# When is the ideal time to start saving for retirement?



## tom_ford (Oct 29, 2009)

At what age should people start saving seriously for retirement? Or is it about age in the first place?

Because when you're in your 20's and 30's, your focus is on starting a family, getting stable finances, building a house, getting the more essential insurance policies, etc.


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## FrugalTrader (Oct 13, 2008)

It's all about how you want your retirement lifestyle to be which determines how much you'll need. The longer you wait, the more you'll have to save. From my experience, people get more serious about their retirement when they hit their 40's or so.

Yesterday was the best time to start saving, but today is the next best thing.


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## Cal (Jun 17, 2009)

I think saving for retirement is also a career of saving, face it, most of us will be retired for as long as our work careers were.

Easier to make it a lifestyle thing, slow and steady, than to have any stress about it later in life.


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## steve41 (Apr 18, 2009)

The issue that most commentators neglect is that salary is not merely a function of inflation. Career enhancement means that your particular salary increases at a (sometimes much) greater rate than inflation.

If you run a needs-based projection (meaning your lifestyle or 'beer&grocery' consumption remains constant over time), then you generally start your working lifetime at a small savings rate, increasing as your salary outpaces inflation and your mortgage gets paid off.

Most plans I have observed start with low savings rates and increase to a maximum just prior to retirement.


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## MoneyGal (Apr 24, 2009)

I like what Steve says -- and I'd emphasize that a high savings ratio in later years should not, IMO, be confused with the idea of funding a high retirement replacement rate. 

Lifecycle investment theory suggests that when you are young, you already have a bunch of saved (illiquid) capital, your _human capital_. 

But because this capital can only be monetized over time, slowly, the spending and savings approach that makes the most sense is to have relatively smooth consumption over your lifetime. 

IOW: You save little in the early years when you are getting established, and lots in the later years when the value of your human capital has declined. 

But this high savings rate in later years doesn't mean you "need" some 60% or 70% of your pre-retirement income in retirement -- instead, you should aim for a smooth consumption rate over your lifetime, which might be only 30% of your pre-retirement income.


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## Ben (Apr 3, 2009)

MoneyGal said:


> But this high savings rate in later years doesn't mean you "need" some 60% or 70% of your pre-retirement income in retirement -- instead, you should aim for a smooth consumption rate over your lifetime, which might be only 30% of your pre-retirement income.


I like the idea of a smooth lifetime consumption rate. If in 50 years I look back and have achieved this (more or less), and have enough funds remaining to leave the "legacy" I desire, I'd be pleased.

On the original question: _"At what age should people start saving seriously for retirement?"_

I think it depends on what we want to define as "saving for retirement". 

If we mean this in the "investing" sense, then I'd argue that one could have excellent success by eliminating _all_ debt before investing. Therefore, the age at which you become debt-free could also be the day you start "saving for retirement", or investing. 

If we define "saving for retirement" as being the same as "building net worth", then I'd argue that no time is too soon to start saving for retirement - yesterday would be good. In this definition, net worth growth through any type of debt reduction or asset accumulation can be considered "saving for retirement", as this net worth can, in general terms, be monetized into retirement income. 

Under the "building net worth" definition, how much to save should be qualified as well: on the one extreme you can live like a pauper for 20 years, accumulate a lot of wealth at a young age, and retire. On the other extreme, you can spend every cent you make, and work to the day you die heavily indebted. Neither of these options makes a lot of sense, and most of us strive to walk the middle ground, referring back to the smooth lifetime consumption concept. 

Personally, I prefer to front-end load my saving now while I am young and have the capacity, so that it frees up more options and reduces financial stress in mid-life.


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## specialk (Jul 14, 2009)

Now.


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## leslie (May 25, 2009)

I agree with Ben. In contrast to the academic premise that "young people spend a lot and have low income, therefore bulk savings only happens later in life"..... it was my personal experience that living cheaply was A LOT easier when I was young. 90% of my savings happened before I was 35. So excusing yourself until you are older doesn't wash with me.

