Comments on: Fidelity’s ‘Scary’ Retirement Findings http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jim http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-211241 Jim Thu, 18 Feb 2010 08:28:27 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-211241 I have been retired for almost 3 years and have come to the conclusion most financial planners are full of beans. Yes, income has plummeted .. as has my portfolio but surprisingly, so have my expenses. I am living a healthy stress free life traveling, working on my house, riding my motorcycle and helping out the less fortunate. I start collecting my CPP this fall and plan to use it to cover off moorage on my sailboat. The secret is to live within your means, learn to cook, pay off your mortgage, fix your own stuff and encourage your children to work and pay their own way through university. From my observations, once your health starts to fail, its a long hard slide to the finish line ... there is a big difference between life and living. I have been retired for almost 3 years and have come to the conclusion most financial planners are full of beans. Yes, income has plummeted .. as has my portfolio but surprisingly, so have my expenses. I am living a healthy stress free life traveling, working on my house, riding my motorcycle and helping out the less fortunate. I start collecting my CPP this fall and plan to use it to cover off moorage on my sailboat. The secret is to live within your means, learn to cook, pay off your mortgage, fix your own stuff and encourage your children to work and pay their own way through university. From my observations, once your health starts to fail, its a long hard slide to the finish line … there is a big difference between life and living.

]]> By: WhereDoesAllMyMoneyGo.com http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73756 WhereDoesAllMyMoneyGo.com Fri, 26 Oct 2007 03:23:48 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73756 CC: Part of financial planning (if either through a professional or by yourself) is ongoing monitoring and review hence I believe my assertions are valid as much for a person more than 10 years from retirement as well. Because: if things change (or should I say when) they will normally change gradually and you can revise your calculations as necessary based on the changes. I agree a lot of things can change in 20 years, but those changes will happen slowly as opposed to during 1 of those 20 years. Better to have an idea now, and modify it bit by bit as necessary as opposed to eye-balling it and seeing how close your 20 year guess was when it was too late. Big changes too soon would be political suicide and/or never receive royal ascension overnight. Having said that, inflation, incomes and expenditures will all fluctuate (and not proportionately so) over time. So having a financial plan at 55 or 25 is not about being spot on so much as it is having a ballpark estimation if you are heading in the right direction. "life" makes it impossible to nail down the future. CC: Part of financial planning (if either through a professional or by yourself) is ongoing monitoring and review hence I believe my assertions are valid as much for a person more than 10 years from retirement as well.

Because: if things change (or should I say when) they will normally change gradually and you can revise your calculations as necessary based on the changes.

I agree a lot of things can change in 20 years, but those changes will happen slowly as opposed to during 1 of those 20 years. Better to have an idea now, and modify it bit by bit as necessary as opposed to eye-balling it and seeing how close your 20 year guess was when it was too late.

Big changes too soon would be political suicide and/or never receive royal ascension overnight.

Having said that, inflation, incomes and expenditures will all fluctuate (and not proportionately so) over time. So having a financial plan at 55 or 25 is not about being spot on so much as it is having a ballpark estimation if you are heading in the right direction. “life” makes it impossible to nail down the future.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73641 Canadian Capitalist Thu, 25 Oct 2007 18:26:22 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73641 Thanks for the link Billy. Like you say, it is far more flexible. I had tried that calculator before, I'll add it to the links page. Thanks for the link Billy. Like you say, it is far more flexible. I had tried that calculator before, I’ll add it to the links page.

