How Much Should I Save For Retirement?

You don’t need millions of dollars to retire early, but what you do need is a plan and a good portion of money saved to continue living the same lifestyle that you are used to, and also to bridge the gap between when you choose to retire and the age at which you can claim retirement benefits from the government.

RetirementLaneYou can estimate the amount that you need to save for your retirement by calculating your actual disposable income. To do that, start with your nominal income – your complete before tax income – salary and otherwise. From here deduct what you pay in taxes and mortgage if you are making payments. Subtract your  retirement contributions, your savings for your kids’ education, and any job related expenses. This will leave you with your real disposable income – this is the amount of money you should have as a target income for your retirement.

At 65, government benefits will replace some of this disposable income, but if you want to retire before 65 then you will have to rely on your savings for income between when you retire and 65 years of age.


Thinking About Downsizing?

Some thing that many retirees consider is downsizing from their current home, which they likely have a lot of equity in, to a smaller, less expensive, home, town home or condominium. But is this a good idea? Is it wise to downsize?

Realestate retirement plan

Many people consider selling their large family homes, which they have a lot of equity in as part of their retirement plans. When you are ready to downsize it’s important to think about where you will be moving to and which type of home to want to buy for retirement. Many retirees choose to move into condos. As a retired person living in a condo has many advantages that allow them to be worry-free such as no lawn care, snow removal, the availability of a fitness center and pool in some cases and also having the ability to travel at a moments notice since you have less responsibilities centered around your home.

After a decade of record breaking house prices in the greater Toronto area this is an appealing direction that many are moving towards there are endless possibilities. You could even choose to have a cabin near a lake or ocean in a more rural location, no more commute, less maintenance and beautiful quiet surroundings.

One problem with downsizing however is that it may it always work out the way that you would think that it would. In many cases home owners walk away with less money that they had anticipated. For example if you are downsizing from a $400K home to a $300K home there will be little left after real estate and legal fees.

This doesn’t mean that downsizing can’t work for you, if you do it right you can walk away with a nice nest egg that will allow you to do the things that you dreamed of such as traveling.

Be Honest About It

Why are you planning to sell your large family home? Financial reasons? Practical reasons? Have your kids moved away? Is your house just too big? Do you want to move closer to your grandchildren? Do you enjoy travel and it is unnecessary? – these are all good reasons to consider downsizing.

Assess Your Needs

How will you live your daily life? Should you consider a bungalow? Is the convienience of a condo appealing to your needs? Take a look at the activities that you currently participate in and those that you wish to participate in and go from there. Taking a look at what you need will help you determine what you do.

Location, location, location

Decide where it is that you actually want to live. What would you like your retirement to look like? Do you want to be in a rural or urban area? Do you want to be closer to your family? Do you want to downsize to a smaller home or condominium?

Smaller does not always equal cheaper

Depending on where you are moving to you may find that monthly expenses are higher than you currently pay. These trade offs can be difficult to quantify, for example if you are moving into an urban condo with many amenities you might find the condo fees can be very high.

Price it Out

If you are considering downsizing make sure that you have realistic expectations. The truth is that most people will walk away with less than they anticipated.

For example: Let’s say you are moving from a $600,000 home to a $400,000 condo. You would think you’d be left with a whopping $200,000 for your retirement. Then you factor in real estate commissions of $30,000, $2,500 in legal fees, $3,000 in land transfer tax, moving fees of $2,500 and outstanding property taxes of roughly $1,500.

Now subtract any outstanding mortgage you have on your property and factor in any new furniture you may need for your now smaller environment. You may find that your downsizing has left you with a modest $50,000-$80,000.

To get a better understanding of what you can expect real estate agents can be very helpful.

Make a Plan

Financial advisers are excellent people to consult when you are putting together a plan for downsizing your home. They will help you draw up a financial plan that will outline many potential scenarios that can help you meet your retirement goals.

Finding Retirement Homes

During your retirement, you may find that it is time for you to search for a home to live in. You may have decided it is time to live in a community with others your age with minimal support.  Generally speaking, retirement homes are for senior citizens who do not require round-the-clock care and may need a bit of support.

