We had a pension plan session at work yesterday. I remember sitting through these things 25 years ago and wishing for a meteor to crash through the ceiling and take me out. That’s how boring it was! But at this stage of the game, one is better off paying attention.
We learned that only about one-third of employees in Canada have a pension plan through work. I don’t know how many of them match dollar-for-dollar, your contributions with theirs, but ours does and that’s a great way to get free money. I’ve always enrolled in company plans, even when I was an impatient 20-something. It just seemed prudent to sock something away for the future.
And the future is coming faster than ever. In his autobiography, Pete Townshend noted that past the age of 45 time moves faster every year. It really does! Why the heck is that? My efforts to slow it down have been failures.
CPP and Old Age Security combined pay out an annual maximum of $18-thousand. For two of us that’s $36-grand. And it’s nowhere near our current salaries although one presumes expenses will be lower. (How, I’m not sure, but I think the federal government is banking on a lot of lottery jackpot winners.) Honestly, I had no idea if it was 5 grand or 15 grand. Until yesterday I had no clue. And because I’m not quite at the magical cut-off age, I can’t collect until I’m 67 anyway, instead of 65. But we don’t plan to really retire. Whether it’s opening a store or building stuff or writing or running guns across the border – KIDDING – I don’t see a time when we truly quit working altogether. The goal is to stay healthy and actually get to use that money that’s been taken off our paycheques since the dawn of our working lives. And to hope that our twilight years don’t have to be spent in fortified cardboard box under an overpass.
Several theories come into play when considering retirement income which form the basis that expenses will be lower in retirement. The first of these is that you will know longer have those expenses associated with employment I.E. clothing, travel, lunches etc. The second assumes that you’re mortgage-free upon retirement or very close to having your mortgage paid off and little or no debt. These are some of the basics which form this theory, however, to advise you more I’d have to charge you large sums of money to demystify what the financial industry isn’t and doesn’t tell you and to put you on a sound path to retirement.
This is a question I’ve been asking for years. I’m 35 and am trying to figure out some sort of a ballpark number of how much we will NEED when the time comes. Neither of us have a work pension but pay into RRSP’s. Nobody seems to be able to answer my question. Give me a range…a ballpark…a loose estimation of what dollar amount to aim for!! I’m totally clueless.
A good financial planner will haul out the calculator and show you projections. And what’s amazing is how a little money now grows into so much down the road. I have a guy, Larry, who does these calculations, shows me and I say “I can’t contribute that much” and he says OK, see you in a couple of years! But he gives me hard numbers.
Dara,
I believe in educating clients to be able to help themselves by giving them the tools and could offer you the guidance you seek, its easier than you realise. Maybe Lisa can provide how you could contact me.
A good financial planner will do a hell of a lot more than haul out a calculator. They will provide you with various scenarios and projections based on various rates of return, inflation, contributions as well as helping you identify ways to restructure your finances to maximize cash flow, reduce debt and minimize tax. If they’re doing a good job, they will review your estate plans, Wills, Power of Attorneys etc. A good financial planner, in fact, becomes the CFO of your corporation.
Ooh, FORTIFIED cardboard?! Nice. Right now I have my eye on some newspaper and a driveway culvert.
Jason, my young friend, you have time to stake out a nice culvert. Your planning days are all ahead of you! Me? I have to start seriously checking out cardboard boxes.