Jun 14, 2018
346 posts
366 upvotes
Definitely less than 50k for myself. My monthly expenses are only ~$1500 a month right now, so I bet I could live comfortably on $3000 per month if I decide to throw in some vacations and other miscellaneous things.
Deal Fanatic
User avatar
Feb 19, 2010
6237 posts
2967 upvotes
Early retired.
Drawing down RSPs
Target the high end of the lowest tax bracket for "income" purposes.
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Feb 19, 2010
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Agree with those who say that this 70% guideline is off track. By the time you retire you should have a pretty good idea what it costs you to live so THAT'S the number to target, in dollars, not a percentage of pre-retirement income.
Deal Expert
Aug 2, 2001
16577 posts
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$130K when I calculated the numbers. It involves a lot of travel expenses, which is definitely subject to change on whether we have the ability to travel (our health, family obligations). The more we talk it through, the more we think traveling for what amounts to several months out of the year may not be something we even want to do at that age. Heck, our kids will even be in grade school still at the point we retire.

To me saving a percentage of your income is not a way to create a target. You should go through what sort of plans you have for retirement and map it out that way. For example, in our retirement budget we allocate more towards vehicles because I would likely do less of my own work and place a higher value on a newer, reliable vehicle because I might not feel like crawling under a car to change the oil or any other regular maintenance.
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Feb 19, 2010
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TrevorK wrote: $130K when I calculated the numbers. It involves a lot of travel expenses, which is definitely subject to change on whether we have the ability to travel (our health, family obligations). The more we talk it through, the more we think traveling for what amounts to several months out of the year may not be something we even want to do at that age. Heck, our kids will even be in grade school still at the point we retire.

To me saving a percentage of your income is not a way to create a target. You should go through what sort of plans you have for retirement and map it out that way. For example, in our retirement budget we allocate more towards vehicles because I would likely do less of my own work and place a higher value on a newer, reliable vehicle because I might not feel like crawling under a car to change the oil or any other regular maintenance.
This post reminded me of pre-retirement sessions that we attended. The information received was that for as much as everybody poised to retire says they're going to travel in retirement, the reality is that if you didn't travel much during your working life, the chances of ramping up travel significantly in retirement was virtually zero. IOW, aspirational travel expectations are not realistic. IOW, don't ramp up your retirement income to cover all the travel you're going to do because you're not going to do it.
Deal Addict
Nov 8, 2017
1420 posts
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Work in healthcare that has a decent pension plan matched dollar for dollar . If I "retire" @ 62 (I'm 52 now) I'll get a decent pension from that( about 1800) . I can work casual for another 10 years after that easy. One day of work is 400$, and it's not a labour intensive job.

I did retirement backwards.
18-35 didn't really have a career, mostly sold weed and travelled a lot.

Some of said they wished they would have done what I have done instead of slaving away like a sucker until your old and die
Deal Fanatic
Feb 1, 2006
9609 posts
818 upvotes
Muskoka
We live well now on $60k, family of 4. We upped our spending the past couple years, so feels quite luxurious. No mortgage.

I expect without kids at home, $50k will suit us fine, but we'll way overshoot, of course. Plus inflation, obviously.

Most Canadians are surprised how much CPP/OAS pays a couple. CPP is a sure thing, OAS likely as well. You really just need to save for topping up these incomes. Unless you didn't live in Canada 40 years and work most of them.
Deal Addict
Feb 4, 2010
3688 posts
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Everyone's number is going to be different because everyone's situation and spending habits are going to be different. Example, it depends if the mortgage is paid off. How much travel. How many health issues. If you have dependents that rely on you.

For me, I plan to have my mortgage paid off at 55-57 which is when I can also qualify for early retirement withDB pension. I can live off my early retirement pension as it covers all my living expenses and some hobbies and trip a year. When I calculate it out, works out to 40% of my income indexed to inflation. My living expenses are pretty low but as backup I also have my TFSA, RRSP, home equity and eventually OAS and CPP.
Before responding to someone (online or offline) ask yourself: is it true? is it helpful? is it kind? is it necessary? This comes from an old Sufi adage that is so relevant today.
Jr. Member
User avatar
May 9, 2019
118 posts
139 upvotes
GTA
hierophant wrote: Everyone's number is going to be different because everyone's situation and spending habits are going to be different. Example, it depends if the mortgage is paid off. How much travel. How many health issues. If you have dependents that rely on you.

For me, I plan to have my mortgage paid off at 55-57 which is when I can also qualify for early retirement withDB pension. I can live off my early retirement pension as it covers all my living expenses and some hobbies and trip a year. When I calculate it out, works out to 40% of my income indexed to inflation. My living expenses are pretty low but as backup I also have my TFSA, RRSP, home equity and eventually OAS and CPP.
This is the same plan my wife and I have. She will be eligible for her full DB pension at 55 or 56. We invest steadily in our TFSAs/RRSPs every month to help supplement this. Add in OAS and CPP and we should be golden. Goal is to have our forever home mortgage paid off by then, too. (Still in our starter house). Lots of factors, and life happens, but we still plan for these goals.

I'm on the path for FIRE... I like to think faaaaar ahead. We're in our mid-20's. :)
Some say they're sick of my crap.
[OP]
Sr. Member
Sep 16, 2009
646 posts
436 upvotes
User455957 wrote: Work in healthcare that has a decent pension plan matched dollar for dollar . If I "retire" @ 62 (I'm 52 now) I'll get a decent pension from that( about 1800) . I can work casual for another 10 years after that easy. One day of work is 400$, and it's not a labour intensive job.

I did retirement backwards.
18-35 didn't really have a career, mostly sold weed and travelled a lot.

Some of said they wished they would have done what I have done instead of slaving away like a sucker until your old and die
Some may have said that. Most (including me at least) are not remotely interested in that lifestyle. Its about balancing things. To each his own.

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