Are you thinking about retirement but are not sure if you can realistically afford to retire? You’re in good company. According to a BMO Retirement Institute report, almost a third of Canadians expect to delay their retirement and continue working due to a lack of financial means.
Obviously, the last thing you want is to realize you’re not financially ready after you’ve already made arrangements to leave the workforce. That’s why it’s important to take into account a number of factors that can help you determine, in advance, whether or not you can afford to retire.
How much will the government support you in your retirement? The Canada Pension Plan (CPP) and the Old Age Security (OAS) program are government public pensions that provide a modest base for retirement income. Find out how much you will receive from the CPP and OAS if you retire at a certain age.
Information on retirement pensions, eligibility and benefits can be found on the Human Resources and Skill Development website. There is also a Canadian Retirement Income Calculator available online through Service Canada.
Many Canadian employers have a pension plan or a group RRSP (Registered Retirement Savings Plan). You can request that your employer give you a projection of how much you would receive if you were to retire.
As a paid employee, you’ve become accustomed to a certain lifestyle that corroborates with the income you receive. While you may be able to cut some costs in your retirement years, a complete lifestyle change is unlikely. When determining if you can afford to retire, you need to consider whether you can realistically sustain a comparable lifestyle to the one you have now.
Identifying a monetary amount may be tricky, but the general consensus is that 70% of your current income in retirement is necessary to maintain your lifestyle. But remember, there are a variety of other factors at play, including debts, longevity, travel plans and more.
Debt and Expenses
While more and more people are retiring with debt, it is a huge factor in determining if you can afford to retire. The 70% rule doesn’t hold up if you still have a mortgage to pay, have financially dependent children or other outstanding debt that will require a large sum of money to pay down. In fact, the 70% rule is predicated on the assumption that you will be entering retirement with no debt.
If you need some help tackling your debt so that you can hop on the road to retirement, don’t hesitate to contact Hoyes Michalos today. We offer a wide range of debt relief services that will help you eliminate debt so that you can focus on saving for retirement.