It is no simple matter to estimate one's financial needs in retirement. One point of departure is to use
retirement calculators.
Here are a few:
The Investor Education Fund, a
not-for-profit entity established by the Ontario Securities
Commission, offers a retirement cash flow calculator. (The site provides many other useful tools.)
The user friendly calculator progresses
logically through the following steps:
- planning dates (time to retirement)
- budgeting during retirement (income, expenses)
- investment returns (RRSPs, TFSAs, non-registered investments) plus assumptions for inflation and annual rates of return
- major financial events (major specific sources of income e.g. house sale and expenditures e.g. condo purchase)
- summary results (how long your stash will last you)
Service Canada offers a useful
calculator tailored to project retirement planning for Canadians.
This
online service will provide you with retirement income information,
including OAS and CPP benefits. You will need to work through a
series of modules in order to estimate your retirement incomes and
compare them to the 70% income replacement rate often recommended by
retirement planners. It also allows you to see the impact of
increased savings. The calculator will help you better understand how
each level of the retirement income system will contribute to your
future financial security. The calculator's results are rough
estimates for information purposes only - not financial planning. The
calculator does not collect personal information or identifiers.
CNN Money provides a good calculator
for Americans – useful also for Canadians.
The value of retirement calculators is that they "set the table for further discussion". Given that entitlement programs are likely to come under further pressure as governements attempt to cope with unremitting deficits, it is even more important to forgo some pleasures of the day in order to stash away some resources for the future. My wife and I lived off one salary for about seven years when we started out ... and we banked the other salary. We did not suffer a reduction in the quality of life and the strategy provided us with a smorgasbord of life options.
Life Expectancy - How Long Could You Live?
Since the results vary widely, it make
sense to run several calculators. Here's a good one from the Population Health Improvement Research Network (PHIRN):
I like the following calculator. It is comprehensive and provides a brief analysis of risk factors. Unlike some
calculators which must have been sponsored by the Taliban, this one lauds
the intake of 2 to 3 drinks each day ... my kind of calculator.
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