How much should you save for retirement?

In 2018, many of you are one step closer to retirement. Many of you are now starting to think about retirement. I really did not think about retirement until about 10 years before I retired. My first thought was, will I have enough money to fund a reasonable retirement? That thought or this thought “how much should I be saving – and have banked already – for my retirement” may be taking over your thoughts as it did mine.

If you listen to the financial industry, the answer is an awful lot more than you probably have. According to one financial journalist, and the industry, by the time you are 30 you should have at least the equivalent of your annual income saved for retirement. By 40 it should be three times your annual income; by 50, six times; by 60, eight times and by retirement 10 times. This advice is not meant for the young who are burdened by student debt, high housing costs and stagnant real wages, any of them can ever dare to dream of saving at this kind of level.

These benchmarks are really fairly arbitrary. The industry is designed to sell and uses the greed- and fear sales pitches as everyone else to flog product (the more we save, the more they earn). But in real life it is impossible to project 40 years into the future in this super-tidy way.

I am like most people, in that I could not afford to save 15% of my income every year (most of it into the stock market) from the age of 25 onwards. Because I had small children and I bought a house.

I retired at 60 but I kept working albeit part time for another 9 years. Many of my cohorts (early boomers) will work past retirement if they can and will end up un-retiring, even when we do retire. The idea that we must save a set amount of cash and live on that cash and only that cash for ever seems old-fashioned. Very few of us will rely on nothing but specific retirement savings from the age of 60 on.

The good news is that almost everyone is now saving something. If you have a defined benefit pension with your employer (if you work in the public sector for instance), you are doing just fine. If you are in an auto-enrolment scheme you won’t be saving 15% of your salary, but you will have made a start, and by 2019, you will be saving 8% of your total income automatically. Here is one idea, if you take your next few pay rises and ask to have them immediately recycled into your pension, you will be close to retirement clover before you know it.

Life is a constant balance between the needs of the present and the needs of the future. When I was young, the present was a lot more important. It was hard to think about saving. And with money tight, and expenses high, it was even harder to save. In Canada we have three pillars to help us as we prepare for retirement. We have

·       Government programs, Old Age Security, Guaranteed Income Supplement, Registered Retirement Savings Programs, Tax Free Savings Accounts and the Canada Pension Plan

·       Employer programs such as Defined Contribution or Defined Benefits retirement programs

·       Personal Savings in non-registered savings and investment programs.

We are all savings toward retirement if we are working in Canada through the Canada Pension Plan, if you decide you want to save on your own, start when you have the ability to put money into your savings program, and don’t be pressured by the industry that is intent on scaring you that you will not have enough when you retire.