How Much To Retire?

How Much Do I Need to Retire?

November 2015

This is a very common retirement planning question and typically the financial industry’s answer is mathematical. You make a few assumptions, plug the data into a calculator and you get a number – for example you need $975,324.67 to retire comfortably. I am not discouraging these calculations, I believe there is value in the data crunching process. For starters it gets you thinking about retirement and savings, as well as about what is important to you in retirement– and there are numerous free calculators you can use, the government of Canada even has one ( However I work with a number of retirees and can confidently say retirement is not a number.

Retirement is a personal process and trying answer the question how much do I need to retire perhaps can best be answered by thinking about what retirement means to you. Do you want to travel? Spend more time with the grandkids? Everyone has a different vision of retirement. If we are trying to put a price tag on retirement what you want to do in retirement will have a big influence. The number produced by the fancy calculators mentioned above is heavily dependent on the amount of money you assume you will need in retirement.

Accurately determining your spending patterns in retirement can be tough. A guide is to look at your current spending and use the 70% rule. Most retirees have a similar lifestyle in retirement as they did prior to retirement. The 70% rule says that to maintain your lifestyle in retirement your retirement income needs to be 70% of your pre-retirement income. The assumption is that you will needless income because by retirement you will have less expenses: you will likely no longer have a mortgage, the kids will, hopefully, be independent and out of the house, you will not have work related expenses (for example vehicle maintenance and gas consumption might decrease because you are no longer commuting), and you will no longer be saving for retirement.

The 70%rule is a good starting point. You will likely have to make a few adjustments.For example if you intend to travel more in retirement than you do now you will have to add in that expense and you may need more than 70% of your pre-retirement income. If you want a detailed worksheet to guide the adjustment process has a helpful retirement budget worksheet under their tools & calculators tab.

Your retirement will be different than mine and different than our neighbour’s. In trying to answer the question how much do I need to retire the heavy lifting is not the calculations. The important steps are done before the mathematics in determining what you want to do in retirement. If you spend more time thinking about those questions, the number produced by the calculator will be more meaningful and lead to better planning.  

Clinton Orr B.Comm (hons.), CIM, CFP, DMS, FMA  lives in Beausejour and is a portfolio manager with National Bank Financial.



This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use, and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity.  As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group.