Recently, a friend and I were talking about retirement and how much each of us would like to have saved before we decided to retire. My friend said she would be very happy with one million dollars in savings. She was shocked when I told her I would only be comfortable with ten times that amount.
And really, it’s all a personal choice. Whether you want to have a million dollars, ten million dollars, or 500,000 – everyone’s answer will likely be different in terms of how much money they would need to have in order to retire comfortably.
Can You Afford Retirement?
When it comes to saving for retirement, the golden rule is a retirement income of 70% of your current income, but some people may need more or less than that to live the life they want during retirement.
How much money is enough?
First off, you need to decide what you want to do when you retire. Do you want to travel? Spend more time with family? Take up a new hobby, such as gardening or golf?
Figure out how much those things will cost you, and also take into account your housing, entertainment, groceries, clothing, and anything else you will need money for in your life.
Personally, I want to live a very comfortable life travelling the world. This will not be cheap – hence why I want to have so much money saved before moving into retirement!
Everyone’s savings goals are going to be different, but try to stick with [at least] the 70% rule of thumb, and assume that you will live in retirement for at least 30 years, to be safe.
What about debt?
In my opinion, going into retirement with any type of debt whatsoever, is just plain stupid. I’m sorry – but it is. Retirement will be much more enjoyable without any debt resting on your shoulders.
Work for another year or two (or more) to get your debt paid off completely, and only then should you consider retiring. I know of someone who retired with over $50,000 in debt – she she is still struggling to pay that off with her retirement savings, more than 10 years after she retired.
Trust me – you’ll be much happier retiring with zero debt to your name.
Helpful tips for retirement
1. Find out about government help – Visit the Government of Canada website to determine how much money you will receive from Old Age Security and Canada Pension Plan if you retire at a certain date.
If you don’t have a pension, and are saving money for retirement on your own, you really need to be strict with yourself and make sure you are indeed saving the necessary amount of money.
2. Find out about employer help – Ask your employer if they have a group RRSP or pension plan that you can be a part of. This is a great way (and an easy way!) to put some money away for your retirement.
Figure out how much money you would receive if you retired at a certain date.
It’s never too late to start thinking about retirement and to start planning for the life you are going to have when you are no longer working.
In order to live freely in retirement, you’ll need to have saved a considerable amount of money. Start saving now. It doesn’t matter how little money you save in the beginning – just start.