A popular question we’re asked is “how much money do I need to live on each month?” – it’s a great question!
There is no one-size-fits-all answer, since the amount of money you’ll need to retire depends on a variety of factors including your age, lifestyle, and expected retirement expenses. However, a general rule of thumb is that you’ll need about 70-80% of your pre-retirement income to maintain your standard of living in retirement.
Many people believe that they need to have at least $1,000 saved per month to live comfortably in retirement, but this number can vary depending on your lifestyle.
If you plan on traveling and spending money on activities, you will need more money saved than someone who plans to stay home and their primary hobby is gardening. Other factors that will affect how much money you need each month include your health, the location you plan to retire in, and whether you will have a pension or other form of income.
The best way to figure out how much money you need is to sit down and make a budget for your retirement. This will give you an idea of how much money you will need to live on each month. You can also speak with a Certified Financial Planner (click here to book a free virtual meeting with one).
Think about your current expenses. How much do you spend on groceries, transportation, housing, utilities, and other expenses?
Next, think about your future expenses. You’ll likely need to pay for healthcare costs and other retirement costs that you don’t currently pay for. You will also need to keep money aside in case you want to do anything beyond sitting at home, such as traveling or vacations.
How Long Does It Take to Build a Retirement Fund?
Once you have decided how much money you want to save, and what kind of plan fits your needs, you can start putting money into it. Many people think they are too old to start saving, but anyone can start saving — even if you are 50.
How long it takes to build your retirement fund depends on two factors:
- How much you are able to put away each month
- The performance of the investments you chose
Once you have a good idea of how much money you’ll need each month, you can start looking for a retirement plan that will fit your budget. There are a lot of different retirement plans available, and each one has its own benefits and drawbacks. Make sure you do your research and find the plan that’s best for you.
What Is an Emergency Fund?
An emergency fund is money that you keep separate from your regular savings and investments. It’s there to serve you when you need to pay for an unexpected personal financial disaster, such as a medical bill or car repair that eats into your savings.
When you are planning for retirement, you should factor in these emergencies and make sure you have enough money to cover them. Even if you are young and not thinking about retirement just yet, an emergency fund can help you beat debt and reach your financial goals.
What Is Retirement Planning?
Retirement planning is the process of deciding when to retire, how to finance your retirement, and how to spend your retirement years. The importance of planning for retirement doesn’t diminish as you get older. Even if you think you are too young to start planning for retirement, keep in mind that retirement planning starts the day you start working!
What Are The Benefits of Retirement Planning?
When it comes to retirement planning, there are a number of important benefits that come with it. First and foremost, retirement planning can help ensure that you have a solid financial foundation for your golden years. This means that you will be able to retire with the peace of mind that comes with knowing you have enough money saved up to cover your costs. Additionally, retirement planning can help you stay on track with your long-term financial goals. By setting aside money each month for retirement, you can gradually build up your nest egg and ensure that you have enough saved up to cover your costs once you do retire. Retirement planning can also help you stay organized and disciplined with your finances, which means that you will be less likely to overspend.
What Are The Biggest Factors to Consider When Planning for Retirement?
There are many factors to consider when planning for retirement. Some of the biggest factors include:
- How much money you will need to live comfortably in retirement
- How long you will live in retirement
- How much money you have saved for retirement
- What kind of retirement plan you have (e.g. pension)
- What kind of lifestyle you want to live in retirement
- How much health insurance you will need once you are in retirement
- How to calculate the income you need to live comfortably
- How to calculate the expenses you have if you are widowed or single
- How to calculate and plan your asset allocation
- Liquidity requirements
- Leave a legacy: are you planning to leave money for the kids?
What Are The Most Common Mistakes People Make When Planning For Retirement?
The four most common mistakes people make when planning for retirement are not saving enough money, not investing their money wisely, not considering healthcare costs and not planning for inflation.
