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How Much do you Need to Retire?

8 November, 2011 / by Bryan Jaskolka

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The magic number for this question seems to be “a million dollars,” and many experts will give you various reasons as to why you need one million in cash before you retire. But how much do you really need before you give up the working lifestyle and start enjoying your golden years? It’s a question that not a lot of Canadians have an answer for; and not knowing how much you actually need could impact your retirement years, and make the reality of them much different than the vision you have in your mind. If you’re one who would meet that question with a blank stare, ask yourself these four questions to find out how much money you need to save before you retire.
How much do I need saved by the age of 60 in order to live the lifestyle I want when I retire?
Each of us has different dreams for when we retire. Some want to travel the world while others want to stay home and finally get to all those projects around the house. Others might want to stay in the same area, but will have different living requirements. You might want a smaller space, now that it’s just you. Or maybe a bigger space, for all those grand-kids!
Figuring out what kind of lifestyle you want to lead in retirement is the first step to determining the answer for this question; and figuring out how much that lifestyle will cost you. There are other, slightly more complicated, issues to take into consideration when determining how much you need to save by a certain age in order to retire; online calculators are plentiful and easy to use to help you figure out the answer to this question.
What will my government pension be when I retire?
The CPP (Canada Pension Plan) is there for a reason, to help you when you retire. Most working Canadians are eligible for CPP, but the amount you’ll receive will be dependent on your particular situation. To get a rough idea of how much you’ll receive from CPP, check out Service Canada’s website. It gives a great guideline and knowing how much you’ll receive will also help you determine how much you need to save.
What are the fees on my investments?
Investments come fraught with fees, and depending on what the investment is and what you want to do with it, you could face some hefty fees come the retirement years. Want to pay off that mortgage, even though there’s still a year or so left on it? Your lender may have prepayment fees. Have mutual funds you want to keep in place during retirement? Make sure you know the annual fee you’re paying to do so. Want to cash out that RRSP? Make sure you know the taxes you’ll pay. Even though investment fees seem straightforward, there are so many different kinds that it’s easy for one or two to get overlooked – and it’s something you could pay a lot for in the long run.

          

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