Planning for Retirement

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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ghariton
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Re: Planning for Retirement

Post by ghariton »

All of which underlines the point that the replacement ratio you need in retirement various with a lot of factors, not the least of which is your income level. If I'm earning $200,000 a year I can retire comfortably on 50% of that. If I'm earning $20,000, not so much.

But it's hard to write and sell newspaper articles saying: Things differ according to circumstances. Don't generalize. Do your own analysis.

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newguy
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Re: Planning for Retirement

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ghariton wrote:If I'm earning $200,000 a year I can retire comfortably on 50% of that.
Me too please.
If I'm earning $20,000, not so much.
CPP@20% = 4k, OAS = 6.5k, GIS = 6.5k for 17k total, so 85% of income anyway and no tax plus free dentist and healthcare and eyeglasses and what else. Plus a roomate if wanted.

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Springbok
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Re: Planning for Retirement

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Shurville wrote:
brucecohen wrote:Also, though Hamilton did not get into this, my experience has been that retirees with practical skills save money on DIY repairs that would have been hired out while working and, of course, retirees have more time to optimize their shopping whether for small or large purchases.
My experiance and that of friends is that this may be true early on but as you age you tend to hire out more . I now hire a lawn service and cleaning lady and snow removal service when down south. We have less interest in dyi home deco stuff and repairs and hire others to do that.Shopping may be fun for some but as time goes on we generally found this got boring.
Many 80 plus people we know add to costs as they now spend 5-6 months in Florida. Fly down since they leave a car there.Eat out lots more with their FL friends . Tire of cooking especially widows and widowers. Health insurance costs increase.

What you are saying is more or less same as I suggested above. Stats Canada and those not yet retired may think otherwise, but I am with Blonde on this - we probably spend 115% of our average pre-retirement income earned in say 5 years before retirement. A lot of this is in capital projects and winter travel. I am also more inclined to hire someone these days than do it myself.
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Re: Planning for Retirement

Post by blonde »

But it's hard to write and sell newspaper articles saying: Things differ according to circumstances. Don't generalize. Do your own analysis.
Yep!!! Everyone has a WIIIFM-Factor. Look After #1, ALWAYS.

At the Geritol-Club it is more common than not, to have a lot of retirement FINANCIAL questions presented anytime after the third drink. Some will even nit pick at what is rite, wrong, good or bad for SOMEONE else. Needless to say, as the cocktails are consumed the debate gets stronger and better. Many times I have been questioned...How can you and spouse survive on such a piddley Cash-Flow?

WHY would anyone work hard for so many years, to retire and live the lifestyle of being 'Poor-Person'? Why don't these same people just work till they die*? Why are so many people being dependent on the govt to provide the financial help in retirement*? Do not be surprised to learn that ANY/ALL govts will promise anything and everything to everyone anytime...but (always a Yabutt) deliver buggar-all when the collection date arrives.

* formal policy is already in place to trigger the 'PLAN'

Mega-Money = Mega-Happiness.

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Re: Planning for Retirement

Post by brucecohen »

It just occurred to me that years ago Statistics Canada did a study of new retirees' income based on actual income tax data. I cited it in The Pension Puzzle. The 1998 study covered nearly 200,000 retirees across the earnings spectrum. StatCan compared income reported for 1995 to that reported for 1992, their last year of full employment and adjusted for inflation. Key findings:
-- Most retirees had income replacement ratios of less than 70%
-- The lower the pre-retirement income, the higher the IRR. That's because of the impact of OAS and other govt benefits that are not income-based

The figures I quoted were:
1992 income.........1995 IRR
$20K-30K.............. 62%
$30K-40K.............. 60%
$40K-50K.............. 59%
$50K-70K.............. 56%
$70K+ ..................45%

I recall Hamilton telling a conference that StatCan data for average Canadians -- as opposed to the more affluent here -- did not validate all of the talk of exotic travel and sun-drenched sunbelt winters. The typical retiree, he said, stayed at home, gardened in summer and complained about the weather in winter.
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Shakespeare
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Re: Planning for Retirement

Post by Shakespeare »

Well, we get the last part right. :wink:
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Re: Planning for Retirement

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I looked at how much money we were squirrelling away into RRSPs, TFSAs and cash accounts each year pre-retirement. After retirement, we should be able to lose the income that allowed us to make these deposits and still have the same lifestyle. E.G. If you are putting away $50,000 of your after tax income of $120,000 each year, you should be able to live on $70,000 after tax income.