]]> By: Billy http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73603 Billy Thu, 25 Oct 2007 15:19:11 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73603 I like playing with the retirement income calculator on the federal governments website: https://srv111.services.gc.ca/(mnag1n551unrra555zqfyx55)/index.aspx It gives more control than the fidelty calculator and much different numbers... I like playing with the retirement income calculator on the federal governments website:
https://srv111.services.gc.ca/(mnag1n551unrra555zqfyx55)/index.aspx

It gives more control than the fidelty calculator and much different numbers…

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73577 Canadian Capitalist Thu, 25 Oct 2007 14:05:03 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73577 Traciatim: You are so young that your estimate of retirement income will probably be wide off the mark (a lot can change in 30+ years). I'm 33 and I guessed $5K per month because I am pretty sure we can live on that amount today (assuming we don't have mortgage, daycare expenses etc.). I think we are in the same boat that we should simply keep investing regularly and figure out retirement details (how much income, how much savings etc.) much later. Dave: Yes, we should avoid high MERs but also keep our emotions in check as well. Arguably, emotions (chasing returns, panic selling) costs us more than expenses. Preet: What you are saying is fine for someone within 5-10 years of retirement. For everyone else, your guess is probably as good as mine because a lot can change in 20 years. Example: CPP age could be raised, early CPP benefits may be clawed back more etc. Nick: Don't focus too much on the "recommended 80%" level. That conclusion is based on faulty assumptions as pointed out in an earlier post. Also, actuary Malcolm Hamilton figures 50% replacement level is adequate for most Canadians. And yes, the amount you save makes all the difference to how much you'll have in retirement. Traciatim: You are so young that your estimate of retirement income will probably be wide off the mark (a lot can change in 30+ years). I’m 33 and I guessed $5K per month because I am pretty sure we can live on that amount today (assuming we don’t have mortgage, daycare expenses etc.). I think we are in the same boat that we should simply keep investing regularly and figure out retirement details (how much income, how much savings etc.) much later.

Dave: Yes, we should avoid high MERs but also keep our emotions in check as well. Arguably, emotions (chasing returns, panic selling) costs us more than expenses.

Preet: What you are saying is fine for someone within 5-10 years of retirement. For everyone else, your guess is probably as good as mine because a lot can change in 20 years. Example: CPP age could be raised, early CPP benefits may be clawed back more etc.

Nick: Don’t focus too much on the “recommended 80%” level. That conclusion is based on faulty assumptions as pointed out in an earlier post. Also, actuary Malcolm Hamilton figures 50% replacement level is adequate for most Canadians. And yes, the amount you save makes all the difference to how much you’ll have in retirement.

]]> By: Traciatim http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73566 Traciatim Thu, 25 Oct 2007 13:42:57 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73566 If you are already saving 30% of your pre-retirement income to prepare (Say, your 18% in to an RRSP and then 12% in to income producing investments? Then does this mean you should be planning on replacing 80% of your 70% that you are currently using. In my case 12% of my income goes in to an RRSP, and that's about it (I'm 27, so I have a while, and other circumstances prevent more). So should I be planning on replacing 80% of 88% of my existing? Maybe I just shouldn't care and I'll just invest what I can and I'll be better off than most of the population anyway. If you are already saving 30% of your pre-retirement income to prepare (Say, your 18% in to an RRSP and then 12% in to income producing investments? Then does this mean you should be planning on replacing 80% of your 70% that you are currently using.

In my case 12% of my income goes in to an RRSP, and that’s about it (I’m 27, so I have a while, and other circumstances prevent more). So should I be planning on replacing 80% of 88% of my existing?

Maybe I just shouldn’t care and I’ll just invest what I can and I’ll be better off than most of the population anyway.

]]> By: Phil S http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73546 Phil S Thu, 25 Oct 2007 11:58:30 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73546 80% of your pre-retirement income is unrealistic as our tax regime discourages saving. RSP accounts are capped at $20K per year - I think the cap moves up to $21K next year. So beyond that, any savings in your taxable accounts adds to your annual income and often pushes you into a higher tax bracket. The only one who wins in the latter case is the government tax collector. 80% of your pre-retirement income is unrealistic as our tax regime discourages saving. RSP accounts are capped at $20K per year – I think the cap moves up to $21K next year. So beyond that, any savings in your taxable accounts adds to your annual income and often pushes you into a higher tax bracket. The only one who wins in the latter case is the government tax collector.

