June 2022
We all eventually plan for retirement. Some wait too long and are unable to recover.
The big question for most revolves around how much money is needed to comfortably survive retirement. The answer varies. Some claim 30 times income. Schwab suggests that $1.7 million is a reasonable goal. Many suggest 80 percent of pre-retirement income will suffice. The actual number depends on where you live, lifestyle and longevity.
Some wait too long before planning for retirement. Individuals retiring without a defined corporate pension have saved an average of $3,000. Among those between 45 and 64 years old, 32 percent have saved nothing and nearly 20 percent have saved less than $50,000. Overall, the average amount most Canadians have saved or invested is $184,000.
It is clear that most are not prepared or preparing for retirement.
Public pensions were never intended as the sole source of retirement income.
- Millennials will be able to receive a maximum of just over $20,000 after about 76 years old.
- The maximum one can collect from Canada Pension Plan today is $14,100 per year ($1,175 per month) although most qualify for less. The average is about $8,000 a year.
- Old Age Security provides up to $613 per month to those aged 65 and up.
In total the amount most will collect is under $20,000 a year; nowhere near what it costs to live. This compares against Social Security in the US which pays at least double starting at age 62 – in US dollars. In Toronto, condo fees and property taxes alone use up most of this money. Since the median household income in Canada is over $90,000, relying on public pensions alone would require many to live on about 20 percent of pre-retirement income. For those dealing with mortgage, condo fees, utilities and property taxes – and still want to eat – this may be an impossible task.
Other income or investments are required to survive.