But a lot depends on your choice to marry, have kids, start a business, etc. So none of us can comment on that.

I also side with the all savings that result in "increase in wealth" is "savings for retirement". When you are retired it does not matter what pot of value you use to live on. So the question does not really make sense.


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## MoneyGal (Apr 24, 2009)

Interesting discussion. I'm the one who raised lifecycle and human capital thinking, so I will continue from that perspective. 

The issue of "saving for retirement," as has already been pointed out in this thread, can involve building wealth, avoiding what economists would call "dis-saving," (= taking on debt), and, finally, actually putting money aside, whether in stocks, bonds or some other instrument. 

The issue of whether you can "save more" when young or old, for lifecycle economists, is broader than whether you are actually putting money aside. In general, from the lifecycle perspective, most people will have a greater capacity to "save money" when they are older, and they will have greater dis-savings (debt) when they are younger -- whether it is mortgage debt or student loan debt, to give the two biggest examples. 

I, too, saved most of my money in my 20s, before I had kids. But I also took on my biggest financial commitment then, a mortgage, which is a big amount of dis-savings for me.

I'm not disagreeing with you, Leslie; at least not intentionally -- it just seems to me that if you accurately value the balance sheet of an idealized young person, with debt and a large human capital balance, versus an idealized older person, with a somewhat depleted human capital balance, ideally much less debt, and ideally greater yearly cash flows from their human capital, then it is clear the older person has a greater capacity to save (if you define saving as putting money aside.)

(If you define saving as building up an asset you can monetize slowly over time, then perhaps the time of greatest savings is when you are in post-secondary education.) 

If you keep spending at a constant $50,000 per year, for example, the idealized young person will likely need to borrow to sustain that level of spending -- while the ideal older person would have the capacity to save a large fraction of their income. 

So, it isn't about "excusing people for starting late" -- at least for me -- it is about keeping your lifecycle spending smooth over time.


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## tom_ford (Oct 29, 2009)

Wow, I didn't expect to get all these 'intellectual' responses and analyses.

I believe that when you are a lot younger, everything that you earn from working goes to all the expenses for your family (monthly groceries, clothing, baby stuff, etc.), to your mortgage, to buying appliances and whatever makes living comfortable and convenient, to your insurance (medical, dental, life, auto, home, etc.), etc. MOst often, nothing is left. That is something I feel most people have a hard time dealing with. Sometimes I can't help but think that you need a really high salary or another income source for you to be able to live the kind of life you want when you're already retired. 

My idea of retirement is living for myself....traveling places I never got to visit when I was working my butt off, devoting my time to my passions -- like photography and painting -- instead of staring at the computer all day long, reading books, etc.. How do I make sure I get to do all these and not worry about whether I still have food on my table the next day? Sometimes the thought is just too frustrating. I know this is also what most of us want for our retirement days, but how many can afford this kind of lifestyle?


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## specialk (Jul 14, 2009)

tom_ford said:


> Wow, I didn't expect to get all these 'intellectual' responses and analyses.
> 
> I believe that when you are a lot younger, everything that you earn from working goes to all the expenses for your family (monthly groceries, clothing, baby stuff, etc.), to your mortgage, to buying appliances and whatever makes living comfortable and convenient, to your insurance (medical, dental, life, auto, home, etc.), etc. MOst often, nothing is left. That is something I feel most people have a hard time dealing with. Sometimes I can't help but think that you need a really high salary or another income source for you to be able to live the kind of life you want when you're already retired.
> 
> My idea of retirement is living for myself....traveling places I never got to visit when I was working my butt off, devoting my time to my passions -- like photography and painting -- instead of staring at the computer all day long, reading books, etc.. How do I make sure I get to do all these and not worry about whether I still have food on my table the next day? Sometimes the thought is just too frustrating. I know this is also what most of us want for our retirement days, but how many can afford this kind of lifestyle?


