Five WAYS TO KNOW IF YOU CAN AFFORD TO RETIRE

About a third of Canadians expect to delay their retirement and continue working during retirement because they don’t have enough savings, a BMO Retirement Institute report says. If you’re fantasizing about fleeing to a life of leisure but you’re nervous about your longterm financial stability, here’s how to find out if you’re ready to retire.

1 Figure out how the government is going to support you. Visit the Government of Canada’s website to find out how much you will receive from the Canada Pension Plan and Old Age Security if you retire at a certain date. “The full measure of that for two people comes to about $30,000 a year per couple if you’ve resided in and worked in Canada for 40 years,” says Lise Andreana, a certified financial planner based in Niagara-on-the-Lake.

2 Determine what will be available from your employer. Your employer may have a pension plan or a group RRSP. Ask your employer for a projection of how much you would receive if you retired.

3 Ask yourself what you need. “There’s a rule of thumb of 70% of your current income in retirement to maintain a lifestyle that’s comparable to the one you have now,” Ms. Andreana says. However, she adds, it depends on the person. Some people need more or less than that. Write down your retirement expenses, she says, and if needed, seek help. “Okay, I’m making $100,000, I think we can retire on $ 70,000. I’m going to get $ 30,000 for the couple. I’m going to get another $20,000 from employer pension plans. I now have a $ 20,000 shortfall,” she says. “As a very broad rule of thumb in today’s investments, I’m going to be making 4% to 5% on my investment portfolio. I need $400,000 in registered or non- registered assets.”

4 Look at your debts. More people today are retiring with debt. “If that debt is even 50% of one year’s income, I’d work an extra year to get it way down. You don’t want to be entering into retirement with a mortgage on your home,” she says.

5 Think about how long you’ll live. “You’ve likely got a 30-year timeline,” says Ms. Andreana. “You need a withdrawal rate that matches that.”