Thoughts on lifestyle through retirement years
I am about half way through my “66 weeks to find myself” adventure. In January I have to choose to “officially” retire or find a job. I have been exploring how I could maybe manage both scenarios at once. In my previous life, I used to give advice about budgeting, investments and living within your means and now I find myself in a place of decision.
How much monthly income do I need to be comfortable?
That’s a tricky question. I use the word “comfortable” on purpose. You can get by with minimum funds. I see seniors whose only source of money is Canada Pension and Old Age Security. They get by and if they are resourceful they can manage with some support.
I have a philosophy on this topic I want to share with you. Have you ever tried one of those “How much do I need to retire” calculators? The outcomes are usually very depressing and, in most cases, out of reach for people. It usually tells you that you will need to invest thousands of dollars a month to keep up your current lifestyle into retirement. What it doesn’t tell you is to think about how you see yourself aging. I am active at age 56. I do some lite hiking, I went on 2 (pre-COVID) trips a year most years. Our house is paid for, my kids are grown and moved on with no financial support from us, except for gifts. I spend money on plants, garden things, my spiritual practices (classes and tools). I have saved a bit, not as much as I probably should have but I have some funds put aside. I have a pension to look forward to which I am grateful for.
The literature I have read says you should plan for about 70% of your pre-retirement income to ensure you can still maintain your quality of life. Most articles don’t talk about how long you should look at sustaining the 70%. I think the key is that while you are in good health, young enough to want to explore and travel you should plan to have a larger amount of available funds. I am pretty sure that if I am lucky enough to live into my 80s or 90s that I won’t need the same amount of excess cash that I might in my 50s or 60s. The high pressure sales that exist saying that you need to support a lifestyle that you don’t have now doesn’t make sense to me. I found that when working with seniors and discussing their finances they did in retirement the same things they did in earlier years. If you saved most of your life you were unlikely to start spending all your money when you stopped working. If you spent thriftly you didn’t start going on shopping sprees in your 80s. We are creatures of habits and we tend to stay consistent no matter what age we are. I would rather maintain a healthy balance of starting to draw from my income resources in my late 50s. Use up my retirement funds to give me the best scenario of quality of life while I can. Then in my late 60s and through til my late 70s I can start to reduce my spending. I believe I won’t require as much to live on then as I do now. I know you think there are some holes in this plan. Also, I should mention that I am a two income family and my husband does plan to work until 65. If the place where he works is still around until then we will have health benefits that are not “out of pocket”.
So, the question remains: How much money is enough to sustain a comfortable existence in retirement?
If you have been lucky enough to have saved for retirement in your younger years and you have a pension to look forward to, I say retire as early as you can. Use the 70% of your income as a guideline but remember you probably will only use that amount for the first maybe 10 years of retirement then slowly reduce it as you get older. When that magic factor (80 in my case) is reached, push the button. I am going to take the maximum allowed annual withdrawals and then reduce them as I get older. Supplement my income with my registered funds and then take early CPP (Canada Pension Plan) at age 60, then activate OAC (Old Age Security) at 65. Even if my husband’s plant shuts down before he is 65 there are many insurance plans we can explore for health benefits.
My parents passed away in their 80s, my sister passed away at 62. Mortality puts things in perspective. I am not saying working is like dying because that’s not true. What I am saying is that by setting myself up with enough income to sustain my lifestyle I can choose when and how to work. Look for projects and work that brings me fulfillment. I know many seniors that are working into their late 70s even early 80s. The world has changed in this regard. As long as you are productive and have a sense of contribution to a community or company then why not enjoy it.
There are so many scenarios and options available when it comes to finding a mix that works best. I wish I would have started to explore it more in my 20s. I know that the options are greater now though when it comes to working virtual or online as opposed to when I was 20(there wasn’t an internet for the regular population when I was 20).
Next time you look at the retirement calculator and the result says you need to invest 10K a month to meet your goals, remember that it is not taking into account your resourcefulness. Plug in the worst case scenario for yourself then explore how you can supplement that amount through other means. It helps to calm the anxiety attached to not having enough.
Maybe the commercial is true? You are richer than you think. The more you think the richer you become as an active mind has the ability to create the best possible outcomes.
PS-These thoughts are my own on retirement and may not be your scenario. Find a financial advisor that can give you good advice based on your circumstances.