If there is nothing left after all that stuff, then you need to do a better budget and back off most of that. For example, don't get a car payment, and babies don't cost as much as it's hyped up to be...you spend thousands on toys and crap and they just play with your keys, for example. If you live frugally, you should have enough money to invest a bit and spend a bit.


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## steve41 (Apr 18, 2009)

It would be interesting to know just what each individual saves for retirement as a function of time. I am sure that the feds must historically track RRSP contributions for each taxpayer. My guess is that in the early stages, savings levels are small to non-existent, and that the major investment activity happens in a flurry in the last 10-15 years of working.

It would make sense that these statistics wouldn't be made public since both the gov't and the investment industry want to encourage savings as early as possible. (My opinion and from observing a lot of financial plans)


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## specialk (Jul 14, 2009)

steve41 said:


> It would be interesting to know just what each individual saves for retirement as a function of time. I am sure that the feds must historically track RRSP contributions for each taxpayer. My guess is that in the early stages, savings levels are small to non-existent, and that the major investment activity happens in a flurry in the last 10-15 years of working.
> 
> It would make sense that these statistics wouldn't be made public since both the gov't and the investment industry want to encourage savings as early as possible. (My opinion and from observing a lot of financial plans)


Ya my assumption would be a bulk of it being last minute panic.


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## Maltese (Apr 22, 2009)

specialk said:


> If there is nothing left after all that stuff, then you need to do a better budget and back off most of that. For example, don't get a car payment, and babies don't cost as much as it's hyped up to be...you spend thousands on toys and crap and they just play with your keys, for example. If you live frugally, you should have enough money to invest a bit and spend a bit.


What is left is going to depend on how much income the family has to spend. A family earning $40,000 is likely going to need most if not all of their funds for everyday expenses. The family with the $150,000 income has a lot more disposable income. Many seem to forget that high incomes are not the norm when it comes to every day people.


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## Berubeland (Sep 6, 2009)

Maltese said:


> What is left is going to depend on how much income the family has to spend. A family earning $40,000 is likely going to need most if not all of their funds for everyday expenses. The family with the $150,000 income has a lot more disposable income. Many seem to forget that high incomes are not the norm when it comes to every day people.


I disagree entirely that low income people cannot save. Savings is a function of spending less than you make. Low income is an excuse. Conversely there are plenty of people who make lotsa dough than don't save a dime.

I agree though that high incomes are no the norm. Also 50% of people have below average IQ's


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## specialk (Jul 14, 2009)

Berubeland said:


> I disagree entirely that low income people cannot save. Savings is a function of spending less than you make. Low income is an excuse. Conversely there are plenty of people who make lotsa dough than don't save a dime.
> 
> I agree though that high incomes are no the norm. Also 50% of people have below average IQ's



Exactly. I agree. My wife and I have a combined take home just under 50,000...so yes...we get it. Despite this fact, we probably have a much more stable financial picture than most co-workers, as well as higher income earners. We were once 70,000 in debt when we were in stupid mode and we are now debt free and building our emergency fund. Our expenses have been cut to nothing to make this happen.


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## Jon_Snow (May 20, 2009)

My wife and I are 37, and from all appearances we wouldn't appear "well off" to anyone. Certainly, we could live a much higher standard of living if we chose to. Instead, we live below our means without depriving ourselves excessively... by following this path I think retirement in our mid 40's is quite possible.

With a monthly income of approximately $8000 we manage to save about $4500 - $5000 per month. This adds up quickly and watching our savings grow at this rate more than offsets the dissapointment of not buying some of the new things we desire. Buying a new house with a big mortgage would really put a dent into our savings rate... so we will stay in our 900 sq. ft condo.


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## steve41 (Apr 18, 2009)

I don't know what you already have saved, but if it was zero and you were just starting out, retiring at 45 would just squeak out a combined after tax lifestyle of $33K which just bridges you out to 60 when your CPP/OAS kick in.

Many would find an after tax income of $33K to be quite comfortable.

Dying broke at 95, 2% inflation, 6% ror.