]]> By: Dave http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73497 Dave Thu, 25 Oct 2007 04:35:11 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73497 Nick, it's unfortunate they didn't have a "cost" slider so you could vary the cost as is also a dominant factor. <a href="http://www.investingintelligently.com/2007/10/24/fidelity-says-you-need-80-pre-retirement-income-in-retirement-just-dont-use-them-to-get-you-there/" rel="nofollow">MERs could actually be one of the main reasons that retirees only have 50% of their pre-retirement incomes</a> (shameless plug). Nick, it’s unfortunate they didn’t have a “cost” slider so you could vary the cost as is also a dominant factor. MERs could actually be one of the main reasons that retirees only have 50% of their pre-retirement incomes (shameless plug).

]]> By: Fidelity Says You Need 80% Pre-Retirement Income in Retirement (just don’t use them to get you there) at Investing Intelligently http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73496 Fidelity Says You Need 80% Pre-Retirement Income in Retirement (just don’t use them to get you there) at Investing Intelligently Thu, 25 Oct 2007 04:32:50 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73496 [...] to Fidelity, we need 80% of our current income to retire (see Canadian Capitalist’s “Fidelity’s ‘Scary’ Retirement Findings“, where I found this story). Canadians on average have 50% of their pre-retirement income in [...] [...] to Fidelity, we need 80% of our current income to retire (see Canadian Capitalist’s “Fidelity’s ‘Scary’ Retirement Findings“, where I found this story). Canadians on average have 50% of their pre-retirement income in [...]

]]> By: WhereDoesAllMyMoneyGo.com http://www.canadiancapitalist.com/fidelitys-scary-retirement-findings/#comment-73493 WhereDoesAllMyMoneyGo.com Thu, 25 Oct 2007 03:25:35 +0000 http://www.canadiancapitalist.com/2007/10/24/fidelitys-scary-retirement-findings#comment-73493 People are living longer. The ratio of working life:retirement life is getting lower and lower. Many pension plans started many many years ago with the assumption people would live about 5 years after they retired. Now it's 30. That is one reason pension plans have been switching from defined benefit to defined contribution - downloading of liability to the end user. If you want to know how much you need - don't rely on a ratio. Get a financial planner if you really want to be sure - they should be able to calculate your retirement income, OAS and CPP and pension income, RRSP and non-reg income, etc. Along with how it's taxed, etc. Then to figure out your expenses you first need to identify what expenses you will still have in retirement - for a seamless transition, basically just subtract your debt payments and savings as you should be debt/mortgage free and you won't need to save for retirement once you retire. I have seen many people with $100K gross incomes retire with $35,000 per year after tax to spend in retirement - that's plenty for the average Canadian (you still have to figure out what is right for you though). A planner will be able to tell you how to structure your withdrawals to minimize taxes - and adjust all numbers for inflation as well. Ideally you want the very last cheque you write to bounce. ;) People are living longer. The ratio of working life:retirement life is getting lower and lower. Many pension plans started many many years ago with the assumption people would live about 5 years after they retired. Now it’s 30.

That is one reason pension plans have been switching from defined benefit to defined contribution – downloading of liability to the end user.

If you want to know how much you need – don’t rely on a ratio. Get a financial planner if you really want to be sure – they should be able to calculate your retirement income, OAS and CPP and pension income, RRSP and non-reg income, etc. Along with how it’s taxed, etc.

Then to figure out your expenses you first need to identify what expenses you will still have in retirement – for a seamless transition, basically just subtract your debt payments and savings as you should be debt/mortgage free and you won’t need to save for retirement once you retire.

I have seen many people with $100K gross incomes retire with $35,000 per year after tax to spend in retirement – that’s plenty for the average Canadian (you still have to figure out what is right for you though).

A planner will be able to tell you how to structure your withdrawals to minimize taxes – and adjust all numbers for inflation as well.

Ideally you want the very last cheque you write to bounce. ;)

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