The amount you need to save depends on the lifestyle you want in retirement. Here we show what you’ll need in today’s dollars. Everyone spends their money differently, but to give you an idea, think of a “basic middle class” couple as being able to afford a used car that they keep for eight years or more. Vacations are mostly driving holidays, with occasional jaunts outside Canada. “Average middle class” couples can buy a new car and trade it in more often, and enjoy foreign holidays with average accommodations. “Upper middle class” couples can buy a new car every five years, or have two cars that they replace every eight years or so. They can also enjoy higher-end international travel.
Notes: (1) Retirement income is before tax. Assumes no debt in retirement and for all categories except Bare Necessities, a paid-for home. (2) Typical amount for OAS and CPP based on fairly long work career at average wages or better. Assumes OAS started at 65. People born after March 1958 will start OAS later and need to adjust calculations. Figures shown assume no employer pension (although employer pension income can be added to this column if applicable.) (3) Assumes initial withdrawal rate of 3.5% for retirement at 60 and 3.8% for retirement at 63, plus inflation. Adjustments also made for starting CPP at early retirement date and for bridging OAS equivalent until OAS start date. (4) Calculated by taking (annual retirement income minus government benefits) x 25. This assumes a withdrawal rate of 4% of initial portfolio plus inflation. (5) Withdrawal rate 4.2% of initial portfolio plus inflation adjustments. Adjusted for OAS and CPP start at 67. (6) Retirement income necessary for “Bare Necessities” derived from Basic Living Expenses for the Canadian Elderly by Bonnie-Jeanne MacDonald, Doug Andrews and Robert Brown, based on typical basic senior’s living expenses averaged for five Canadian cities. Amounts in study adjusted for inflation using Statistics Canada Consumer Price Index. Government benefits in this case comprised of CPP, OAS, and the Guaranteed Income Supplement and vary widely but ensure roughly that necessities at least are covered. People born after March 1958 have to wait longer than age 65 to collect OAS and GIS.
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