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## Jon_Snow (May 20, 2009)

steve41 said:


> I don't know what you already have saved, but if it was zero and you were just starting out, retiring at 45 would just squeak out a combined after tax lifestyle of $33K which just bridges you out to 60 when your CPP/OAS kick in.
> 
> Many would find an after tax income of $33K to be quite comfortable.
> 
> Dying broke at 95, 2% inflation, 6% ror.


Fortunately we already have approx. $200K in our "retirement savings" fund... our tentative plan would be sell our condo (similar units are fetching $300k in our complex) and move to our acerage in the Gulf Islands, which we own outright. If we can maintain our income and keep saving at our current clip, we should add another $600K-$700k to our portfolio over the next ten years.

Even using conservative investment vehicles, I don't see why we cannot achieve a portfolio in excess of $1.2 million in ten years.

The very idea of retirement at 47 puts a smile on my face... of course if one or both of us lost our jobs it would pretty much torpedo these grand plans...


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## OhGreatGuru (May 24, 2009)

tom_ford said:


> At what age should people start saving seriously for retirement?


According to my soon-to-be-patented Decisive Optimum Planning & Extrapolation (DOPE) model, the optimum time is 47.3 years before you plan to die.


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## Ben (Apr 3, 2009)

OhGreatGuru said:


> According to my soon-to-be-patented Decisive Optimum Planning & Extrapolation (DOPE) model, the optimum time is 47.3 years before you plan to die.


Finally, a decisive answer to an impossible question! I'll add DOPE to my list of Humorous Acronyms Helping All (HAHA).


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## Ana72 (Dec 11, 2009)

The ideal time for me is when your still in 20's or 30's. Cause when your old enough to save for your retirement, it can be complicated for you to save for the other expenses, and a side from saving money plan as well for the changes that you might encounter with. Be ready in some changes in your income, use of time, and even relationship with your love ones. So you must have a retirement planning to guide you through these changes.


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## cannon_fodder (Apr 3, 2009)

steve41 said:


> I don't know what you already have saved, but if it was zero and you were just starting out, retiring at 45 would just squeak out a combined after tax lifestyle of $33K which just bridges you out to 60 when your CPP/OAS kick in.
> 
> Many would find an after tax income of $33K to be quite comfortable.
> 
> Dying broke at 95, 2% inflation, 6% ror.


I started to work on a CPP estimator spreadsheet for people who retire early. Have you figured it out Steve? 

From what I could find on the internet, no one really understood how the formula worked and a call to CRA didn't give me anything.


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## Ben (Apr 3, 2009)

cannon_fodder said:


> I started to work on a CPP estimator spreadsheet for people who retire early. Have you figured it out Steve?
> 
> From what I could find on the internet, no one really understood how the formula worked and a call to CRA didn't give me anything.


I've wondered about that as well. It seems like a big black box, with the secret closely guarded.


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## steve41 (Apr 18, 2009)

Yeah, I never really got into the CPP black box. 

From what I understand, you can call or link to the feds and they will come back with a CPP estimate for each individual salaried person. I assume it comes with a couple of parameters such as when you plan to retire, take CPP, and an estimate of your salary going forward.

I tell my users to enter their own CPP estimate from this govt source, rather than having RRIFmetic compute it. I guess I should revisit this sometime, but I don't expect the feds to open their kimono on the CPP calc any time soon.


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## Ben (Apr 3, 2009)

steve41 said:


> ... I don't expect the feds to open their kimono on the CPP calc any time soon.


Any idea why this appears to be the case? 

If I want to know how much money I will get if I get laid off, I go to the EI website, and the formula is there in plain view.

If I want to know how much money I will get every month if I had 3 kids, I can check another web page for all the data, or if I want to black box it, just plug my numbers into a little calculator they have.

etc, etc, etc.

Why doesn't the government seem to be open with how they calculate the CPP payments? How does a bloke know whether he's being stiffed or not, if there's no way to check the calculation?


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## HaroldCrump (Jun 10, 2009)

Ben said:


> Any idea why this appears to be the case?
> 
> If I want to know how much money I will get if I get laid off, I go to the EI website, and the formula is there in plain view.
> 
> ...


