How much is enough to retire on?

i 6f9cba4c27f32783a7686d761c17eb69 nestegg hands(1) How much is enough to retire on?One of the most common questions we hear from people is, “how much do I need to retire comfortably?”  And from those who are already retired, “do I have enough to support my spending for the rest of my life?”

It’s our job as wealth advisors to run the sophisticated and detailed analysis that provides the assurance — or occasionally, the cold water dousing that says savings and spending habits need to be changed.

But for those who may be approaching retirement and wondering ‘how much is enough’, here is a very – and I’ll stress very - rudimentary illustration of the amount of capital you’ll need.

You’ll see there are different scenarios based on spending levels at age of retirement, ranging from $100,000 to $200,000 per year, amounts that are typical for our clients.  Other assumptions are listed below.

Inflation @ 2%
Investment Return 5%
Investment income split between spouses
No RRSPs or pension (except CPP/OAS)
Investment capital consumed at age 90

Investment Capital: (in millions)

i 11b8ff7a5539e4fc8d0f61484564d4ff Table(1) How much is enough to retire on?

It’s interesting to note the impact of inflation. For every percentage increase in inflation, one has to amass an additional $400,000 of retirement capital.

Another, somewhat obvious, observation is that early retirement is costly. You can only spend about 3%-4% of your capital. Whereas, if you retire at age 65, you can spend about 6%-7%.

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