Once you know how much you need, add up all your post-retirement income sources. When income > need, quit your job!
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ghariton
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Re: Planning for Retirement

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From Bill Gross of PIMCO, expenses on car ownership and operation, according to age (I think):

This is from a John Mauldin newsletter, so I don't have a link. And Gross doesn`t really comment on what these numbers mean. Although Gross doesn't say what year the data are from, it is safe to assume that they are U.S. data. But Canada shouldn't be very different.

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newguy
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Re: Planning for Retirement

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ghariton wrote:And Gross doesn`t really comment on what these numbers mean.
Maybe monthly expenses cause that's waaaay to low for annual.

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Shakespeare
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Re: Planning for Retirement

Post by Shakespeare »

Looks pretty low for monthly, too.
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Re: Planning for Retirement

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newguy wrote:
ghariton wrote:And Gross doesn`t really comment on what these numbers mean.
Maybe monthly expenses cause that's waaaay to low for annual.

newguy

For a 70 year old, $740.00.
Lets say 37c/km total cost to operate a car (low these days) Km that could be travelled 740/0.37= 2000.

If monthly, possible but not annual.

I am 73 and between my wife & I we put on about 35k km pa total for 4 cars so for 1 car family, 24k pa could be about right.

The chart says annual - not believable.

BTW, my 37c is low these days:
http://newsroom.aaa.com/2012/04/cost-of ... %99-study/
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Re: Planning for Retirement

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Springbok wrote:BTW, my 37c is low these days:
http://newsroom.aaa.com/2012/04/cost-of ... %99-study/
AAA wrote: Sedan (Average of S M & L) Cost Per Mile 59.6 cents
59.6 ¢/mile is almost exactly 37 ¢/km - and:
AAA wrote: These ownership costs are assumed to be on a purchase of a new vehicle, depreciated over five years.
- but not everyone drives a new car, so average depreciation would have to be less than the amount included in the report. "Depreciation over five years" is clarified in the linked brochure:
AAA wrote: Depreciation is based on the difference between new-vehicle purchase price and estimated trade-in value at the end of five years.
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Re: Planning for Retirement

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pmj wrote: 59.6 ¢/mile is almost exactly 37 ¢/km
Yes it is - fine if you have an "average" sedan whatever that is! If you have a full size sedan, SUV or minivan as many do, 37c/km is a low figure these days. That was my point.
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Re: Planning for Retirement

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Springbok wrote:
pmj wrote: 59.6 ¢/mile is almost exactly 37 ¢/km
Yes it is - fine if you have an "average" sedan whatever that is! If you have a full size sedan, SUV or minivan as many do, 37c/km is a low figure these days. That was my point.
And if, like many of us, you don't replace your vehicle every 5 years, whether it's a "full size" or not, 37c/km is a high figure these days.
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Re: Planning for Retirement

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Springbok wrote:The chart says annual - not believable.
It's only believable if the average is over all persons that age, not just car owners. If so I find it quite believable.
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Re: Planning for Retirement

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Springbok wrote:
pmj wrote: 59.6 ¢/mile is almost exactly 37 ¢/km
Yes it is - fine if you have an "average" sedan whatever that is! If you have a full size sedan, SUV or minivan as many do, 37c/km is a low figure these days. That was my point.
Your original quote didn't comment at all on the size of the car:
Springbok wrote:Lets say 37c/km total cost to operate a car (low these days)
Here's the more detailed report (1.5MB pdf) http://newsroom.aaa.com/wp-content/uplo ... ts2012.pdf

• Small sedan — Chevrolet Cruze, Ford Focus, Honda Civic, Nissan Sentra and Toyota Corolla.
• Medium sedan — Chevrolet Impala, Ford Fusion, Honda Accord, Nissan Altima and Toyota Camry.
• Large sedan — Buick Lucerne, Chrysler 300, Ford Taurus, Nissan Maxima and Toyota Avalon.