Well, you _can_ get a CPP estimate from the CRA website.
It will estimate for you that if you _were_ 65 today and you _were_ to retire today, how much your monthly pension payment will be.


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## Ben (Apr 3, 2009)

HaroldCrump said:


> Well, you _can_ get a CPP estimate from the CRA website.
> It will estimate for you that if you _were_ 65 today and you _were_ to retire today, how much your monthly pension payment will be.


http://www.hrsdc.gc.ca/eng/isp/common/cricinfo.shtml

I checked it out a bit, but it still feels a lot like a box I can't look inside. Are there any sources to determine how the calculations are made?

I also noticed the estimator uses average earnings. So if I made $1,000,000 for a few years, and $5,000 for the other 45 years, then I would have a nice average income, but would have contributed very little to CPP over that time (as contributions capped in the $45,000 range). I would not then expect to receive very much CPP in retirement - but the calculator would tell me I'd get max payments. Less extreme examples of this would be the norm - lots of people have a few years of interruped income, and I'd heard piecemeal accounts that CPP income could get hammered by such instances. I would believe that the actual calculation made to determine your payout would take into account the actual incomes you earned, and the years in which they were earned. But, I can't find any data to confirm this!...full circle. Would like to know the methodology.

Anyway, no closer to understanding CPP. To be honest I haven't felt any real impetus to get a firm grasp on the rules because I know damn well it will look completely different when I turn 60 in a few decades.


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## MoneyGal (Apr 24, 2009)

What Harold said. They will give you a statement of contributions, plus an estimate of what you would have as a pension if that were your total contributions to your age 65 and you were retiring today at age 65. 

The reason they won't give you any other estimate is that there are too many other variables, including unknown future changes to CPP benefits. How many years are you going to work? At what rate will you make contributions? When will you take CPP? Will you be splitting CPP with a spouse? What happens if you become disabled and thus eligible for a CPP disability pension? Will you take advantage of the "drop-out" provision (aka "child-rearing" provision)? If so, for how many years? 

CPP is one of the least black-box formulas there is. The amount of full payments is known (in today's dollars, now) -- and it is not dependent in a significant way on investment earnings. You need to either assume full benefits, or adjust downwards for fewer years at full contribution rates. 

If I was looking to control for randomness in my retirement income planning, I wouldn't start with CPP!


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## OhGreatGuru (May 24, 2009)

The EI entitlement is based on insured earnings for which you have paid premiums. There is no guesswork about what you are entitled to.

But you are asking CPP to tell you what your CPP might be at age 65, based on contributions you have not yet made. That's guesswork of the highest order.


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## steve41 (Apr 18, 2009)

Yabbut, if I were constructing a model or plan of my future and I entered a history of my prior salary (with normal CPP deductions) and an estimate of a future salary profile (with normal CPP deductions), why wouldn't there be a simple formula to determine what my CPP might be going forward starting from 60, 65, 70?

I think that is the problem.


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## MoneyGal (Apr 24, 2009)

This is such a bizarre discussion to me. 

The maximum CPP payment in 2009 is just shy of $11,000. The average CPP payment for all pensioners today, on the other hand, is $6000 yearly. 

So, you need to estimate something between $6,000 and $11,000 as your entitlement. 

I don't understand the apparent call for precision about such a small amount of money, and one that is relatively easy to control (i.e., if you want the maximum, work in a job that requires maximum CPP payments). 

What am I missing? Why is knowing the precise amount of a future CPP payout important?


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## steve41 (Apr 18, 2009)

Oh, I dunno... maybe because there are a few near-retirees out there that only have a few 100 K in savings. They certainly care.


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## cannon_fodder (Apr 3, 2009)

MoneyGal said:


> This is such a bizarre discussion to me.
> 
> The maximum CPP payment in 2009 is just shy of $11,000. The average CPP payment for all pensioners today, on the other hand, is $6000 yearly.
> 
> ...


