The Magic Million
Lots of people decide that they need a randomly determined dollar figure to enjoy their retirement years comfortably. Many set that goal at $1 million. Why? No reason. But assigning a random dollar figure is not only unhelpful, but it can be daunting too. Your retirement goals should be tailored to you specifically. Here is a quick and simple calculator you can use to see what you will need for retirement based off your lifestyle.
Consider your lifetime achievements
If you retire and are in relatively good health, are mortgage-free and no longer have vehicle payments, chances are your cost of daily living will be much lower than it was in your 30s when you were making more money to pay all of these things off. On the other hand, if you don’t own a home and will have to make rent payments, pay for long-term care or factor transit into your costs, your financial needs will be higher than those who don’t have those expenses. The moral of the story is, the more you work to be debt-free during your working years, the less you will need to carry yourself through your retirement years.
Now, clearly if your plan for retirement involves travelling all over the world and driving luxury vehicles, you are going to require a more substantial nest egg. For the average retiree though, your expenses usually do go down as you enter retirement.
There are things you can do to retire well before the standard age of 65. As mentioned previously, eliminating your debt load is a key factor. Another way you can achieve this is by ensuring you have a passive or residual income after you retire. This can come from dividends, owning real estate that is generating an income, or strategically selling off assets that aren’t earmarked for inheritance. The most obvious way to retire earlier is to build up your retirement savings quickly so that it can sustain your sooner, and longer.
Retiring at 55 means that you may easily have to support yourself for another 30 years (if you live to age 85) without an active income. If you intend to do that entirely off a retirement savings account, then you may well need a large sum of money to make it work. Getting creative with income sources that do not require you to participate in a traditional job is a really great way to offset this, and reduce the need for massive savings.
Be in the Know
Perhaps the most important thing you can do is set the goal for WHEN you want to retire, rather than how much you must have to retire. If you know the when, then you can plan the how. The government of Canada has a handy page regarding retirement savings, costs, and things to consider.
Don’t get overwhelmed. There is a lot of really useful and insightful information available online these days. Some may be more relevant to you than other information, but there are many great ideas to consider if you are hoping to retire at 55 in Alberta and make the most out of your golden years.