You have probably heard the phrase; too much month left at the end of the money. Paying for housing, groceries, fuel, utilities and various child rearing expenses, although very necessary, can put a huge strain on a family when outlays sometimes exceed your income. Fortunately, this is usually only a temporary hiccup in most people's lives.
Many people look forward to retiring, and going to live beside a golf course, on the coast, or somewhere else where they have always dreamt of. It's enticing to think that your leisure time can be spent pursuing activities you have worked and longed for all your life. In fact, whole retirement communities are set up on the premise people want to relocate to such a scenario to live out the rest of their lives.
Good question. Many retirement income planning tools use a percentage of income to determine an income need in retirement and then calculate an amount needed to provide that income. People with similar incomes often have different spending and lifestyle habits. This can affect their income needs in retirement.
It is still important to calculate what the income needs will be in retirement. Arriving at the right percentage of income to replace may require a little more work.
A few years ago, when the federal government restored the OAS eligibility age back to 65, many Canadians breathed a sigh of relief. When eligibility changes were originally implemented they only affected those under age 54 as of March 31, 2012, but it became apparent that even an extra few hundred dollars a month in retirement could mean a lot to many future Canadian retirees.
By far one of the most crucial financial strategy steps is accurately estimating retirement expenses. Correctly accounting for retirement living expenses is critical to ensuring that retirees do not outlive their money. For those already retired, there are usually few good options for creating new income sources later in life.
Getting retirement spending projections correct is both an art and a science. To deal effectively in planning for future retirement needs, a financial professional can help determine the best course of action.
Statistics Canada recently reported the ratio of household credit market debt to disposable income reached the highest level since the agency began tracking this figure. In 1990 it was 50%, rose to 110% in 2000 and jumped to 171% by the fourth quarter of 2017. This can cause some angst for those with children reaching post-secondary school age.
You have probably heard about the old 70 percent rule that suggests retirees will need the equivalent of about 70 percent of their current income level to maintain their lifestyle in retirement. This assumes that retirement living costs will be 30 percent less during working years. While it may have been applied appropriately for retirees two or three decades ago, it is fraught with significant risk and potential disaster for today's retirees.
Harry and Sally both earned high incomes and liked to live the good life. They leased higher end European cars, took two-week exotic vacations almost every year, and lived in a house much larger than they truly needed. To accomplish this lifestyle, they put off retirement savings. Now in their forties, Harry and Sally are realizing they have some catching up to do. Six things to consider are:
Delay no more - Procrastination or bad breaks may have derailed a savings plan. Now is the time to make savings a priority.
The conversation with clients about retirement income planning is much different from those conversations that occur over the years while they are building retirement assets using vehicles such as pensions, RRSPs, LIRA's, TFSAs and so on. Often, their focus is on being “conservative” because their understanding from public sources suggest that this is the appropriate approach to managing their money during retirement.
Canadian couples rely upon Government pensions, CPP and Old Age Security (OAS) for a significant portion of their total retirement income planning, which can equal 20% to 50% or more, of their actual or projected total retirement incomes. Corporate and personal pensions (such as RRSPs and TFSAs and other savings) are other sources of retirement income from a planning perspective.