My wife and I feel we can comfortably retire on about $42k after taxes in today's dollars. The difference between whether we each get $6k or $11k is a BIG difference when you only need $42k.

I'm sure Steve could run a scenario where it could mean the difference of at least needing an additional $100k in RRSP savings.


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## cannon_fodder (Apr 3, 2009)

Ben said:


> http://www.hrsdc.gc.ca/eng/isp/common/cricinfo.shtml
> 
> I checked it out a bit, but it still feels a lot like a box I can't look inside. Are there any sources to determine how the calculations are made?
> 
> ...


I've been able to take what I know about my personal situation, and info I found on the internet and 'reverse engineer' to get an answer that is very close to what the CRA states. But, I need to have a few more samples to fully understand if I have hit upon the "formula".


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## cannon_fodder (Apr 3, 2009)

steve41 said:


> Yeah, I never really got into the CPP black box.
> 
> From what I understand, you can call or link to the feds and they will come back with a CPP estimate for each individual salaried person. I assume it comes with a couple of parameters such as when you plan to retire, take CPP, and an estimate of your salary going forward.
> 
> I tell my users to enter their own CPP estimate from this govt source, rather than having RRIFmetic compute it. I guess I should revisit this sometime, but I don't expect the feds to open their kimono on the CPP calc any time soon.


Ah, I see. I was wondering how you could project early retirement scenarios for people on here when you have no idea how much to put in for CPP.

Someone retiring at 50 will not be entitled to full CPP as far as I know. You can drop all of the low income years that the government allows and you still will come up short.


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## Berubeland (Sep 6, 2009)

"a few near-retirees out there that only have a few 100 K in savings"

I am laughing my head off because there are a lot more than a few who only have a few 100 K. People who have a few 100 K are the exception rather than the rule.

_http://www.cbc.ca/news/background/retirement/enough.html_

You qualify for maximum Canada/Quebec Pension Plan benefits of $9,945 a year – and Old Age Security benefits of $5,661 a year. That takes you to $15,606 – not quite a third of the way there. 

If you're an average Canadian, you've set aside some money in a Registered Retirement Savings Plan – around $42,000. You stroke your chin and ponder the possibilities: stick that money in some safe investment and you might be able to earn a return of four per cent. There's another $1,600 or so per year.


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## steve41 (Apr 18, 2009)

> People who have a few 100 K are the exception rather than the rule.


Did you not mean to say "the rule rather than the exception?


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## MoneyGal (Apr 24, 2009)

But if you are at or near retirement, you can get an accurate calculation from CRA about your future entitlements -- and it is too late to do much about creating more CPP payouts in that case anyways. 

And if you are a low-income senior, you are entitled to GIS which will make up some or possibly all of the "missing" CPP entitlements. 

And if you are NOT near retirement, and you are worried about not getting maximum CPP, you have the opportunity to change this situation, if you want, by working in a scenario in which you make maximum CPP payments. 

???


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## Ben (Apr 3, 2009)

cannon_fodder said:


> I've been able to take what I know about my personal situation, and info I found on the internet and 'reverse engineer' to get an answer that is very close to what the CRA states. But, I need to have a few more samples to fully understand if I have hit upon the "formula".


Precisely. Why so difficult to hit upon the 'formula'?



MoneyGal said:


> But if you are at or near retirement, you can get an accurate calculation from CRA about your future entitlements -- and it is too late to do much about creating more CPP payouts in that case anyways.


All true. But to be more clear on what I’m trying to determine: why do I have to rely on the CRA calculation? Surely the calculation method is available somewhere on a government website - anyone? I should not have to ‘reverse engineer’ from piecemeal sources in order to see whether CRA has done it correctly.



MoneyGal said:


> And if you are a low-income senior, you are entitled to GIS which will make up some or possibly all of the "missing" CPP entitlements.


The GIS is a great government benefit for low-income seniors, and I’m glad to live in a country that makes such a program available. Sidebar comment – I wonder how many seniors out there don’t know about the GIS, but could otherwise qualify? 



