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Lost, really need that much money for retirement?


shootingstar
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https://www.theglobeandmail.com/investing/personal-finance/retirement/article-seeking-a-retirement-plan-that-will-age-well/

I seriously don't quite understand this CAnadian @63 yrs.,  who feels he needs $100,000/yr. to live when retired. He doesn't have any children. Is single. (I noticed that gold band. Hmmm. Keep women away?)  He won't get private pension. The 2 public govn't pensions will probably be approx. $15,000 min./year, depending on when he plans to initiate it.

He has not mentioned about buying a vacation home. Lives in Toronto house worth $2 million. (Must be a big home for 1 person.. or maybe it's by the waterfront with incredible views). His total assets- $3 million. Well, that is if he doesn't liquidate funds at wrong time.

I did calculate how much it would cost annually and threw in a couple thousand /yr. for travel and some health care.  For SURE, it was not $100,000.

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8 minutes ago, shootingstar said:

$100,000/yr

What's that in US $$$?  $25,000? :D

But yeah, it seems retirement planners have been steadily replacing the old advice which was like 60% of highest income needed for retirement???  I have seen it getting closer and closer to 100% as the "suggestion", and, while that seems insanely high, it also removes all financial worry by the time you retire.

But, even at the old 60%, if the guy makes $160k/yr, then planning for $100k/yr in retirement is "reasonable".  I'd simply assume he's making somewhere north of $150k/yr (He plans to retire from his $250,000-a-year sales job at the age of 67.and wants to keep living the same lifestyle in retirement.

EDIT: His $250k definitely shows he should be aiming for that 100k.  150k even!

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11 minutes ago, Razors Edge said:

But yeah, it seems retirement planners have been steadily replacing the old advice which was like 60% of highest income needed for retirement???  I have seen it getting closer and closer to 100% as the "suggestion", and, while that seems insanely high, it also removes all financial worry by the time you retire.

But, even at the old 60%, if the guy makes $160k/yr, then planning for $100k/yr in retirement is "reasonable".  I'd simply assume he's making somewhere north of $150k/yr and wants to keep living the same lifestyle in retirement.

Some people never want to face change.  Delusions and dreams ...well what's the difference?

This covid which is resulting in support income by govn't...is creating a budget hole.  What is scary is sceptre of much higher taxes.. or we just have crappy services. Or no service.

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Just now, shootingstar said:

Some people never want to face change.  Delusions and dreams ...well what's the difference?

Why face change if you can actually plan for mitigating or avoiding it?  Should he need to drastically lower his lifestyle in retirement? Why?  If you're making and living on $250k/yr, then I think the 100k or the 150k/yr in retirement is a good goal, not a bad one.  I think I'd rather be comfortable in old age, rather than worried about $$$.

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12 minutes ago, Razors Edge said:

Why face change if you can actually plan for mitigating or avoiding it?  Should he need to drastically lower his lifestyle in retirement? Why?  If you're making and living on $250k/yr, then I think the 100k or the 150k/yr in retirement is a good goal, not a bad one.  I think I'd rather be comfortable in old age, rather than worried about $$$.

I guess some of us have lived reasonably well at modest level, that it's hard to imagine a life @ $100,000/yr.  $200.00/night hotels for every travel trip, restaurant dinners several times / wk.?  Travel around the world.  (I mean we haven't had a car in several decades....that's probably incredibly modest to many folks.)

Look, I love foreign travel. But after 4 wks. overseas, I like returning back to Canada. Lots to see in my own country ....still. 

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1 minute ago, shootingstar said:

I guess some of us have lived reasonably well at modest level, that it's hard to imagine a life @ $100,000/yr.  $200.00/night hotels for every travel trip, restaurant dinners several times / wk. 

But that doesn't change HIS math for retirement.  Set a lifestyle in your middle age and expect/hope/plan to maintain it through old age & retirement.  I work for a reason - to earn money to live now and into old age.  I want to do things now and in retirement, and without a certain amount of $$$ in the bank, those options would be limited. If I'm lucky and plan well, retirement will be a wonderful adventure.

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18 minutes ago, Razors Edge said:

But that doesn't change HIS math for retirement.  Set a lifestyle in your middle age and expect/hope/plan to maintain it through old age & retirement.  I work for a reason - to earn money to live now and into old age.  I want to do things now and in retirement, and without a certain amount of $$$ in the bank, those options would be limited. If I'm lucky and plan well, retirement will be a wonderful adventure.

Very true, about working hard and reducing worry @retirement. 

I'm just glad to have done several overseas foreign trips....before covid hit globally.  Not wait until retirement.

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5 hours ago, 2Far said:

His $2M house in Toronto, paid for?? If not, that could be quite a monthly payment, plus taxes & insurance and upkeep. 

Yea, one wonders.  If his taxes isn't $11,000/yr., then maybe $6,000 or more.  It is possible he might have a home he bought 15-20 yrs. ago and assessed value has gone up alot.  I am familiar with some wonderful neighbourhoods which a person needs to have bought in such areas 20 yrs. ago for property appeciation over $1 million by now.

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I started to read the article and then got interrupted, and now I can't get back to it.   However, if he's lived in that house for a long time, he may have purchased it at a lower price and had a lot of appreciation.  I don't know much about Canadian real estate, but i know some locations have had a lot of appreciation in recent years.

