Mirador Real Advice Blog
How Much Money Do I Need to Retire in Canada?
April 16, 2024
“How Much Money Do I Need to Retire in Canada?”
“What is a Good Retirement Income in Canada?”
These are both such incredibly personal questions.
In the Mirador meeting room, there is a plaque on the wall that reads:
“Wealth is the ability to Fully Enjoy Life.”
If your name is Jeff Bezos or Bill Gates, evidently you need billions to fully enjoy life.
I live in the hills southwest of the town of Longview. I have many friends and neighbors here that fully enjoy their life more than anyone I know. They are wealthy in land and cattle, but they don’t have a yacht in Malibu or a cottage on the coast of France.
In the 1990s I read a popular book called “The Millionaire Next Door.” I learned a lot from this book, but one thing really stood out – wealthy people rarely fit the Hollywood stereotype of the “Rich and Famous”. In fact, I learned that at the time, the most popular vehicle among U.S. millionaires was the Ford F150 pick-up truck. Not the Cadillac Seville, Land Rover, Jaguar, or Ferrari.
Teaching investing for income seminars I have met thousands of people from all walks of life. I have met extraordinarily wealthy people that were not happy at all – they find little enjoyment in their life. And I have met little old widows living in the east village of Calgary happier than a pig in poop – fully enjoying life.
The answer to the questions starts with the question, how do YOU want to live, in order to fully enjoy your life? Not everyone wants to travel. Not everyone likes fast cars and dinners at 5-star restaurants. Some don’t like sitting on the resort beach drinking Mimosas. Some don’t see the point of a big mansion. Its okay if you want to do all this and more, and you are okay if you don’t want to. Its your life to live how you choose. Only you know what really makes you happy. How you fully enjoy your life is your business and you should not be swayed by popular culture.
The next step is to “Think with the end in Mind”. Start from the solution and work back for the answer. Take a piece of paper (and maybe a glass of wine) (and maybe your significant other) and write out what it would look like to fully enjoy your life. Then, start adding up the bills for this. Everything – assets, lifestyle budget, basic living, and asset maintenance expenses. Add some time frames to this. Make some conservative assumptions about longevity (aim longer), rates of return (aim lower), and inflation (aim higher). Then reverse engineer how much before tax money you will need to achieve what’s on that piece of paper.
Now, another possibility is that you bring that paper to Joyce and I at Mirador. We will ask you some clarifying questions and collect additional data. Maybe you complete our Investor Personality Survey. We will give plenty of thought to your situation and goals and enter the numbers into our highly advanced software. Then we will meet with you and report to you how much dollar wealth you need to fully enjoy your life.
Okay, I know, we still have not answered the questions. Is it a million bucks or maybe two million? Well, here is another aspect to consider. The answer also depends on whether your wealth advisor has done the best job possible structuring the various accounts that comprise your total retirement portfolio.
For example, if your retirement portfolio is completely in a RRIF, your RRIF withdrawals will be 100% taxable, so the after-tax income will be less than other account alternatives available. So, if you are depending on RRSPs and RRIFs for all your retirement portfolio income, you will need a larger retirement nest egg.
But, if you have significant TFSA’s or corporate accounts with high shareholder loan balances (so you can pull out money without tax implications) then your total retirement nest egg amount might be smaller in order to get the same after-tax retirement cash flow if you only draw from a RRIF.
So once again, there is no straight and simple answer to the questions. But one thing is for sure, you need to plan. Failing to plan is a plan to fail. You also need to plan for the worst and hope for the best. Plan so you can withstand a major life disaster or setback and still meet your goals to fully enjoy life. Your solutions might be in the thousands, millions, or billions of dollars.
Yes, you might need to make changes to your current ideals and life. And maybe some compromises. But first there needs to be thought and analysis. At Mirador our clients range from teenagers just starting with thousands to highly successful businesspeople worth tens of millions. Our needs-based holistic approach is of service to all of them and we respect everyone’s dream and plans and do our vey best to make sure they come true.
If you would like to learn more about our needs-based approach to wealth advice and planning, please reply to this email or call me at 403-608-4664.
Stan Clarke,
Investing for Income Believer