How much money will you have in retirement on a $100,000 income?

How much money will you have in retirement if your income is $100,000?

It depends.

There are so many factors that go into determining how big of a nest egg you’ll need to retire comfortably and sustainably that it’s impossible to give an exact answer. In this blog post we’ll discuss some of the key factors that come into play when calculating how much money retirees should have saved for their retirement years.

Many soon-to-be retirees start wondering how much they’ll get from their savings. They start thinking about how much they’ll need to live off once they reach their retirement date.

How much money is enough to have in retirement?


But also ask yourself… do you want to have more than ‘enough’?

To answer these questions, we need to know:

  • What you plan to spend each month.
  • How long you anticipate living?
  • Are there are any other sources of income?
  • Retirement lifestyle, retirement plan (i.e., traveling, staying put)
  • Retirement age
  • Leave a legacy for the kids or not

We’ll assume you’re an individual who intends to collect full retirement benefits at the age of 65 (since that is when you can start full CPP retirement benefits).

Other questions to consider:

  • Do you have investments? How much income will that generate?
  • What is the expected rate of return? [ ROI ]
  • What are you estimating your life expectancy to be?
  • What is the portfolio’s level of volatility?
  • How much of your money do you want
  • Will you be able to retire on your 65th birthday and live comfortably for the rest of your life?

Retirement is not simply a number. There’s also a lot more that goes into retirement planning and making sure you enjoy yourself, with activities to do once you’re retired.

What retirement means to you is as important as how much money remains in your retirement fund.

Let’s answer the retirement question now with an income of $100,000: would I be able to retire and live on this lump sum of money?

To meet the expense of living in retirement, you should anticipate requiring around 80% of your pre-retirement income. In other words, if you earn $100,000 now, you’ll need roughly $80,000 per year (in today’s dollars) after retirement, following this 80 percent rule. Note: this doesn’t account for inflation (more on that below).

The idea behind the 80 percent rule is that once you retire, you will be able to cut back on some costs. You won’t have to save for retirement any longer, and you may spend less on transportation and other work-related expenditures. Of course, everyone’s situation is unique. You may want to modify it up or down depending on the sort of retirement you want to have and whether your costs will be different.

If you plan to pay off your mortgage before you retire, you may be able to live off less than 80 perecent.

If you want to travel regularly in retirement, you may want to aim for 90 percent of your pre-retirement income, or higher.

Let’s look at an example scenario: you and your spouse currently have a combined annual income of $150,000. Based on the 80 percent rule, you may anticipate needing $120,000 in yearly income after retiring, or $10,000 / month.

In this scenario, if you plan to retire by 65, and want to sustain yourself for 30 years, with 2% annual inflation, and your portfolio is gaining a 7% annual yield on average, then at retirement (assuming no other income sources) you’ll need to have at least $1,956,935 million in retirement savings if you want to live comfortably.

Let’s play with the numbers a bit and see how the example scenario could play out differently:

  1. Let’s say your portfolio’s annual yield was a more modest 4% on average… now you’re going to need to start with $2,755,106 millionin savings on the day you retire in order to keep a comfortable lifestyle for 30 more years.
  2. Let’s reduce the life expectancy from 30 years down to 20 years, with 7% annual yield on our portfolio… we’ll need $1,581,895 millionin savings. If our investments yield 4%… we’d need $2,008,237 million.

Little changes can have a big affect on the outcome.

According to a CIBC survey, Canadians believe they would require an average of $756,000 in retirement savings, yet the great majority (90%) do not have a strategy in place to attain the lifestyle they desire in their senior years. Worse, the majority of Canadians (65%) do not seek professional guidance to prepare for retirement.

One thing is for sure; if you don’t want to run out of money at some point in your life then it’s important to take steps now so that you can make ends meet down the road.

Sources Of Retirement Income

The annual retirement income of a person is usually derived from three sources:

  1. Their government retirement pension, CPP, which they’ve contributed to during the course of their working life PLUS OAS.
  2. Any employer-sponsored retirement plans they may have had (like Defined Benefit pensions).
  3. Personal retirement savings that they’ve acquired over their lifetime by contributing to your RRSPs or non-registered investment accounts, TFSAs.

Planning Your Withdrawal Rate

A key component of your retirement income decision is deciding on how much to withdraw from your portfolio each year.

A withdrawal rate that is too high could deplete your savings and leave you with nothing, but a withdrawal rate that is too low may not provide enough income to live on.

What are some ways to determine what the best withdrawal rate for retirement might be?

What will be your optimal withdrawal rate?

This number will be dependent on your portfolio’s expected rate of return. A safe withdrawal rate of 4% implies that you’re in a safe, conservative portfolio. Your $100,000 portfolio would be in a good position if you invested in a balanced portfolio and earned an average return of 4%. The higher the returns, the higher the potential risk in the portfolio and, as a result, the larger the unpredictability of returns. When this happens, market volatility may completely devastate income-generating portfolios.

Assume your retirement savings are a bucket of money. When you’re ready to retire, all you have to do is “tap the bucket” to begin drawing an income. The arithmetic above is only a starting point to help you decide how much money you can draw from the bucket or how much income you may expect in retirement. If you think about it, you can either open the tap to allow more money to flow out or stop the tap to allow less money to flow out. If you turn on the faucet, you risk depleting the funds in the basket too rapidly and running out of funds.

Don’t Forget Inflation

When you retirement you’ll still need enough to make ends meet, but it’s even more important to keep your spending in check. Don’t forget about inflation! Keeping up with inflation is essential if you wish to continue living the same sort of lifestyle in retirement as you do now.

If you were planning on spending $60,000 in retirement and inflation is at 5% you would need to have saved up over $74,000 [$60k x (1 + 0.05)]. You don’t want to plan your retirement and then realize that the retirement income you planned to take out each month doesn’t add up because 1) the price has gone up so slightly so your retirement funds haven’t really kept up with this rise in inflation and 2) everything else has inflated – except your income!

Start With A Retirement Calculator

A simple online retirement calculator may provide a more accurate picture of how much money they will need to prepare for retirement.

These online calculators frequently include additional useful information such as tax rates and inflation rates; these numbers tell you exactly how much purchasing power your savings will have over time, providing you with an accurate picture of what life might be like during your retirement years (and whether or not you should adjust any plans accordingly).

Do you want to buy a boat or a car? Travel or a vacation cruise? A new home near the beach? There are several options for which you may prepare, but in order to accomplish those objectives, you must determine how much you will invest each year and set away for your retirement future.

Knowing how much money you’ll have when you retire will allow you to make realistic plans for living costs and determine how much money you’ll have left over to spend on goods for your enjoyment.

Experiment with the calculator variables to discover how they impact your retirement income amount. Perhaps an early retirement is a feasible objective for you, or perhaps working an extra 2 or 3 years over your planned retirement age provides better outcomes than expected.

Book A Call With Us

Don’t rely only on the calculator tools. Always seek the assistance of a qualified financial advisor to guide you through each of the calculating stages! Seek the assistance of a specialist who can answer your retirement pension concerns and assist you in understanding the findings of the retirement calculator so that you can successfully modify your retirement plan.

Pension Solutions Canada’s staff are available to assist you. 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.

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