Written by: Marc Pranger – RIS, QAFP™ | Wealth Management Advisor | Mainstreet Credit Union |
Credential Asset Management Inc. | Chatham
As a financial and wealth planner I am frequently asked the question “am I retirement ready?” Every time I’m asked this, I wish I could offer this person an easy answer. Unfortunately, it’s not as straightforward as a specific dollar amount or age that makes you automatically “retirement ready” – it truly differs person-to-person. A big consideration though as to when financially you may be ready to retire is your lifestyle and how much it costs. More specifically, how you plan to live out and enjoy your retirement years.
If you have the travel bug and want to see the world, you very likely need a different amount saved for your retirement compared to someone looking to spend their golden years on hobbies like reading or spending time with loved ones.
Despite not being able to provide a ‘one size fits all’ approach and answer, I do have a solution. It involves capturing a snapshot of your current pre-retirement spending. By taking a moment to understand what you spend on your current lifestyle, you can then remove items that you plan on no longer paying for once retired (i.e. mortgage or student loans, work related expenses, childcare costs, etc.) and add in the expected costs that will be part of your retirement like that travel fund, golfing or other recreation costs, hobbies, in-home support, etc.
Upon completing your list, you will have a good idea of the amount you will need to spend to live your ideal retirement life.
In retirement, your income may come from multiple sources – not just your personal savings. You might have a pension with your employer, and you may also qualify for annual retirement income dollars from the government via the Canada Pension Plan (CPP) and Old Age Security (OAS). As you plan for retirement it is important to review your retirement income sources and the amount each will provide you. From there, we can calculate the surplus or shortfall between your retirement income and the amount you will need to spend to live your ideal retirement life (while factoring in inflation that will occur over the years).
To assist in determining your retirement income surplus or shortfall, a helpful tool you can use at home is Mainstreet’s Retirement Planning Calculator found on our website.
If you are wondering if you are retirement ready, connect with a Mainstreet Advisor. We can assist you with creating a savings and financial plan to achieve your goals, prepare you financially for the retirement you envision, provide a second opinion on existing investments, and discuss different product solutions that are the right fit for you and your goals from RRSP’s and TFSA’s to virtual wealth and online investment solutions. Take the first step today to prepare for your journey of tomorrow.