Ask most financial planners what you will need for retirement savings and you’re not likely to get a one-size-fits-all answer. After all, when it comes to the ideal retiree lifestyle, no two plans are alike.
“While it’s important to have a retirement savings goal, there isn’t one number that’s right for everyone,” says Jason Round, head of Financial Planning Support for RBC Financial Planning. “Your goals and dreams for retirement deserve a plan that’s personalized to you and takes into account many other relevant factors.”
Canadians Unclear On the Numbers
But if the 23rd Annual RBC RRSP Poll is any indicator, Canadians are unsure as to how much they will need to live a comfortable life post-retirement.
Only one in four pre-retirement Canadians and half (46 per cent) of those already retired have determined the amount of money necessary to enjoy themselves after the daily grind is done.
Further to that, those who haven’t retired but have set their savings goal have been wishy-washy to say the least, reducing their planned savings from an average of $778,000 in 2011 to $564,000 in 2012.
Prior to retirement, retirees estimated that they would only need an average of $347,000, says the poll.
Even gender plays a factor according to the poll with men aiming for $424,000 in savings and women shooting for $510,000.
“When looking at your percentage of pre-retirement income needed in retirement, some say 75 per cent, some say 85 per cent and some even say 110 per cent – we say everyone is different,” says Round.
Although Canadians may not know exactly what they need just yet, more than half of those polled say they are at or ahead of where they should be in terms of retirement savings.
Consider the Variables
So what factors can influence how much you need to retire comfortably?
Longevity: The magnitude of Canada’s aging demographics is a reality. In addition to the growing amount of retirees, Canadians aged 65 in 2012 can expect to spend more than 20 years in retirement, according to Stats Canada. Life expectancy for males is 18 plus and women is 21 years or more. What does this mean for your financial plan? How will your lifestyle evolve over 20 years?
Health: Another major factor is health – how big of a concern is healthcare for you? Almost one-third of retirees put it at the top of their list, as ongoing issues can be a constant drain on funds.
Inflation: Anyone who’s reached the age of 65 has seen the ebb and flow of the economy. When putting away retirement money, are you considering how much inflation can affect your savings? Thirty two per cent of retirees pointed to the effects of inflation as a chief concern. What measures have you taken to manage inflation? How will it affect your savings?
Work: Many Canadians are abandoning complete retirement in favour of working at a reduced capacity. According to the poll, 27 per cent of Canadians say they will never retire and 23 per cent even plan on opening their own business in retirement. Are you planning on working at a reduced capacity?
As Round says, retirement isn’t a black and white issue; there’s a plethora of factors to consider.
“Planning for retirement is so much more than just a magic number and this is where financial advice can ensure all aspects of retirement are explored to ensure you have the retirement you want,” he adds.