I hope he's willing to downsize, because his investments alone aren't going to support his desired lifestyle.  But I didn't read enough to know if he's got any pensions or how much he'll get from the Canadian govt retirement plans.  Plus if he has equity in the house, that's a nice increase to his nest egg.   Even a small decrease in his annual expenses can significantly reduce the overall amount he needs.

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2 minutes ago, Prophet Zacharia said:

I tend to doubt it, since having $3.2M (even Canadian) should be enough for a 62 yo to retire, let alone retire after 5 more years of work!

But  I thought the $3.2M includes the $2M house.  If he's not willing to downsize and sell the house, he'll be trying to get $100K a year from $1,2M which would be an over 8% withdrawal rate. If he sells the house and downsizes to something costing $700K, his withdrawal rate would be 4% which is much closer to a typical safe withdrawal rate.

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8 minutes ago, Kirby said:

But  I thought the $3.2M includes the $2M house.  If he's not willing to downsize and sell the house, he'll be trying to get $100K a year from $1,2M which would be an over 8% withdrawal rate. If he sells the house and downsizes to something costing $700K, his withdrawal rate would be 4% which is much closer to a typical safe withdrawal rate.

It does include his house.  I dunno he seems to be living in slight denial at this time for $100,000 /yr. retirement lifestyle.  Good on him, if he can pull if off PLUS deal with nursing care costs near end of life.

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21 minutes ago, Philander Seabury said:

I think the real answer is closer to 100% than 60% for retaarment income. Commuting and saving are aboot the only expenses that would go down significantly. Maybe 80-90%?  That would let you pay slightly less taxes.  
Of course if you want to travel a lot it goes way above 100%. 

B) Then, he feels he lives a wonderful, luxe life @$100,000/annually...which may be the norm in ...30 yrs. with inflation???? :o

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14 hours ago, Philander Seabury said:

Inflation can be a bitch. And from what I’ve seen of Canadian real estate prices, $100k seems a minimum. 

Seems, even with inflation factored in, this guy's good to go?

Mr. MacKenzie’s forecast shows that with 2-per-cent inflation, a 4-per-cent rate of return on investments and the eventual sale of his home, by the age of 95 Danny’s net worth (in dollars with today’s purchasing power) will still be more than $1-million. He has a “surplus” of about $500,000, the planner says. “That means if Danny’s net worth was $500,000 less than he has now, he could still achieve his main goal, which is never to run out of money.”

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BTW, I found Jane to be more interesting

 

In two years, Jane plans to retire from her $124,000-a-year job in the education system with a full teacher’s pension of $71,800 a year, fully indexed to inflation. She’ll be 58.

When she does, she wants to spend time outdoors – playing golf, skiing in the Rockies and travelling abroad. With more time for the things she enjoys, Jane aims to double her travel and leisure budget to $20,000 a year. She also wants to help her daughter, who is 16, with university costs.

Once she has put the working world behind her, Jane is mulling selling her suburban Toronto house and moving to a smaller city or town where she can live simply and enjoy nature. In the meantime, she wonders whether she should focus on paying off the remaining mortgage on her city home or direct more savings toward investing.

Jane says she is willing to work a little longer if it would put her on a more solid financial footing. She’s not sure how much money she will need but has set her goal at $90,000 to $100,000 a year after tax. She manages her own investments and wonders whether she should consolidate her assets.

We asked Karen Hennessy and Nushzaad Malcolm, financial planners at T. E. Wealth in Montreal and Toronto, to look at Jane’s situation.

 

What the experts say

First, her daughter’s education. Jane has $80,000 in a registered education savings plan and $120,000 in a trust account for her daughter’s studies. These investments should be adequate for future tuition costs estimated at $20,000 to $30,000 a year, plus expenses, the planners say. To take full advantage of the federal education savings grant, they recommend Jane continue to save in the RESP until her daughter turns 17.

Next, the mortgage versus investing question. The planners look at Jane’s income needs now and when she retires under two scenarios, one where she pays off her mortgage and one where she keeps it to maturity in 15 years.

“Jane’s total cost of living will be reduced when she retires,” the planners say, so her spending target is probably higher than necessary.

Jane’s basic expenses total $67,750 a year. Mortgage payments add another $15,600 a year and she is saving $22,500 a year, for total current outlays of $105,850. Even if she retires with the mortgage in place, she will no longer be saving $22,500 a year, so her cash needs will fall to $83,350.

Once her mortgage is paid off in 15 years, she’ll have basic spending of the same $67,750 a year (with no savings and no mortgage payments). She’ll add another $10,000 a year for travel, for cash needs of $77,750 a year after tax.

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On 8/24/2020 at 11:56 AM, Prophet Zacharia said:

Yeah, but only because he has national health coverage. :unsure:

If we can hope the health care system remains public. What is hard is to estimate how much money I should set aside in case our public health care system changes in certain areas.

Just to clarify only for Jane, in Ontario, the teachers' pension fund is incredibly healthy and doing well for past few decades.  Alot of Canadian public pension funds aren't that successful..like mine over 1 billion $ was mismanaged. This was revealed just 4 months ago.

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