MoneyGal said:


> And if you are NOT near retirement, and you are worried about not getting maximum CPP, you have the opportunity to change this situation, if you want, by working in a scenario in which you make maximum CPP payments.


True again. But I want the formula so I could compute how much the situation would change in a certain scenario.
My personal interest is not in determining to the penny how much CPP I will pull in, but rather in seeing that the methodology CPP uses to calculate payments is readily available in the public domain. So far, the best answer uncovered seems to be in this link, but I haven't looked too hard as yet.

http://forums.canadianbusiness.com/thread.jspa?messageID=296641


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## cannon_fodder (Apr 3, 2009)

Berubeland said:


> "a few near-retirees out there that only have a few 100 K in savings"
> 
> I am laughing my head off because there are a lot more than a few who only have a few 100 K. People who have a few 100 K are the exception rather than the rule.
> 
> ...


Right away alarms go off... do they include those people who have a very nice company/government pension? If so, it is not surprising that they would not have a lot in RRSP's.

Secondly, I prefer if they would not only talk about individuals, but couples. They gave the impression that an individual at lower income levels looks for a retirement income of $25k to $35k. But, would couples need more like $40 - $45k?

I've already posted that I think $42k in ATI would be sufficient for my wife. Another poster said that pretty much matches what they are thinking. I've seen on another site where someone was more around $33k.

Is $42k a realistic amount? I've already seen both of my parents eschew travel as they got near their 70's. Part of that is because it seems to be more irritating than exciting. Part is because their poorer health makes it more difficult. And, perhaps the biggest factor is the fact that they never really travelled when they were younger. Now that they have the time, they don't have the inclination - the "dream" either never was, or was just talk.

It certainly would be great to find real retirees volunteering their lifestyle data points before and during retirement. It would offer some help to support our forecasts.


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## cannon_fodder (Apr 3, 2009)

steve41 said:


> Did you not mean to say "the rule rather than the exception?


Steve - do you have data that suggests that most Canadians who are closing in, or actually in, retirement have $400k in retirement savings? To me, a "few" means at least 4.

It would surprise me that most Canadian *couples* would have more than $400k - let alone individuals.


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## cannon_fodder (Apr 3, 2009)

MoneyGal said:


> And if you are NOT near retirement, and you are worried about not getting maximum CPP, you have the opportunity to change this situation, if you want, by working in a scenario in which you make maximum CPP payments.
> 
> ???


For the most part (except when I was in University) I've been gainfully employed at the YMPE level. But, if I want to retire early, let's say 55 which is my goal, then that is going to affect my CPP benefits.

So, why can't I go to a CRA website and have them expand their calculator to not only show what happens when you collect at 60, but what happens *in my specific case with my own data* how much I could expect if I collect YMPE until I'm 55.

That is all part of the planning process. If I find out that I've overestimated both mine and my wife's CPP payments by $2k / year, then that is a total of $4k or about 10% of my projected income needs at 60.

I can run the numbers through my retirement program without any consideration for CPP although it would be more prudent to know what the absolute minimum CPP I should be entitled to if I never worked another day in my life.


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## cannon_fodder (Apr 3, 2009)

Ben said:


> Precisely. Why so difficult to hit upon the 'formula'?


You fire up the car, I'll bring the GPS. Let's go to Ottawa!


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## steve41 (Apr 18, 2009)

To CF's point...

Say I am 30, working and earning $30K and making normal CPP deductions.

I plan to work 10 years, take a 5 year sabbatical to go to school then come back to the work force for another 10 years at which point I will be earning 60K and making the requisite CPP contribs.

Now, I wish to create a plan which, in addition to including savings, pension, taxes, loans, OAS, GIS... etc , will incorporate my CPP income taking CPP at say age 60.

Why wouldn't it be possible to determine what that future CPP stream might be now, when I am creating a plan instead of waiting until I actually reach 60? It is a cash flow financial planning issue.


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## Sampson (Apr 3, 2009)

Very interesting thread. If the formula isn't published or available, how can they be accountable?

