# the Ideal Retirement situation



## Eoink15 (Feb 25, 2015)

hi Im Eoin,Self employed contractor. 25 years old. 
Have about 10k in tfsa and rrsp. Random Stocks few canadian, 2 american!
Make over 100k per year. buying a house in the GTA soon in the next 3 months. Have 15% downpayment saved.
Im very frugal, could save 50% a year if i had to!

Anyway to the point, Im 25 want to retire at 60 or around then.
How much do i need to save a month/year for a Good pension/retirement.
and also in your individual experiences what are the best methods/investments?

Thanks for the help guys!

Eoin


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## james4beach (Nov 15, 2012)

The most important things you can do to achieve your goals are to
1) earn as much income as possible, perhaps in a 2 income household
2) spend as little as possible
3) keep your spending habits low, be frugal, live within your means

1 and 2 go much farther in building your wealth than any kind of investment activity you will do. 3 is the key to making your money last a long time.

For example, 100K is a good income but doesn't mean anything on its own. How much of that are you able to save towards retirement? I have coworkers who earn 150K and still live paycheque to paycheque. They will not be able to retire any time soon.


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## kcowan (Jul 1, 2010)

35 years a lot can happen. Right now make sure that the house you buy in competitive with rental alternatives, including serving your needs for at least 10 years. Build a reserve fund to sustain yourself for 12 months before committing.


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## 0xCC (Jan 5, 2012)

Try to get your down payment up to 20% if you can in order to save the CMHC insurance fees (even if you have to use the Home Buyer's Plan to borrow from your RRSP to get that extra 5%).

Make contributions to both RRSPs and TFSA, probably TFSA first but at your income level the RRSP might make more sense.

If you do contribute to your RRSP make sure that you contribute the entire before tax amount you can afford to, not just the after-tax amount (and then spend the difference). For example, if you can afford to contribute $1000 to your RRSP in after tax income at your income level in Ontario that would really be around $1750 before taxes assuming a 43.1% tax bracket ($1000/(1-0.431) = $1757 and checking the math, $1757 *43.1% = $757 and 1757-757 = $1000).

As for how much to save, you should try to aim for at least 10% of gross income per year which in your case would be $10k. You don't need to start out at that level but you should try to get there. It sounds like you might easily be able to do that and you you can saving more will just give you more options.

There are a lot of methods/investments to use for retirement savings. It sounds like in your case you might want something that will be low maintenance and straightforward since I would expect you want to spend more time and effort on building your business instead of managing your investments. In that case you should consider a couch potato strategy.


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## Eoink15 (Feb 25, 2015)

Yea a couch potato system would work. I just have no clue how to structure it or what to put in it. 
To me I feel it makes more sense to just save with my tfsa and maybe a small bit of rrsp. 
Any input?
Thanks for the help guys!


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## 0xCC (Jan 5, 2012)

Do you have any reasoning behind why you think investing mostly in your TFSA with only a little bit in your RRSP? If you have been a Canadian resident since 2009 it seems like you should have a reasonable amount of TFSA room so it could make sense to invest mostly in a TFSA. I'm just curious if you have thought it through more than just having a general feeling.

If you are actually able to save up to 50% of your income as you mention above you are going to run out of TFSA contribution room (your take-home is probably around $65k-$70/year, 50% savings rate is $32k-$35k/year, you would use up your current TFSA contribution room in a little over a year at that rate. Each year after that you would only be able to put $5.5k into a TFSA which would be 15%-20% of your savings capacity).

For the couch potato stuff you can start taking a look here: http://canadiancouchpotato.com/ with some model portfolios using different accounts depending on the size of your portfolio here: http://canadiancouchpotato.com/model-portfolios-2/. Looking at the ETF options there are a series of five asset allocations ranging from conservative to aggressive with suggested ETF percentages here:
http://canadiancouchpotato.com/wp-content/uploads/2016/01/CCP-Model-Portfolios-Vanguard-2015.pdf that also have breakdowns of returns to the end of 2015 for each asset allocation. The same breakdown is available there for the other two options if your account size is smaller. All the hard work is done there, all you have to do is figure out what your risk tolerance is and pick the asset allocation that you are comfortable with for the account type that makes sense for you.


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## peterk (May 16, 2010)

Hi Eoin. I bet you'll be able to retire a lot before 60 if you keep this up. Don't worry about so far into the future though, I'd say. If you focus on doing well each year of your life, progressing in you career and saving as much money as you can by spending wisely and living moderately, you will prevail financially probably far younger than you expected.

Starting to put that savings into a TFSA and RRSP, and buying a couch potato portfolio, sounds like an excellent idea. Set it and forget it, then focus on making big money in your line of work.

How come you are so interested in buying a house right now? From what I hear renting is currently much cheaper than buying in the GTA. Making the right decision about your housing and living situation over the next several years is a much much more important decision than how to invest your 10k TFSA, in my opinion.


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## Eoink15 (Feb 25, 2015)

Yea I agree about the couch patoto Gona research it now! 
As far as buying a house goes, I am a skilled contractor so I can renovate and hopefully flip a house in the gta at a low cost.
Hopefully do a few of them along the way to gain finical independence!


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## Spudd (Oct 11, 2011)

I just want to add, that hopefully your downpayment is being held in a savings account and not in the stock market. If not, fix that ASAP.


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