52d39b58d45644c08419d98eb2484d9bSome seniors decide to move into a retirement home because it enables you to keep most privacy , however support on some level is still present.  Most retirement homes will have occasional cleaning, upkeep of homes, and food included in the cost. Another feature that may entice you are the leisure programs most retirement homes also have included in the cost.  This is a great opportunity to get our and socialize with your peers, and to get to know other residents in your community.

Before you begin to search for a retirement home, it is advisable to decide exactly what you are looking for and would desire in your home.  You will want to know if you would prefer a bigger or small unit, what you or your family are able to budget or if there are specific amenities you would want, such as  a pool or hot tub.

Once you have identified some retirement homes you may be interested in it is a good idea to obtain some information from each of those potential homes-even if it is as minimal as having brochures mailed to you.  If this home or homes still appeal to you, call and arrange for a tour.  You can speak with the staff and current residents to “get a feel” of how things are there.

It is good to know if current residents are happy with where they live. You will want to look for cleanliness and sanitation of the facility. Sampling the food is also a good idea as you will be consuming it at least three times a day. It is crucial to ask as many questions as you can think of. You may also think about bringing some friends or family members with you as they may think of questions or concerned you have not thought of yourself.

When touring a facility, you will also want to ensure that you have a general good feeling about the place. If something is unsettling about it, or you just do not have a good feeling, it is likely not the place for you. You must go with your feelings-after all, you re the one who will be spending all your time there.

Once you have found the place that fits for you, you may find it is somewhere where you will be able to be very active and maintain your dignity with support if you do require it.

If there is imminent need and therefore no time for someone to search for a retirement home either by themselves or with friends and family, a social worker or community support for seniors may be contacted to obtain a home more quickly.

10 Things to Consider for a Happy Retirement

You’ve had a job for your entire adult life, raised your kids and most likely have paid off your mortgage. Your retirement is ahead of you and it can really be the best years of your life. So what makes the difference between a happy retirement versus a retirement filled with stress? I recently asked a few people who have already retired what kids of things they thought were keys to having a happy retirement. This is the list that I came up with after some careful considerations:


Plan Ahead

Determine what you need, and what goals you need to achieve, in order to retire. It’s important to devise a plan that will help you accomplish this goal. Many people fail to plan their retirement properly which can lead to stress and worry in your retirement years.

Make conservative assumptions

Assumptions will likely be an important part of your retirement plan. When making assumptions it’s always a good idea to leave room for variability or margins of error. For example, do not assume that your investments to return a large sum of money that you will depend on as a major source of income.

Have a diverse portfolio

Make sure that you have a diverse portfolio of investments. For example, having a diverse portfolio of GICs, bonds, equities and income trusts will help you at times when stocks are losing money by balancing your asset classes.

Account for inflation

Inflation will affect your income in retirement whether you like it or not. You will find that as the years go by your costs will increase steadily and you may have to make some adjustments to your income. Everyone planning their retirement should be accounting for higher living costs.

Develop hobbies and interests before retirement

We all look forward to not having to do anything, but that will get old fast and you will find yourself with too much time on your hands. Keep busy in retirement with hobbies and interests; it will make you much happier. Planning what you want to do with your time will help prevent getting stuck in a rut when you actually retire.

Understand your retirement income

Where are you going to get income for retirement? An important thing that should be done by everyone planning their retirement is to become aware of the rules surrounding government benefits. Everyone should know everything they can about their sources of income whether it is pension plans, RRSPs or government benefits.

Minimize tax

It’s easy to get caught up in worrying about the safety of your investments in retirement, but people often forget to focus on minimizing tax. Good tax planning can make a tremendous impact on your retirement.

Be conservative with your investments

Sometimes it’s better to stay conservative and live a modest life than to go with investments that have a higher potential for returns (these types of investments also have higher losses). Just make sure you are able to sleep at night with the investment plans that you have chosen. Retirement is about living a comfortable life with what you have.

Live a healthy life

This should be obvious, having a health problem early into retirement is not something that you should have to worry about. Be conscious of what you eat and remain physically active. The healthier you are the longer you will live and the more you will enjoy your life. Money is nothing without health. You only get one body, take care of it.

Be happy with what you have

It’s easy to get caught up in the wants, but when it comes down to it, if you are having all your needs met in retirement that is a tremendous reason to be happy.