Comments on: Fidelity’s Retirement Math

By: Fidelity’s ‘Scary’ Retirement Findings

Fidelity’s ‘Scary’ Retirement Findings — Thu, 25 Oct 2007 00:00:51 +0000

[...] of their pre-retirement income once they retire”. Fidelity continues to insist that this is well short of the “recommended 80% level” despite the shaky assumptions in their original research and another extensive study by Malcolm [...]

By: Are Canadians Saving Enough For Retirement?

Are Canadians Saving Enough For Retirement? — Fri, 15 Jun 2007 19:03:31 +0000

[...] many times in the past how much of a nest egg is needed in retirement and vigorously disagreed when the financial industry suggested it to be a million dollars or more, even the lowest estimates run to at least a few hundred thousand dollars plus a fully paid-off [...]

By: ML

ML — Sat, 26 May 2007 00:18:58 +0000

I have been retired , early, for four years now and I would say it is definately lifestyle changes. My experience has been closer to what Hamilton and Trahair envision than what the ads of the financial services try to get us to believe.
Why I read all kinds of blogs and websites on financial matters and retirement is –because I have more time to do what I want–and the management of assets does not stop when one retires. I still have a RRSP portfolio that I will not convert to a RRIF/annuity for several years.
Just having time to research and think without deadlines and the pressure of employment changes ones spending. What I am getting at is that I have much more time to look for the best deal for the stuff I normally buy. I did not always have time to do this when employed. Lastly, my stress level has gone way down since I retired and one of the big benefits was that I was able to quit smoking. It really is easier to do so when you are in a low stress enviroment. This lifestyle change alone resulted in a drop in spending of after tax dollars.
Finally, as you get older you tend not to be interested in accumulating things and spend less doing so. Of course, some people are exceptions to this rule.

By: Canadian Capitalist

Canadian Capitalist — Wed, 23 May 2007 23:59:16 +0000

George: Good point and that’s exactly what StatsCan’s data suggests as I discuss in the next post.

ML: I am aware of the debate over retirement spending and I’ve mentioned the other side of the debate many times, specifically David Trahair’s “Smoke and Mirrors”. Many studies have demonstrated that retirement expenses are lower, but it is unclear if it is due to lower income or lifestyle changes. Hence, the debate rages…

By: Phil S

Phil S — Wed, 23 May 2007 22:26:46 +0000

For me personally, I maximize my RSP every year just because I want that tax relief right now! Then I invest that RSP money (in a self-directed account) to the best of my ability.

But beyond that, I sort of “let the chips fall where they may”, as I have not defined any sort of a “target” where that portfolio needs to be when I retire. I just make sure that I maintain a fairly balanced portfolio of selected stocks and bonds and a couple of mutual funds for some diversity.

By: ML

ML — Wed, 23 May 2007 21:57:20 +0000

People should also read Malcom Hamilton, chief actuary
with Mercer Human Resources Consulting Canada, member of the CPP investment board and a much published actuary.
Mr Hamilton spears the the retirement income estimates of financial companies he claims are self-serving. He says we generally need much less income than the companies tell us.
If you are going to read the arguments of the retirement investment industryyou should also read his analyssis for balance.
He has had artcles on the subject of retirement income published in magazines like Monerysense. You can probably find some of his articles on this and other financial matters by googling him.

By: George

George — Wed, 23 May 2007 21:48:04 +0000

So Fidelity was kind enough to e-mail me the report that CC mentions. The only thing that struck me is that they based their recommendation on the assumption that “post-retirement consumption” (income minus taxes) would be the same as “pre-retirement consumption” (income minus taxes, CPP/EI contributions, and savings).

I don’t think this is a fair assumption, unless you narrow the timeframe for “pre-retirement consumption” to the 5 years immediately preceding retirement. If you’re in your 50s or 60s, you probably have your car and house paid for (or nearly so) and you probably don’t have many other debts.

Right before retirement, your “consumption” level is likely less than it would be when you are in your 20s, 30s, and 40s, when you’re paying for child care, the mortgage, car payments, and so on. Ideally a large portion of your income at that stage in life is going toward retirement savings.

Accordingly, I think it’s difficult to look at generic “income replacement” percentages and apply them to an individual scenario. It’s best to figure out exactly what your expenses are right now, subtract the expenses that will be eliminated in retirement, and add in any planned retirement expenses (i.e. travel). Only by doing this exercise can somebody figure out what their “true” income replacement goal should be.

By: Phil S

Phil S — Wed, 23 May 2007 20:54:22 +0000

To Riscario Insider: Cottage living is really difficult for access to medical services. But there’s nothing that says you can’t move to a town or small city in cottage country. I don’t go up to cottage country personally enough to know for sure, but I’m guessing that places like North Bay, Orillia, maybe even Kincardine would have a hospital.

By: George

George — Wed, 23 May 2007 19:17:44 +0000

CC: I’ve e-mailed the Fidelity contact that was listed on their press release, and asked that they e-mail me the full report.

As far as the StatsCan study is concerned, have you looked for it online? StatsCan puts tons of their material on their web site – http://www.statscan.ca.

By: Riscario Insider

Riscario Insider — Wed, 23 May 2007 18:53:31 +0000

It’s odd that the article isn’t available electronically.

The idea of retiring somewhere exotic and cheaper is intriguing, but how likely is it that we’d really move from the place that’s been home for years?

As Phil S points out, health care is a big concern. We have a retired neighbour who moved back from cottage country to Toronto after a heart attack. The reason? Medical treatment.

We don’t expect to get sick, but it’s reassuring to know that medical care is nearby.