Can I retire at 65?
In a pivotal scene of the blockbuster 2004 film The Notebook, an emotional Ryan Gosling asks Rachel McAdams to look into her future and poses a simple question “what do you want?” Forced to choose between her handsome upper-class fiancé and the rugged Ryan Gosling, a teary-eyed McAdams replies “It’s not that simple.” The future rarely is. A series of complex factors influence each of our decisions. However, much like McAdams’ dilemma, finding a way to answer the question “what do you want?” is integral to determining whether you are on pace to retire at 65.
There isn’t a single principle or plan that you should follow. Everyone’s situation is different. To know if you’re on the right track, it is important to define what kind of retirement lifestyle you want and set savings goals that will allow you to get there.
But where to start?
A useful place to begin is determining your retirement priorities. Do you want to travel widely? Buy a vacation property? Give financially to your children or grandchildren? Answering these questions will help shape your retirement plan. Try this Retirement Readiness Checklist as a starting point.
Once you have determined your retirement goals, it is vital to take stock of your financial situation by estimating what your retirement income and expenses will be. If you’re not a budgeter, you will have to develop budgeting skills in order to effectively calculate these figures.
Retirement income might include: pension payments from your employer, your Registered Retirement Savings Plan (RRSP), Old Age Security (OAS), Canada Pension Plan (CPP), along with any additional assets and savings you have or will accumulate over time.
Travel costs, household expenses, entertainment budgets, and taxes are all common retirement expenses. Many people also set aside an emergency fund to use if their retirement situation changes unexpectedly.
In an ideal world you won’t enter retirement with a mortgage or other large debts, but it is important to include any projected debt in your estimates.
These numbers will vary greatly for different people based upon personal saving habits, employment history, and how you envision your retirement. They also may change over time. That said, estimating these figures to the best of your ability will help determine if you’re saving enough to retire at 65 while maintaining your desired lifestyle.
If you’re having trouble answering these questions, don’t worry, you’re not alone. There are some key markers that you can use to help project how much you need to save as you develop your retirement plan.
One useful way to think about your retirement savings is as a multiple of your income. Assuming you live a reasonable lifestyle based upon your means, you should aim to retire with eight times your pre-retirement income saved.
An effective way to reach this goal is to set five-year savings milestones. This approach helps make retirement saving seem more manageable. For example, if you can save four times your income by age 45 and to try to save an additional year’s worth of income every five years, you will reach your ultimate savings goal at 65.
Whatever type of retirement you envision, figuring out when you’ll be able to retire can be complicated and stressful. The key to knowing if you’re on track to retire at 65 is to make a personalized retirement plan based upon your goals and financial situation. The sooner you can determine what you want retirement to look like and actively start working towards your financial goals, the more likely you are to retire comfortably at 65.