How do you like to run your financial matters now that you are no longer receiving your monthly paycheck? When it comes to determining how much money you need for retirement, it’s hard to come with a specific number. It’s a long-standing debate about how much money an average Canadian needs in order to have a financially stable retirement. Financial experts come up with recommendations ranging from 40% to 70% of what you earned before you decide to retire. Some financial experts say $1 million is enough to retire comfortably. However, studies show that retirees can go beyond $1 million in as little as 12 years.
Effective retirement planning can help you determine how much money would be enough for you to last through your golden years. Following are some of the considerations you should take into account:
Your retirement goals
How much you need to save for retirement depends largely on how much you are planning to spend in retirement. Define your situation first. For example:
- Will you work after you retire?
- Do you have debt or mortgage to pay?
- Do you have children to support?
- Your expected lifestyle
- Your age when you retire, etc.
You may divide your retirement life into three stages to develop a better understanding of your future financial needs. The first stage comes right after you retire when you are in good health and have enough money to travel and support leisure activities. In the next stage, your health starts deteriorating and now you prefer to have a calm lifestyle. The final stage is when health-related issues start dominating your life and you would be spending most of your savings on health care. Off course, these are only assumptions which can help you with your retirement planning.
Analyze your current and expected retirement spending
Start with analyzing your current average spending and then compare it with your expected future spending. In most of the cases, people spend less after they retire due to decreased cost of living. To prepare better, you can consult a financial advisor to get realistic estimates. You can also use Canadian Retirement Income Calculator to get some instant help.
You should take advantage of seniors’ discounts. For example, it would be a great idea to find a financial institution which offers low-fee or no-cost bank accounts to seniors. Also, many businesses offer special discounts to seniors on some goods and services.
Deciding when to retire is one of the most important decisions which can have a great impact on your retirement life. It is recommended to get advice from a financial planner who could help you make the most of your pensions, personal savings, and investments.