How much money will you need to retire in Canada?

Your plans for retirement may have shifted as a result of how your life now appears to you. Want to know how much money you'll need to reach your objectives? Consider the following 10 questions as a jumping off point.

How much does it cost to retire in Canada?

A registered retirement savings plan (RRSP) or an employee pension plan is where most people put their retirement funds. Do you worry that you won't be able to maintain your current standard of living in retirement if you don't save enough?  

In a position to begin designing a retirement plan that works for you Get in touch with a Sun Life advisor today!

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The real issue, however, is how much money you'll need to retire in Canada. How much money do you need for retirement, anyway? There is no easy solution, unfortunately.

For a secure retirement, Canadians need to set aside a certain percentage of their income, but this number is up for debate in the financial planning community. There is a wide range of suggested amounts, from 40 to 70 percent of your final salary. Is it helpful to view retirement preparation in this way? Maybe not

Since each person's circumstances are unique, a blanket percentage estimate isn't practical. Consider the following:

  • the significance of retirement to you, and
  • your potential costs  

How much you need for retirement and how much you need to save can be calculated with the help of a financial advisor. As a placeholder, please begin by responding to the following 10 questions to get a general sense.

A higher percentage of your income should be set aside for retirement the later in life you begin saving. Well-known personal finance author Gordon Pape explains that this is because you have lost years of compounding. It has been estimated that a 25-year-old only needs to set aside 8-10% of their annual salary in savings. A 45-year-old, on the other hand, may need to set aside as much as 25% ”

In a nutshell, the longer you have to save, the more money you can expect to have in your retirement fund. Income from investments is another source of wealth creation.

Would you consider retiring at age 60 instead of 65? Since you won't have those five years to put toward retirement contributions, you'll need to put away more money. What's more, you'll need your savings to last for a longer period of time.

Alternately, perhaps you should postpone your retirement. If that's the case, you're not alone As a result of the current economic climate, including rising interest rates and inflation, Canadians' retirement plans have been impacted.

In a recent survey on Canadian retirees, Abacus Data and the Healthcare of Ontario Pension Plan (HOOPP) The majority of Canadians (63%) agree that rising inflation will force them to delay retirement.

Planning ahead for your retirement savings, income, and healthcare needs is crucial to enjoying your golden years.  

*Data sourced from the 2022 Canadian Retirement Survey

Death is an unpredictable event that no one can foretell. Nonetheless, Canadians are living longer than ever before. Statistics Canada reports that in their most recent national census, kids born in that year have an 82 year life expectancy. Furthermore, Canadians over the age of 100 make up the country's fastest-growing age group.  

Taking life expectancy into account in your retirement plan is therefore important, especially if

  • I heard that your ancestors all made it to 95!
  • Your health is excellent.

When you think about retirement, what activities come to mind? Half of your pre-retirement income might be sufficient to support a comfortable retirement. On the other hand, you may need 70% or more of your pre-retirement income if you intend to lead an active retirement full of travel.  

It's safe to assume that your retirement budget will be less than it was when you were working full-time. Many costs will eventually end up being unnecessary. You won't need to worry about expenses like gas, lunch, or new clothes because you won't be commuting.  

Retirees' spending habits change despite these financial gains. Consider the following three phases of retirement when calculating your expected income needs:

  1. After finishing the day's work, the first phase begins. The odds are good that you’ll be in fine shape and have plenty of disposable income for vacations and other fun pursuits.  
  2. The next phase is a more sedate one. Some of your vigor may begin to wane, and you may find that moving at a more leisurely tempo is more to your liking.  
  3. Finally, as you get older and your health starts to decline, you may incur substantial costs for medical treatment. Care for the elderly may be included in these expenses.

This is all very intimate. One retirement is not like another. Consider your options for retirement income to help you prepare for these eventualities.

This annual tax-deferred bonus will reduce the amount you need to save on your own if your employer offers a workplace RRSP or Pension plan and matches some or all of your contributions.

  • Find out how pension plans for workers function by reading on.

What you need to save for retirement depends on the rate of return you expect from your investments, which you can use to estimate your starting point. There's no way to know for sure how consistent your returns will be, but a diversified portfolio can help.  

A financial adviser can assist you in making your investment portfolio more diversified and in deciding upon a sensible target return.

Contact a Sun Life advisor today! Discover a place close by.

A registered plan is likely to be your first savings vehicle. Moreover, you can put away up to 18 percent of your salary by doing the following:

  • a Registered Retirement Savings Plan (RRSP), or
  • a type of retirement plan in which contributions are made by employees rather than the company  

You can deduct your contributions from your taxable income, and the growth of your investments will be postponed. Putting money into a defined benefit plan will almost certainly cut into your RRSP contributions for the year. You can use a carryover to make up for lost RRSP contributions in subsequent years.

The annual RRSP contribution cap is something I urge everyone to reach. In some cases, this can be a very difficult task. To paraphrase Bruce Sellery, author of The Moolala Guide to Rockin' Your RRSP, "You'll be glad you did it in the future."

Your assets may include not just your RRSP but also things like:

Depending on their worth, you might be able to reduce the amount you set aside for retirement each year.

Withdrawals from a Registered Retirement Savings Plan are subject to tax at the individual's highest marginal tax rate. Without time, you also miss out on compound interest and the ability to make contributions. In light of the reinstatement of TFSA contribution room next year, it is preferable to build up an emergency fund in a TFSA.

  • The real price of tapping your retirement savings too soon

Is it your intention to live lavishly while you are still alive? Would you rather provide for your family or a favorite charity in your will? Your retirement savings goal and annual spending budget will both be affected by this choice.

This article's sole purpose is to serve as a general resource. When it comes to matters of law, accounting, or taxes, Sun Life Assurance Company of Canada will not offer guidance. If you need help, it's best to consult an expert who can look at your unique financial, legal, and tax details.

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