"Average Sedan" was the average cost of small, medium & large sedans. The quoted vehicles seem to be a reasonable cross-section of the market. The cost for a minivan is only slightly more than for the "average" sedan - 63.4 ¢/mile / 39.4 ¢/km vs 37 ¢/km.
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Re: Planning for Retirement

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pmj wrote: "Average Sedan" was the average cost of small, medium & large sedans. The quoted vehicles seem to be a reasonable cross-section of the market. The cost for a minivan is only slightly more than for the "average" sedan - 63.4 ¢/mile / 39.4 ¢/km vs 37 ¢/km.
They only included low end cars - No Mercedes, Lexus, Audis etc All I know, is that the CRA used to pay me more than 37c/km 10 years ago when I did consulting work for them. That is why I said 37c is low today - See this link:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... s-eng.html

Anyway, this discussion doesn't have much to do with thread title, so perhaps it should be dropped.
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Re: Planning for Retirement

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Agreed! Maybe the rate-setters over at CRA all drive Mercedes, Lexus, and Audis :shock:?
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Re: Planning for Retirement

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Springbok wrote:They only included low end cars - No Mercedes, Lexus, Audis etc
:roll: :twisted: :roll:
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Re: Planning for Retirement

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I thought it was meant to be a joke because it was the shape of a car!
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Re: Planning for Retirement

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Springbok wrote: Anyway, this discussion doesn't have much to do with thread title, so perhaps it should be dropped.
Unless there is some correlation between the cost of car ownership and retirement planning... perhaps people are planning to live in their cars?
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Re: Planning for Retirement

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At least in the westie I get a good night's sleep! :P
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Re: Planning for Retirement

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kcowan wrote:
Shurville wrote:Many 80 plus people we know add to costs as they now spend 5-6 months in Florida. Fly down since they leave a car there.Eat out lots more with their FL friends . Tire of cooking especially widows and widowers. Health insurance costs increase.
I think their total budget declines. The costs of eating out at 5:30pm is often cheaper than preparing a meal in Canada. Insurance costs are offset by cheap airfare, travelling when discounts are available. The costs of flying somewhere warm for a week are eliminated.

I am interested in others actual experience here. Ours is an overall reduction of 23% including extra insurance costs for health and car, and a yearly trip to Europe for a month.
My experience is similar to Shurville's post. My total expenditures have increased significantly since I decided to become a snowbird. There may be small savings while in Florida due to lower costs of food and new purchases (clothing, golf clubs). Also I no longer have the costs of winter ski vacations. However those savings are more than offset by the costs of renting a vacation home in Florida (while still incurring costs of maintaining my home in Canada), travelling to/from Florida, travel medical insurance, etc.
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Re: Planning for Retirement

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Arby wrote:
My experience is similar to Shurville's post. My total expenditures have increased significantly since I decided to become a snowbird. There may be small savings while in Florida due to lower costs of food and new purchases (clothing, golf clubs). Also I no longer have the costs of winter ski vacations. However those savings are more than offset by the costs of renting a vacation home in Florida (while still incurring costs of maintaining my home in Canada), travelling to/from Florida, travel medical insurance, etc.
Very close to our experience. Probably in the "etc", but you left out the golf green fees which cost us almost as much as our rental (we both play)! We also eat out a lot more when South.
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Re: Planning for Retirement

Post by Chuck »

I would think the 60-70% of pre-retirement income would be a no brainer. It seems the fact you don't have to put away 20-30% for "retirement savings" plus the reduced income tax burden (for salaried employees anyway, the self employed seem to have lots of tax avoidance options) would put you right there without making any expenditure sacrificies.

If you want to live a 'vacation' lifestyle year round it's going to cost you a bit more, which is a nice thing if you can afford it, but if not, if you can get by with a 4 week holiday every year or two (you know, like in your pre-retirement years), you should be fine.
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