How Much Do You Need to Retire Comfortably in Canada?
John Woodfield, Senior Wealth Advisor, Portfolio Manager, B.Comm, CFP®, CIM®, FMA, FCSI®
Summary of Key Points
Retirement is described in three stages: the go-go stage, the slow-go stage, and the no-go stage.
In the go-go stage, people often travel more, stay active, and may spend the same or slightly more than they did in their final working years.
In the slow-go stage, people travel less but may spend similar amounts, with activities continuing at a slower pace.
In the no-go stage, travel is limited, people stay home more, and income needs can drop significantly.
Long-term retirement health depends on proper planning and a balanced portfolio, as overly conservative choices, such as GICs, can harm outcomes over the long term.
Video Script
In this video we’re going to walk through the top 3 considerations when deciding how much you need to retire in Canada. You’ll also learn about the 3 stages of retirement.
As a financial advisor licensed in both Canada and the USA, many clients come to me not knowing what they need to spend during each stage of retirement. These numbers are crucial to planning. You may assume you will spend less in retirement. But that’s not always the case. I have broken down retirement into three stages: the Go Go stage, Slow Go stage and No Go stage.
When you first retire you are in the “Go Go stage” traveling and spending time doing all the things you finally have time to do.
This can be expensive. In the “Slow Go Stage” you start to do just that. You slow down. Not as much cash is needed. In the “No Go Stage” you prefer to be more comfortable at home. You don’t entertain as much and find you start to spend less.
I typically estimate that a client will spend at least the same amount as their pre-retirement expenses during the first several years of retirement. It will be on different things.
In your case, you may not be paying for parking at work, but you may be golfing or travelling more. Your priorities shift and you become comfortable with your routine.
Many of our clients have been drawing their incomes from investments for over 30 years. You should plan to live well into your 90’s.
For example if you spend $5000 per month, over 12 months that is $60,000 after tax per year. If you multiply that by 30 years of retirement, you get $1.8 million. This doesn’t consider investment growth or inflation but it gives you an idea of what you might spend in retirement.
I understand that this is a long time frame to grasp as a recent retiree. You are healthy and probably feel you have enough resources. I’ve been doing this for close to 30 years and I have seen it all.
The two most damaging things to your future financial health are a lack of long-term planning and an unbalanced investment portfolio.
For example, many investors, upon retirement, purchase low risk GICs or TDs. These low interest, fully taxable investments seldom beat inflation and chip away at your financial health.
Do you want to make sure that the retirement you dream about for you and your significant other is properly planned and effectively protected?
Take the small step today of looking closely and what you feel your financial needs may be.
Do you feel you have enough to live comfortably for 30 plus years?