“How much do I need to save?” – This is one of the most asked questions when working with people on their retirement plans. The answer can vary greatly from person to person depending on what lifestyle goals they have set for their golden years. The universal idea of saving $1 million to live comfortably in retirement has become a counterproductive goal because some people will need more, while others will be able to live quite comfortably on less.
It’s already difficult to understand saving and investing for retirement in normal economic times, but with the current economy it’s not surprising so many people having increased anxiety around it. As inflation increases the cost of everyday items, and rising interest rates make it more difficult to pay off mortgages and service other debt, creating a saving plan for retirement can seem overwhelming.
When planning for your retirement, start with evaluating your current lifestyle. What do you do in your spare time? What would you like to do? In the Fidelity Investments report How much do Canadians need to save per year for retirement? it suggests “As a starting point, you will need 70% of your income during your working life to maintain approximately the same standard of living in retirement, although this assumes you no longer must support children, service a mortgage, pay for transportation to work or save for retirement itself… In individual cases, it could also be higher or lower depending on your family status, tax bracket, real estate ownership, lifestyle and health.”
Saving Through the Ages
20s: Create a budget and pay down debt.
Those in their 20s are just starting their financial journey. This is the perfect time to buckle down and eliminate any student loans and consumer debt. Try focusing on creating a budget that allows you to save a portion of your income to go towards retirement, a down payment on a home or an emergency fund. The best time to eliminate debt is now because the next decade is very expensive, so the less money you owe the better off you’ll be.
30s: Start your savings.
By now many 30-somethings will have their own families, first homes and new careers on their minds, but now is also the time to begin thinking about saving for the future. Fidelity Investments recommends having at least one year’s worth of employment income set aside for emergencies (or at least saved/invested) by age 30, and two years’ worth of employment income by age 35. Regardless, by starting young there is lots of time to grow your investments, even putting away $250 a month can put you ahead of the game.
40s: Bringing retirement into focus.
Majority of 40-year-olds are well into their careers and will have become settled into a certain standard of living. This helps with bringing your retirement ideals into better focus. By age 40 you should aspire to have three times your employment income saved and four times by 45.
50s: Catch up on your savings goals.
Ideally in your 50s you are at the peak of your earning years, and expenses for children and housing may start to slow. This is the perfect opportunity to play catch-up on your savings goals if you’ve fallen behind. By age 50 aim to accumulate six times your annual employment income, and by age 55 have seven times your annual employment income saved up. The sooner you start saving and investing, the bigger the nest egg will grow.
60s: Entering the home stretch.
As you enter your 60s, you enter into the home stretch towards retirement. By now you may be planning the retirement date or may have already retired. Before retiring though, you should strive to have nine times your working income (by 60) and ten times by 65, according to Fidelity Investments. Remember this is only a guideline, everyone’s plan will be different depending on your lifestyle and age of retirement.
If you would like to review your retirement plan to ensure you are on track to live the lifestyle you envision once you stop working, please don’t hesitate to reach out.
Have a great weekend,
Tracey and Paige
Read the original article here:
https://www.fidelity.ca/en/investor/investorinsights/how-much-canadians-save-for-retirement/
Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp. 4665 Yonge Street, Suite 309, Toronto, ON M2N 0B4 t 416.964.0440
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