To know how much you should save each year, you need to know how much savings you have and your financial goal for retirement. If you still have not set your goal, you need to estimate your financial needs and set realistic savings goals. Systematic saving is always the best option. Start saving now!
Since everyone's financial situation is unique, it is important to measure the impact of early retirement. The earlier you retire, the more you need to count on your personal savings to round out your income. In addition, some people have a tendency to underestimate how long they will live. Do not forget that 50% of current retirees live beyond their life expectancy, which is growing rapidly in our society.
SimulR and
CompuPension can help you determine how much you need to save to achieve the desired retirement income replacement percentage.
SimulR is easy to use and can tell you what income replacement percentage you will need for retirement, and how much you should save to achieve your financial goal. CompuPension allows you to access your Québec Pension Plan data and gives you an accurate picture of your retirement income.
SimulR scenarios
Julie is 50 years old and earns $50 000 a year. She has decided to apply the
70% rule to determine the retirement income she will need. For the purposes of this example, the rate of return on savings is 5%. Julie has $150 000 in an
RRSP.
1st scenario: Retire at age 60
Julie wants a retirement income of $35 000 a year, that is, 70% of her current income, starting at age 60. According to SimulR, she must save 45% of her salary each year to achieve her goal despite the fact that she already has $150 000 in an
RRSP.
Saving the amount she needs to retire at age 60 requires a considerable effort on Julie's part since she has only 10 years before she turns 60.
2nd scenario: Retire at age 65
Julie wants a retirement income of $35 000 a year, that is, 70% of her current income, starting at age 65. According to SimulR, she must save 6% of her salary each year to achieve her goal despite the fact that she already has $150 000 in an
RRSP.
To replace 70% of her annual salary of $50 000, Julie must save nearly 45% a year if she applies for her
QPP pension at age 60, but only 6% a year if she applies at age 65. Therefore, the age at which Julie applies for her
QPP pension has a direct impact on the amount she needs to save to achieve her financial goal for retirement. Her pension is higher at age 65 because of a combination of 2 factors:
- She has an extra 5 years to save.
- The value of her pension is 60% higher at age 65 than at age 60.
3rd scenario: Lower the income replacement percentage
Julie wants a retirement income of $32 500 a year, that is, 65% of her current income. She wants to retire at age 66 but apply for her
QPP pension at age 63, and for her Old Age Security pension at age 65. However, she intends to work part time between ages 63 and 66. According to SimulR, she must save 4% of her salary each year despite the fact that she already has $150 000 in an
RRSP.
SimulR is for everyone, especially for individuals between ages 25 and 45. It provides an overview of your retirement income. You can change the age at which you begin receiving a lifetime retirement benefit such as a pension under the
QPP, the
OAS program or a defined benefit plan. You can also choose when you will withdraw your accrued savings and even opt for phased retirement.
CompuPension provides more specific data for calculating your retirement income. The closer you are to retirement, the more important this specific data is. Draw up a preliminary
budget including your retirement income and expenses , and use CompuPension to refine your scenario.