Short answer: it depends. Long answer: a lot of times it’s the amount of money we’ve saved and our lifestyle goals that truly determine when we can retire.

The average age of retirement, based on the government and most private pension plans, is age 65. However, I’ve seen individuals continue to work well into their 70s or others who start a gradual retirement in their 50s.

Once we turn off our employment income tap we’re going to need to turn on the tap from our retirement savings.  We need to be sure that the amount we’re withdrawing is sustainable and we won’t run out of money.

The way you ensure the well doesn’t run dry is by planning and preparing.

Planning and preparing for retirement

My members come in and sometimes say things like, “I hear I need $1,000,000 to retire”. Well, that’s a daunting and discouraging number. I want to focus more on the question of how much would you like to retire with.

When trying to figure out how much you need, I recommend updating your budget then combing through that budget and cutting items that won’t be there at retirement (hopefully) like mortgage payments, spending on children, amounts going to savings, etc. This will help you better understand the amount you need. Once you know how much, you can work backwards to create a savings plan.

There is the age-old saying, “those that fail to plan, plan to fail.”  Ideally, as soon as you start working, you should get in the habit of putting money away regularly. Adopt a “pay yourself first” savings strategy but be realistic. Start with something that you know you’ll be able to keep up with.

Once you’re used to the amount, consider making increases along the way. If you get a raise through work, look at a corresponding increase to your savings.

Slowly, but surely, you’ll build up a substantial pot. This routine is something you’ll have to practise until retirement.

When it’s time to retire, you’ll have to create a new budget to accommodate for the lack of new income. The general idea is that during retirement you’ll need 70%-80% of your current spending. I find a lot of individuals don’t necessarily want to change their pre-retirement spending habits. A good tip is to separate your spending into needs and wants. While we may want to travel the world, we need to put food in the fridge.

3 stages of spending in retirement

There are different spending stages in your retirement you can also plan for. Each timeframe usually requires a different income or savings plan.

Go-go years

This is the time we’re the most active and want to spend the most. This will usually last for the first 10 years or so of retirement. It’s the peak travel season when retired.

 Slow-go years

During this time spending money on travel starts to decline and we’re not as active anymore.

No-go years

The no-go years are when we’re more physically limited. Usually, there will be a big spike in spending in the later years of our lives with healthcare costs, which can be expensive.

4 tips if you haven’t saved enough

If you’re worried about not having enough money saved, or if there is a high probability that you might outlive your money, there are a handful of things that you can do to help bridge the gap:

1.Increase the amount

Increase how much you’re contributing to your retirement savings. The more we have saved at the point of retirement, the easier it is to make it last.

2. Grow your savings more efficiently

Low-interest options like GICs and savings accounts can be good for protecting your savings but can be ineffective for long-term savings as they tend to struggle to keep up with the cost of living. Exploring options that would allow for a little more growth potential, while still aligning to your comfort level, can be effective at building your retirement pool quicker.

3. Work longer

This can be a tough pill to swallow for some if they’ve already put themselves into a retirement mindset, but having a few extra years of saving and growing (coupled with fewer years of spending) can definitely have an impact on the longevity of your funds.

4. Spend less

By separating our spending into the different categories of needs and wants we can attempt to make the hard choices a little easier. It’s tough to crush someone’s lavish dreams of purchasing that new fancy retirement vehicle, but if it comes down to that or making sure the lights get turned on it can at least soften the blow a bit.

Talk to a financial Planner

Working with a Financial Planner can help relieve the stresses around retirement as they can help make sense of what retirement will look like financially for you. If you’re on track, then it’s just confirmation that you’re doing the right things, but more importantly, if you’re not on track they can help guide you through changes to improve your retirement picture. Give us a shout.