In a recent survey conducted by BMO, it was found that Canadians now believe a retirement fund of $1.7 million is necessary, indicating a 20% increase compared to previous surveys. While this figure grabs attention and makes for a compelling headline, it oversimplifies the intricacies of retirement planning. The truth is, there is no one-size-fits-all approach when it comes to preparing for retirement.
Retirement income is not solely reliant on savings. The landscape of work pension plans has evolved over time, and some individuals still benefit from the security of defined benefit pension plans, which guarantee them a fixed income during retirement. For those fortunate enough to have such pensions, their savings requirements are alleviated by this additional income stream. Furthermore, all Canadians are eligible to receive income from the Old Age Security (OAS) and the Canada Pension Plan (CPP). If both members of a couple have worked and contributed to these government pensions, they can anticipate an average of $1.5k each, or $3k as a couple if they retire in their 60s and start receiving pension payments at 65. The more pension income one receives, the less one needs to rely on personal savings to achieve a comfortable retirement. Timing is also a crucial factor to consider. Most Canadians retire in their 60s, aligning with the age at which many pension plans take effect. The earlier one chooses to retire, the higher their savings must be to bridge the income gap until pension payments commence. Another significant determinant of the retirement fund needed is personal spending habits. From my experience working with retirees, I have observed a wide range of lifestyles, spending patterns, comfort levels, and individual needs. What may seem like an extravagant monthly income for one retiree may be insufficient for another. Generally, the lifestyle one leads prior to retirement serves as a reasonable benchmark for estimating the required income during retirement. However, this figure varies for each individual, depending on their unique circumstances and desired standard of living. These are just a few of the factors that must be taken into account when planning for retirement. Although I have only touched upon pensions, retirement timing, and budgeting, it is evident that the required funds for a comfortable retirement differ for each person. The BMO survey appears to reflect people's sentiments rather than providing precise retirement data. Given the challenges we have faced in recent years, such as the pandemic, lockdowns, inflation, and market fluctuations, it is understandable that some individuals may feel discouraged and doubt the feasibility of retirement. It is advisable to consult with financial professionals who can assess your specific retirement goals and determine whether the amount you have set aside aligns with your needs. CG WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of CG Corp., and may differ from the opinion of CG Corp’s. Research Department. Accordingly, they should not be considered as representatives of CG Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or CG Corp. assume any liability. Tax & Estate advice offered through CG Wealth & Estate Planning Comments are closed.
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AuthorClinton Orr is a Senior Wealth Advisor and Senior Portfolio Manager with Canaccord Genuity Corp. Archives
July 2023
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