I think the prudent question now is "how often does the CRA make mistakes?" and will it happen to me?


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## osc (Oct 17, 2009)

at the first paycheck


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## Berubeland (Sep 6, 2009)

Cannon fodder You misunderstood the data entirely. There is no 42 K in ATI. That is the entirety of their savings in RRSP's. 

That's right the average canadian has $42000 saved up for their retirement. That's it. 

Of course some go into retirement with negative assets. And some like a lot of us travel in exalted circles with several hundred K in the bank. 

I would say that people with $100 K are the exception rather than the rule.


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## steve41 (Apr 18, 2009)

OK.... say I am 65, own my own home, have worked and lived well, and accumulated full CPP status.

That measly $42K in my RRSP leaves me with a modest $20.2K annually out to age 95 (after tax/after inflation) That's 1.7K per month for food and booze. Oh, and I defer my property taxes as well.

That's for a single. A married couple would be more comfortable. Staying out of the health care system is the real trick. 

Don't bother to cue the violins just yet.


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## cannon_fodder (Apr 3, 2009)

Berubeland said:


> Cannon fodder You misunderstood the data entirely. There is no 42 K in ATI. That is the entirety of their savings in RRSP's.
> 
> That's right the average canadian has $42000 saved up for their retirement. That's it.
> 
> ...


actually I did understand it. I read the entire article so that is where I came up with some of those income figures. Coincidentally the target ATI that I'm working with for my wife and I is also 42k. I still think it would be revealing to carve out those people who are primarily funding their retirement through pensions. 

Then we can start breaking it down by age groups. You have said that there is a dramatic shift in retirement investing once people reach that stage where their earnings are high, the mortgage is discharged and the kids are gone.

The stats look almost tragic but perhaps they're not as bad as they seem.


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## HaroldCrump (Jun 10, 2009)

steve41 said:


> Staying out of the health care system is the real trick.


What do you mean?


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## steve41 (Apr 18, 2009)

Stay healthy. While it is not as important a piece of advice as it might be to someone south of the border, health difficulties can still put a crimp it your finances and quality of life.


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## Smac20 (Sep 7, 2009)

*Retirement Saving*

The best time is always today. Whether you are 20 or 55 now is always the best time. Don't sacrifice your life for retirement savings though. You need to have balance. If you are diligent you can save when you’re young and then laugh your way to the grave, but you may miss out on some key life experiences so way the choices and seek balance.


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## steve41 (Apr 18, 2009)

Sigh. (one more pitch for the math)

OK.... there are not a lot of parameters here...

-your salary and an expected trajectory as to how it will (hopefully) grow and when it will end or go into a partial retirement state.
-the amount you have saved including registered capital, nonreg, equities (including realestate) and taxfree.
-any loans and their parameters (rates, types, etc)
-an estimate going forward of what you think rates will do
-finally, a general idea of your 'best before' date... when you think you could make it out to.

The amount of time this posting took to compose would be just enough to determine how much you should be saving now, and once retired, how much you should be withdrawing on the downslope in order to maintain a level after tax lifestyle. If you are reading this forum, then you have the computer power to invoke this calculation.

These 4% rules and 'how much should I be saving?' mantras are so 90s (1890s)


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## cannon_fodder (Apr 3, 2009)

steve41 said:


> Sigh. (one more pitch for the math)
> 
> OK.... there are not a lot of parameters here...
> 
> ...


I started out figuring this out with pen and paper. Then I graduated to an Excel spreadsheet. At this point, inspired by you to be honest, calculating the after tax income proved very difficult. And the ability to figure out an annual income so that all retirement savings are depleted, well, my hat off to you. That was very challenging and I'm sure your program is far more sophisticated.


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## ssimps (Dec 8, 2009)

As soon as you can start saving. IMO this means AFTER you pay off any debt you have. The sooner you start saving the sooner you start seeing your $ as something you want more of, instead of the latest big screen TV, expensive car, etc, etc.

So when really depending you your exact situation.


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