Wednesday, 20 February 2013

Retirement Planning

I will admit that I find planning for retirement to be quite a challenge at the moment.  Unfortunately it’s not the technical stuff that stumps me.  I can explain the difference between RRSPs and TFSAs, the role of inflation, and how to make an investing plan.  

The problem that I have is rather fundamental.  Most well written retirement planning books that I have read start out with a simple question; what is your retirement going to look like?  You take what you want to be doing during retirement, and assign a dollar value to it.  Then you figure out where you are in your savings and make a plan to get from where you are to where you want to be.  Simple right?

The problem is I don’t know what my retirement will look like.  I don’t know if I’ll have a spouse or kids, or where I’ll live.  I’m not even certain at what age I want to retire.  I can come up with where I am but even the working years don’t have a plan.  I don’t know if I’ll work for the same company for my career, I don’t know if I’ll end up with a pension.  I don’t even know at what rate my pay will increase. 

That said I am a big believer in saving early on, so I’m saving for retirement anyways.  I set aside about $350 a month for retirement savings.  That is 10% of my take home pay, which is generally the recommendation from experts (such as the author of “The Wealthy Barber” and Gail Vaz-Oxlade).  While I could save more, for the next 5 years I am concentrating on making my mortgage disappear. 

In the meantime $350 a month is being added to the $22,000 that I am to receive instead of a pension for my military service.  If I continue to save at my current rate and assume 7% return on investments; then at 55 I will have $708,000 in retirement savings, and $1,484,000 if I wait until I’m 65.  (Actually probably a bit more because my 10% contribution will increase as my pay increases and I plan to reinvest any tax benefits.) 

That said I fully expect my plan to be revised as my life changes.  The first point of revision will be in 5 years time when my mortgage is paid off.  At that point I can adjust my plan and step up savings if I want since losing my mortgage payments will free up $1,500 a month. 

Have you got a retirement plan worked out?  


  1. nice post......
    sharing information about retirement planning

  2. Hi, Elizabeth. We’re on opposite sides of the spectrum when it comes to thinking about starting a retirement fund – it’s the technical stuff that boggles my mind. Good call on saving early, though. At least when you finally figure out something concrete, you’ve got a head start and have a better idea on what adjustments to make with your finances.

    1. Thanks! I've got my parents to thank for my early saving habits. (They made me start saving for university/college when I was about 5.) If you're looking for a good resource on the technical aspects of investing I would recommend reading "Free at 45" by Timothy Stobbs. It gives you the generals and then a list of references at the back for information on more specifics.


  3. I am half way agree with your proceedings. One must keep a back up retirement plan as well. Don't put all your eggs in one basket. Anyways, nice study. You are a keen observer, Elizabeth.

    1. Not all of my eggs are in the same basket I invest in a broad range of index funds (some that hold stock and some that hold bonds). I am also diversified in different markets Canada, US and international. My eggs are in many baskets.