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No, You Don’t Need a Million Dollars to Retire (Or Even Half a Million)

Lately my Facebook feed has been filled with ads asking if a million dollars will be enough in retirement. Let’s face it. If a million dollars were needed in retirement, few people would retire. Sure, if you want to dine out twice a week, take expensive vacations twice a year, drive a new car every few years and live somewhere with high property taxes or condo fees you’ll need a lot of money. But if you have a modest, mortgage-free property, love hanging out with the locals when you travel and don’t need a car, you can retire on less than a million dollars or even half a million.

Start with government benefits. Assuming you retire at 65 and can receive full OAS and close to full CPP, you’ll have almost $1,800 a month. Then add in a company defined benefit pension plan if there is one, which may or may not be significant. If it’s a defined contribution plan, it will generate income in retirement.

Let’s say someone lives in a mortgage free home and decides they need $4,000 a month after tax to live a comfortable life. They would need about $5,000 a month before tax. Assume government benefits of $1,5000 and a workplace pension of $2,500 a month. In such a case, they only need an additional $1,000 a month to achieve their goal. An investment of $200,000 generating a 6% return would provide this extra $1,000.

If there is no pension plan then of course more needs to be saved. Assume in this case government benefits of $1,500 and savings of $300,000. At a return of 6% that would generate $1,500 a month leaving a shortfall of $2,000 a month. This is where prudent planning comes into play. Is the person willing to work longer, delaying government benefits and building up more savings? Would they downsize to a smaller home or consider renting? Could they work part time? Many self-employed people love what they do and will continue to work as long as they are able and willing. Can they scale back on their needs?

For many reasons, many people have not saved up significant assets and I have worked with them. Being realistic, flexible and open-minded makes a comfortable retirement possible. Reach out to me and let’s get you on track to financial security.

For over 20 years as a financial advisor in Toronto, Francine has helped hundreds of families in the GTA. Clients appreciate her non-judgemental approach, as well as her patience and open mindedness. Currently, she specializes in working with women transitioning into retirement. She has been an advisor with Carte Financial Services Inc. and Carte Wealth Management Inc. since the summer of 2016 where independence allows her to provide the best service and products to her clients. Contact Francine through francine.dick@cartewm.com