You've always pictured your retirement looking like this: You in a sun-kissed bikini, prancing through the sandy beaches of Australia with your best friend in tow (thanks, Elle Macpherson, for burning that glorious image into our brains). But now you find out nearly a third of Canadians just like you don't envision themselves being off the full-time train by age 66. Sixty-six!
And to the 14 percent of retirees saying they’re worried about outliving their savings - we can’t say we blame you.
These were just some of the findings from a new survey by Sunlife Financial, which also polled another 27 percent of respondents who said they to plan to drop down to part-time, while more than one in ten said they weren’t yet sure.
On the bright side, more than a quarter of Canadians are a little more optimistic, with 27 percent saying they figure they’ll be living the unemployed-by-choice-and-lovin’-it dream by then - complete with a beach-adjacent yacht and personal swath of servants (okay, we made that last part up).
But whether you’re optimistic or overly-cautious by contrast, it never hurts to have a healthy dose of reality to help you prepare better for the more realistic outcome ahead of you.
Here’s how to figure out a practical goal for what you’ll need to retire in peace - as well as just how long you can really expect to have to work full-time in order to reach your retirement goals.
5 steps to a faster retirement
- Step #1: Choose your golden age.
Expert opinions vary in the amount you actually need on hand to retire comfortably. Estimates range anywhere from 8 times your annual salary and up - but it can change depending on the age at which you plan to retire. Benefits consultant Aon Hewitt tells Time that retirees can expect to need 11 times their annual salary by the time they hit retirement, assuming they plan to retire at age 65. Bump that age up to 67 and the number drops to 9.4 multiples. Chisel that age down to 62 and the number soars to 13.5.
- Step #2: Calculate your income-to-egg ratio.
Determine that magic number. If you plan to retire at 65, multiply your annual income by 11 (unless your advisor suggests otherwise) and write that figure down on a piece of paper.
- Step #3: Consider how much you have saved up already.
If the answer is ze-ro - no need to fret. After all, that’s why you’re here, right? Move onto the next step.
- Step #4: Consider the impact inflation and increased life expectancy can have on your plans.
Average life expectancy in Canada grew to 80 years among men and 84 among women last year, according to a report by the World Health Organization - which means that by the time you hit retirement, that number could already be higher. Make sure you’re prepared for those extra years you might not have seen coming by adding an extra multiple to your magic number - just in case.
- Step #5: Think about the actual amount of your annual income you can comfortably put away.
There are plenty of online calculators to help you determine how much of your income you need to put away each paycheque in order to make the grade. Once you have that number, you can aim to double your efforts (or even reduce them, if you find you’re being stretched too thin) and gain better control of the time you have remaining before you actually get to trade in that full-time gig for the yacht and swath of servants (or camper van and kayak, if that's more your budget style).
Retire your worries
Retirement happens while we’re busy making our retirement plans. That’s why it’s ever important to make sure those plans account for the what-ifs of your golden years. What if inflation rates skyrocket on you? What if you find yourself being the longest-surviving member of your group home? What if you outlive your retirement savings, like 36 percent of working Canadians fear they will?
Whatever your retirement goal is now, you’ll have no problem exceeding it so long as you keep yourself regularly updated on your progress. Don’t worry - that yacht is just around the corner.