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RRSP Centre

How Much Income Will I Need?
Whether you are entering your retirement years or still just planning for them, the question on everyone's mind is - how much income am I going to need to live a comfortable retirement? If you take the traditional approach, you would look at how much you're earning today and apply the rule of thumb that says you're likely going to need 70% of your pre-retirement income. But these days that approach may no longer be valid and here's why.

Canadians are living longer and enjoying a more active lifestyle during retirement. In fact, you can say that retirement isn't what it used to be.

Because the face of retirement is changing, it's time to consider how much income you will need at various stages of retirement. Let's call them the early, middle and the later years. Here are some things to consider, when planning for each stage of your retirement.

Early years - You will likely be the most active in the early retirement years. You'll be spending time travelling to places you've always dreamed of, thinking about home renovations or improving your golf game. Chances are, you might be keeping active by working part-time, starting a new career or business or volunteering for a special cause. You may still have dependent children at home, or you may be the primary care provider for an aging parent. All these factors will impact how much income you will need during this phase of retirement.

Middle years - The middle retirement years are what most people view as "traditional" retirement. You're still in good health but you're not as busy travelling, you're no longer working and have settled into a less hectic routine. In this phase, expenses are likely to decline, at least temporarily.

Later years - Very few people consider the likelihood of living to age 90 or beyond. Statistics tell us that there's a 50% chance that one member of a couple will live to age 90. Longevity does come with a price (studies are showing that we could live up to 5 years in need of personal health care). This is something that can significantly impact a person's retirement plan.

For more information, contact an Investment Advisor at a BMO Nesbitt Burns branch near you.

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