Have you seen seen that warm and cozy snapshot of Grandma and Grandpa sitting on their porch looking out over the horizon, sun on their faces, Grandma with a cup of tea, Grandpa playing the banjo? (Yes, I know, could be us.) This lovely portrait may not be as idyllic as it appears. Maybe they are content, or maybe that’s all those old folks can afford to do.
Having spent 10 years in the hallowed halls of retirement I am often asked, “How much money do you need to retire?”
And I always say, “Well, it depends on how you want to spend your time. Are you planning on a quiet life or do you want to get out and travel, do things you never had the time to do before? How much do you spend now? That amount is not likely to go down.”
Being debt free at retirement and owning your place of residence will help - a lot. If, however, you have no company pension, no RRSP’s (mutual funds, stocks, GIC’s), no source of revenue other than OAS (Old Age Security) and CPP (CanadaPension Plan) to draw on, you could be in trouble.
How much pension money you will receive when you first retire is also very difficult to determine. Government websites are hard to navigate.
How much money do you need per month? Difficult question. Government pension income is fixed and essentially goes down every year because the response to inflation is pretty unrealistic. The increase received this year is more like $20/month than the 57 cents claimed by that continually streaming meme on FaceBook, but rising expenses far exceed such a small monthly increase. Just look at the price of gasoline and heating fuel! Being rural and 40 miles from everywhere, those two items, plus insurance and maintenance of our farm truck and car, pretty well swallow up close to half of our combined government pension income.
People who are not new to reading my blog know that we live a fairly simple life on a small farm. We are essentially a pair of “back to the landers” right out of the early 70’s. We are partially retired now, running only about 1/8 of the number of sheep that we had when we were younger. Sheep sales (including putting one or two in the freezer) and our garden help us to keep our heads above water. Farm and pension income could be sufficient if nothing ever went wrong. IF - if we never repair or improve anything, if the ram hadn’t died, if my dog didn’t suddenly need a vet, if we don’t need new tires, if the well pump doesn’t seize, if hail doesn’t devastate the garden, if our health manages to hold up... There are an endless number of possible “ifs”! So far our government pension comes up short, on average, by about $1000/month.
What works in the beginning may slowly become insufficient. If you are depleting your savings rather than maintaining a sufficient balance to cover inflation and withdrawals you’ll have little choice but to pull back from all those little extras that make life special, and may eventually have to reassess what is essential. Inflation and circumstance can easily cause you to become financially marginalized. Plenty of people these days are forced to work well beyond 65 in order to make ends meet. So, when planning your retirement, if at all possible, make sure you have an extra source of revenue to draw on. Assess you desires, your needs, and don’t forget that plenty of monkey wrenches will get tossed into the mix. Access every subsidy, insurance plan, discount, etc. for which you are eligible. These are not entitlements, you earned them through employment and taxes over your entire working career.
As you grow older you may, like me, prefer a simpler life style, close to home. You may even want to be that old couple on the porch I described above, smiling because they are truly content. Good planning, sprinkled with a healthy dollop of good luck, will provide you with a choice.
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