Retirement planning is personal

When it comes to retirement planning, too many people are seeking answers by looking at others when they should be really be looking at retirement from a personal perspective. Sometimes we care too much about what other people think when the only thing that matters is what we think and want for our own retirement. If you truly want retirement to be the best years of your life, what’s it going to take? If this question is answered properly, I suspect 100 people will have different answers.

Here are some common questions I get about retirement and retirement planning are:

How much does the average person or couple spend in retirement?

Who cares? It does not matter how much someone else spends. Let’s say the average person spends $3000 per month in retirement, does that mean you should too? Spending is so personal and the best retirement plan is the one that accounts for your personal spending.

The biggest challenge is that many people have no clue about their spending so they use rules of thumb to help them plan for retirement. An example of this is the income replacement rule. Back in 1996, a group of US actuaries did a study that suggested retirees would need 70% of their pre-retirement income. This study was widely adopted as the primary rule of thumb to planning for the amount of income needed in retirement. The main idea behind this study was that the average person would need less income in retirement because of a reduction of a number of expenses like no more mortgage payments or kids would become financially independent and there would no longer be a requirement to save for retirement.

Related reading: How Much will you spend in retirement?

I guess the problem is few people are average. And do you really want to be average? Those that are serious about making retirement the best years of your life need to take retirement to a different level away from averages to make it personal.

How much do you really need to save for retirement?

This is the billion-dollar question. Again, the answer usually lies in some common rules of thumb.

The 10% rule suggests that as a minimum, we should all be saving at least 10% of our gross income. It’s common sense to understand that savings are so personal. Is it possible that someone will save 10% of their gross income every year and not have enough at retirement? What if someone started saving 10% in their 20’s while someone else was starting to save in their 40’s? Do you think their savings rates need to be different?

Rules of thumbs can be helpful because they are simple but it’s also important that people understand the amount you need to save depends on so many factors like rate of return, time horizon, your retirement price tag, your desired lifestyle, etc.

Related reading: Saving for retirement is simple, not easy

How much does the average person get from CPP and OAS?

The maximum CPP amount is $986.67 and the maximum OAS payment is $540.12 for a total possible income of $1526.79 per month from government benefits. Unfortunately, the averages are much lower. According to Service Canada, the average CPP payment is $512.64 and the average OAS payment is 508.35.

So what should you use for planning purposes? The maximum, the average or some people assume they will get nothing because the benefit may not be there in the future?

The best figure to use is your personal estimate. For CPP, all you need to do is call Service Canada and ask for your CPP Statement of Contributions. This statement tells you how much you have contributed to CPP over the years and how much you are eligible to receive at normal retirement (age 65). Average just is not important or relevant here!

Related article: How much will you get from the Canada Pension Plan?

How am I doing compared to the average Canadian?

People find comfort in knowing they are doing better than others. That may be why I get this question a lot. How many RRSPs do most people have? Do most people carry credit card debt? Is it OK that I still have a mortgage at 56? Do most people still have a mortgage at 56?

Money and wealth are personal. Everyone has their own definition of what it means to be financially secure and independent. For some, it’s when the mortgage is paid off and they are completely debt-free. For others, it’s about making sure you have enough money every month to live on without going into debt.

The other problem with defining wealth and financial independence is the target is dynamic, not static. Think about it, no matter how much you have, don’t you always want more?

My five cents

At the end of the day, it matters less what others have and what others don’t have. The key is to be happy with you and make sure you are measuring your own financial success by comparing your past net worth to your current net worth. Comparing your cash flow in the past to your current cash flow. Are you improving? Are you feeling like you are better off financially today than you did before?

What do you think? Do averages matter? Why are people so interested in the average or what is happening to the finances of others?


  1. Charles

    Have your (no matter how humble)House/Condo.Paid Off.The rest is Groceries ETC….Paying rent is a No brainer…Take care of your HEALTH .NO SMOKING..Eat Right Work out.Learn to live and enjoy the simple things in life..Walk in the Woods smell the roses Etc…

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