Most people do not save enough money for retirement. The average person needs around 80% of their pre-retirement income to live comfortably in retirement. However, the average person only saves around 10% of their income. This can lead to a lot of financial stress in retirement.
Another common mistake is not investing their money wisely. Many people put their money into savings accounts where they can earn very low returns. If people want to have a comfortable retirement, they need to invest their money in stocks, bonds, mutual funds, managed investment portfolios and other investments that will provide a higher return. It’s all about growth of your money.
Healthcare costs are another big expense in retirement that many people do not plan for. Sure, we live in Canada, but don’t expect all of your healthcare costs to be covered by the Canadian healthcare system. Our healthcare system was built to support curative care (helping cure you when you become sick) rather than maintenance-based or preventative care to keep you healthy (such as your regular trip to the dentist).
Critical illness insurance is something to consider before you retire. It will help you by paying out if you’re diagnosed with a serious health issue that’s covered by your policy. It can be well worth the money and gives you peace of mind that you’re covered.
How Can I Save for Retirement when I Don’t Have a Lot of Money?
There are a few things that you can do to save for retirement when you don’t have a lot of money. One is to start saving as early as possible. Another is to make sure that you are contributing to a retirement account. You can also look for ways to reduce your expenses and save money on your taxes. Also, make sure that you are investing your money wisely! The better you invest, the larger your returns and those returns can be invested into your future retirement fund.
What Are the Biggest Risks to Retirement Savings?
There are many risks to retirement savings, but some of the biggest ones are market volatility, inflation, and longevity risk.
Market volatility can be a huge risk to retirement savings, especially if someone is counting on those savings to last for a long period of time.
Inflation can also eat away at those savings, especially if the retiree is living on a fixed income.
Longevity risk is the risk that someone will outlive their retirement savings. All of these risks can be mitigated somewhat with proper planning and diversification, but they are still important factors to consider when planning for retirement.
What Should You Do if You’re Not Sure how Much Money You’ll Need in Retirement?
If you’re not sure how much money you’ll need in retirement, there are a few things you can do. First, look at your current expenses and try to estimate what they will be in retirement. Also, factor in any additional costs you may have in retirement, like healthcare or travel. You can also save as much money as possible now to help ensure you have enough savings for retirement. If you’re still not sure how much you’ll need, it’s best to consult a financial advisor who can help you create a retirement plan that fits your needs.
When Is the Best Time to Start Saving for Retirement?
There is no single answer to this question, as the ideal time to start saving for retirement depends on a variety of factors, including your age, income, spending habits, when you plan to retire, how much you need to save each month to reach your retirement goal, and your current income and expenses. Most experts agree that it’s never too early (or too late) to start saving for retirement.
If you’re in your twenties or thirties, it’s a good idea to start saving for retirement as soon as possible. This will give you plenty of time to accrue compound interest over the years. If you’re closer to retirement age, you may need to save more each month in order to make up for lost time.
If you plan to retire in the near future, you’ll need to start saving as early as possible. Ideally, you should aim to save at least 10-15% of your income each month. However, if you have more time until retirement, you can start saving a smaller amount and increase it over time.
How to I Achieve a Steady Stream of Income During Retirement?
It’s also important to make sure you are investing your savings in a way that will provide you with a steady stream of income during retirement. One option for saving for retirement is to invest in stocks or mutual funds. This can be a risky investment, as the stock market can go up or down, but over the long term it has proven to be a profitable way to save for retirement. Another option is to invest in bonds, which are a less risky investment but also provide a lower return.You can also invest in other ways such as purchasing real estate and finding a property that will appreciate in value over time.
Meet With A Certified Financial Planner
Think about what you want the golden years of your life to look like and take steps towards making it a reality now. Retire with peace of mind by consulting with a Certified Financial Planner today.
At Pension Solutions Canada, we specialize in assisting people in preparing for retirement. Allow us to evaluate and review your retirement income sources and assist you with retirement planning. Call us at 1-888-554-6661, or click here to book a virtual Zoom meeting.