Canadians drastically reducing retirement targets: report
Roughly half (53%) of Canadians feel they're at or ahead of where they should be in terms of retirement savings, according to a rcent study from RBC.
That's good news, until you realize that most of them have actually lowered their retirement savings goals by a hefty margin.
For those who have yet to retire, the magic number seems to have been reduced by more than $200,000 to an average of $564,000 in 2012 from $778,000 in 2011.
Most say they either have pushed their retirement to a later date or are unsure about when they will retire. Talk about diminished expectations.
A huge six digit target can be intimidating, particularly if you're still trying to figure out how to pay those monthly bills. For many people, it’s probably no more useful than those medical charts telling you the optimal weight for your height.
And the number itself can be misleading, particularly if you don't have a good sense of how inflation, the crab grass of retirement planning, can work against you.
Behavioral economists warn of "wealth illusion," or the tendency for people to overestimate the sustainable income a large pile of money can generate.
Fidelity Investments recently put together an age-based savings guideline with a range of savings goals that might make you think in a different way, assuming the firm’s daunting assumptions don’t scare you away altogether.
And Fidelity knows that.
“We believe these savings targets offer a rule of thumb to help employees get engaged in retirement planning by making it simpler and more achievable,” says James M. MacDonald, president of workplace investing at Fidelity.
Still not sure where you stand? Have a look at this calculator to get a glimpse of the future.
Do you have a magic number that you're working towards? Has it been adjusted up or down in recent years?
By Gordon Powers, MSN Money
Posted by: karra | Feb 13, 2022 6:03:07 PM
What a useless calculator. It did not take into account company pension, CPP, OAS or any other source of income - it just told me I need 1.2 million which is absolutely absurd, as pensions cover most of our needs - I've done the math already. A pure marketing tool from Ing is what it turned out to be.
We already live on the amount we plan on living on in retirement and save the rest - the budget shouldn't change much at all as we're 5 years away and don't have much in the way of work related expenses. It's ridiculous to say you need x% of your current income to retire on - we've had the same budget for the last 5 years too while employment income rose steadily, but we never increased our spending. I guess we're trying to make up for lost time and periods of unemployment, but it's good discipline to make a retirement budget and try it out in advance (add a section for employment expenses if applicable, and don't forget health benefits which you may not be entitled to any more).
Posted by: future homeless | Feb 15, 2022 2:19:02 PM
most of us don't have a company pension, we can only dream of that, the recessions, which ate into my investments, plus the layoff which scuttled my chances to advance, it looks like my pension plan will be a shotgun barrel in the mouth with my toe on the trigger. i will keep on going until the money runs out, then ?
Posted by: ZREXER | Feb 15, 2022 4:31:10 PM
Well, it is possible to set aside money for retirement. It is all about priorities. My wife and I have always llived far below our means. This is not to say we don't spend, but we spend wisely and have both realized that life is not about continued spending on 'stuff' yopu really don't need. We do have a warm destination vacation every year.
At 53 & 54, we have paid off our house (10 years ago), paid for 2 university educations for our two children (both were honour students, so even though we paid, they worked their asses off), set aside $100,000 for each of two kids to get their lives launched. Our daughter used her money for a down payment on a condo. Our son is still at home in his fianl semester of university.
Our current savings for retirement is over 2 million. Yes we both earn around $125,000 a year, but this has only happened in the last few years. We have many friends that earn far more than us, that have huge houses, lots of stuff, but are always strapped for cash.
Our secret was from day one of our marraige was to make savings a priority. In the early years the amounts were small, but we kept the discipline to save a certain amount no matter what. 30 years of compounding has amazing results.
I get sick of hearing how many people are broke in a country as rich as Canada.
I have always had the philosophy it is up to me to make sure I have a secure retirement, not the company I work for or the government.
Posted by: adam | Feb 17, 2022 12:08:40 PM
Well its good you have it so good ZREXER. but most people dont make 125,000... let alone 2 of you making a total of 250,000. Trust me if most of the country made that much money, people wouldnt be complaining. between myself and my wife we make around 110,000. If we had that extra 115000 like you, yes i would be smiling all the way to the bank also. So before you start to fell more sick about how broke people are. better ask yourself how much they might actually be making. But if you want, i can try to come over to you, and give you a golden star to stick on your fridge for doing so good in your life.
Posted by: Rayne | Feb 17, 2022 4:18:10 PM
The calculator is very silly.....
I stayed at home with our son until he was 7, then back to work for the school season. Hubby worked for government (ie low wage but a pension at the end) and we did not spend.....paid off the mortgage in our early 40's...every single extra penny went towards it. Saved for our son's university and saved for our retirement as the pension would not cover everything (nothing gold plated here!). So, next year at the age of 57, we are retiring--never made over 100,000 between us but our house is paid for--and it's only 5 years old--no repairs for a bit-- and we have about 750,000 plus his pension, my very small pension and a lifestyle that will provide us with warm holidays every year, good food, exercise....
We knew when we were very young to save, save and save some more.
It has worked for us....and we lost money too in the crash....but all the little jobs, all the bit of extra money was saved, not spent....
One year and counting....
Posted by: linda | Feb 17, 2022 4:41:16 PM
The two of us combined made over 100,000 exactly once. We've helped our kids with school some (but not totally), and are about 3 years away from paying off our mortgage. With CPP $ OAS, we'll be replacing about 60% annually of what we need to have. I'll have a small pension, as I don't have eligibility for full pension; my husband has always worked for smaller companies that don't have pensions. What the RRSP folks don't calculate in is that you should earn at least a little interest on your investments, and as you age, your needs perhaps decrease because you tend not to be as active at 85 as at 65. We've figured that we probably want about $400,000 in our combined RRSP's, but the only way we're going to hit that is through a bit of inheritance money from both sets of parents. Otherwise, our plan might be winning the lottery, as we certainly don't have the income to sock away another $300,000 on top of what we have now. We're both in our early 50's.