Retirement nest egg.

I remember talking to a colleague at work about 20 years ago and I had heard that $650,000.00 was the money a person would need saved to led a average retirement. The co worker was pretty upset that I would bring up this amount and he simply could not get his head around the amount , it being way to high.

Fast forward to today and its more than doubled to $1.7 million so I am sure he is not any happier.

It does seem a lot of money but lets say you could get an annual return of 5%, so your interest would be $85,000.00 , then assuming you will be taxed at 25% say $21,500.00 leaves you with $64,000.00 left to spend.

Canadians now expect to need $1.7M in order to retire: BMO survey - BNN Bloomberg

O.K.
At what age?

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Originally Posted by Gilroy

I remember talking to a colleague at work about 20 years ago and I had heard that $650,000.00 was the money a person would need saved to led a average retirement. The co worker was pretty upset that I would bring up this amount and he simply could not get his head around the amount , it being way to high.

Fast forward to today and its more than doubled to $1.7 million so I am sure he is not any happier.

It does seem a lot of money but lets say you could get an annual return of 5%, so your interest would be $85,000.00 , then assuming you will be taxed at 25% say $21,500.00 leaves you with $64,000.00 left to spend.

Canadians now expect to need $1.7M in order to retire: BMO survey - BNN Bloomberg

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With a decent pension plan like OMERS or a defined benefit plan from the private sector,nowhere near that total is what's needed unless the person had to finance their own pension plan while working in the private sector that didn't include a plan. I have friends who worked hard all their lives,but,failed to save for retirement. Now,they're close to exhausting what savings they had and are staring at living on CPP,OAS and a paltry GIS right in the face.

I am lost with this calculation..........
If one has 1.7 mil put aside and earn 5% annually-live off that earning+ whatever retirement the person has....it seems the person is expected to kick the bucket with out tapping into that 1,7 mil?

For 25 years the 1.7 mil yields 68 K annually.Plus retirement money coming in with OAS.
Lets leave the interest /investment earning to fight inflation.
When one is 85+.....how much money they will actually spend annually?(if they live that long)

I call it BS and fear mongering.
Making justification for Financial advisors to make nice living!

And -a let me justify my existence study/article.

In reality that doesn't mean much. It all depends on your life style and what you want to.

My best friend retired 2 years ago now at age 50. Collects a small pension of 1200.00 a month, has zero debt meaning no mortgage no loans no nothing.
He raised 2 kids as a single Dad has 1/2 million in the bank. Has no interest in travelling to other countries. Spends his day doing a 10 km hike every day. He spends about 1500 / month the difference easily covered by interest, in the summer he hits about 2200.00 / month.

He can fix and build anything has an electronics shop with more equipment the most companies and a small welding shop.

I will retire with a small pension and investments shy of my friend and again no debts. I wont have as much as my buddy but if my wife wants to occasionally travel I will just go do some farming or something, not really worried. I don't have much wants I know how to repair my equipment if I want to travel I will just go do some dairy farming work for a few months.

I feel like putting a hard number on this topic is pretty difficult, people have different expectations when it comes to retirement lifestyle. I'm 25-30 years out, worst case, and Ive seen a lot of the old guard retire in the past couple of years. The difference in expectations is spread so far across all the people I've talked to, one guy had accumulated a 10k/month pension and was worried how he would live on that in 10 years! And that's with zero debt and over a million in assets. Others don't have a thing to their name and aren't even worried a lick.

Quote:

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Originally Posted by Gilroy

I remember talking to a colleague at work about 20 years ago and I had heard that $650,000.00 was the money a person would need saved to led a average retirement. The co worker was pretty upset that I would bring up this amount and he simply could not get his head around the amount , it being way to high.

Fast forward to today and its more than doubled to $1.7 million so I am sure he is not any happier.

It does seem a lot of money but lets say you could get an annual return of 5%, so your interest would be $85,000.00 , then assuming you will be taxed at 25% say $21,500.00 leaves you with $64,000.00 left to spend.

Canadians now expect to need $1.7M in order to retire: BMO survey - BNN Bloomberg

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That is assuming you only spend your earnings and leave the principle intact. If you retire at 65 and live until 90, a 25 year annuity worth 1.7 million at 5% interest is over $120,000 per year over and above your CPP which is around $1,000 per month. Forget your OAS. At $132,000 a year it would be entirely clawed back.

https://www.calculator.net/annuity-p...ength&x=70&y=9

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Originally Posted by trimmer21

With a decent pension plan like OMERS or a defined benefit plan from the private sector,nowhere near that total is what's needed unless the person had to finance their own pension plan while working in the private sector that didn't include a plan. I have friends who worked hard all their lives,but,failed to save for retirement. Now,they're close to exhausting what savings they had and are staring at living on CPP,OAS and a paltry GIS right in the face.

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I think the article is pretty much talking about a person who does not have that OMERS plan or any other work pension. I remember back those 20 years ago we had financial planners talking about 11% or 12% annual returns, not so much of that going on. With OMERS returning 4.2% last year pretty more realistic. I know a few guys who took an early lump sum at 25 years service expecting that promised 11%, some of them are back working.

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Originally Posted by Gilroy

I think the article is pretty much talking about a person who does not have that OMERS plan or any other work pension. I remember back those 20 years ago we had financial planners talking about 11% or 12% annual returns, not so much of that going on. With OMERS returning 4.2% last year pretty more realistic. I know a few guys who took an early lump sum at 25 years service expecting that promised 11%, some of them are back working.

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I sure wouldn't want to be them these days. It's painful to watch close friends in their late 60's or early 70's who thought they had it made going back to work after they lost their pensions through businesses or retirement investments crashing. Thank God there was a federal government in power that literally rode roughshod over GM when they threatened to pull out of Canada forcing an arms length pension roll in that the corporation couldn't control,but,had to place all previous pension contributions into a blind trust with heavy payments periodically until GM's total pension obligations were met (which it now is) to the tune of over $3billion. Failing that,even though salaried corporate employees got royally shafted,but,were still included to some extent,Canada would have been dealing with almost 500K instant welfare cases. Pension reform and some very heavy legislation is still needed to protect seniors in this country.

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Originally Posted by trimmer21

I Pension reform and some very heavy legislation is still needed to protect seniors in this country.

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X2-long overdue, non understandable and without any excuse in this rich country,where we dole out BILLIONS ,left - right and center ,to anyone even remotely seemed to "need"it.
Regardless if the person is living here,abroad or inbetween.

Yet,the ones making/made the money are kicked to the curb.

That IS the epitome of very very poor Government.