Can You Afford to Retire?


Retirement is a very personal choice that is influenced by several factors, such as your family situation, your health, how much you love working and how much cash you’ve saved. Retirement is also an element we consider when advising our real estate investors (and developers too!), so it’s important to spend time on the topic.

So, how much money do you need to retire in Canada? Here are some questions that can help determine how much you might need:

  • Will you continue working? You could choose to stop working completely in retirement, or continue engaging in part-time work that adds to your savings

  • Will you downsize? In case you are thinking of relocating to a smaller apartment or house, your utility bills and home maintenance costs are likely to be lower

  • Do you have debt? If you have mortgages, bank loans and credit card debt, you will need to have more money saved for retirement

  • Where will you reside? If you choose to reside in a major city or town, you will have to save more. On the other hand, living in a small town will mean lower daily expenses

  • How active will you be? If you are thinking of traveling and engaging in other activities frequently during retirement, you must have more money saved

  • What unanticipated costs should you prepare for? If you are not covered by a medical plan, you will have to save more

  • What pensions do you expect to receive? The Canada Pension Plan (CPP) currently gives an average of $702.77 monthly to retirees aged 65 or above. You might also qualify for the Old Age Security (OAS) pension if you are a Canadian citizen or legal resident

Though the amount of money needed for retirement varies from one individual to another, a general guideline is to save around 70% of your current annual income. For example, if you earn $100,000 a year, you might need $70,000 a year in retirement. Take this amount and multiply it by 25 (assuming you will live 25 years after retirement). In our case, this will result in a total of $1.75 million. This number shocks many of the folks we work with; if you are also shocked, real estate investing might be a great option for supplementing your income and your retirement fund.

To get a more accurate number that takes into account additional factors like investment savings and federal assistance, use the government of Canada’s Retirement Income Calculator.


Conclusion

Whether retirement is close or decades away, you need to start thinking about strategies for maximizing your savings. One great way of generating passive income for retirement is by investing in real estate. Regalways Homes will help you create a solid investment plan based on your goals for retirement. Get in touch with us today.






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