How much money will you need when you retire?

You are looking forward to a long and healthy retirement. But how much will it cost? Here are five tips to help you figure out how much money you will need when you retire.

1. Start early – “It’s never too early to start planning for your retirement,” advises Chartered Accountant Alan Wainer of Soberman LLP in Toronto. “Sit down and think about when you want to retire and what your retirement goals are.”

2. Think about how you will spend your time in retirement – “Do you want to travel, buy a second home or take up new hobbies?” asks Chartered Accountant Scott Conner of BDO LLP in Huntsville. “Once you decide what standard of living you want in retirement you can make some decisions about how much income you will need.”

3. Don’t expect your spending to go down – “When you are not working it is easier to spend money,” says Wainer. “In addition to spending money on things like travel and hobbies, many retirees also find they are called upon to help their adult children financially.” Keep in mind that basic costs – such as food and transportation – will continue to increase over time, adds Conner. Once you do a realistic assessment of your assets and costs in retirement, you can decide whether you need to adjust your plans. This could mean putting more money aside pre-retirement or spending less post-retirement.

4. Be sure to factor in medical expenses – “People don’t like to think about it, but medical expenses such as nursing and attendant care, increase during the retirement years,” says Conner. If you are concerned about your ability to cover medical costs, Wainer suggests considering critical illness insurance or long-term care insurance. “The earlier you buy this type of insurance, the less expensive it is,” he adds.

5. Seek professional advice – “It’s important to have a good investment advisor to help you deal with market fluctuations and to preserve your capital, especially during the early years of retirement,” says Wainer. “A Chartered Accountant can help you develop a basic cash flow plan and minimize your taxes in retirement. Your CA can also act as a sounding board and will help you review and revise your plan on an annual basis.”

Brought to you by the Institute of Chartered Accountants of Ontario.

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