Create a Retirement Scenario

The first thing to think about as you consider your retirement scenario is, how much will I need to retire? How much is enough? To determine this, you first need to answer the question: “What am I spending now?”

This is the primary factor in determining whether you will have enough to retire comfortably because your current spending patterns are an indicator of how you will spend in retirement. People become comfortable with a certain lifestyle and, generally, will not dramatically alter that lifestyle when they retire.

Income Requirements

In 2015,

48% of couples don't know how much they need to save to maintain their current lifestyle in retirement.

25% of couples expected to help an adult child in retirement.

To determine what your income requirements will be for retirement, start by tallying your current expenses. To evaluate and compare current and estimated retirement expenses, use the Current and Future Expense worksheet. Keep the following tips in mind.

  • Remove expenditures that will, hopefully, not continue (such as children’s expenses, mortgage, CPP/QPP/EI contributions, and RRSP contributions).
  • Estimate your income tax. As a quick rule of thumb, add 25-30% of your income to your expenses. (If projected income required is greater than about $60,000/year, you should do a more detailed income-tax calculation.)
  • When adding up your current living expenses, you may want to examine your expense pattern for areas where you could cut your expenses, if you had to.
  • Don’t forget an annual estimate for the “lumpies” (such as a new car, home renovations, gifts or vacations).

Use Conservative Assumptions

Inflation erodes your purchasing power. Even modest inflation of 2-3% will cause your expenses to double during your retirement years. Further, the types of investments you will own during retirement will impact your long-term rate of return. If you’re a conservative to modest investor, assume an average annual rate of return in the low to middle single digits during retirement.

Life expectancy is another important assumption. If you live for a long time in retirement, you’ll need to enter retirement with a larger nest egg. Consider your family longevity history and your lifestyle behaviours. A conservative projection assumes that you may live longer than anticipated. Keep in mind that many retirement planning calculators default to a life expectancy of age 90.

Finally, it may be wise to assume that your actual expense levels later in retirement might differ significantly from your projected income requirements. Hence, you should run multiple retirement scenarios with the retirement calculator below to control for different expense levels later in retirement. For example, one scenario with less costs if you will travel less and maybe one with greater costs if you will need more medical-type care. 

Retirement Planner Calculator

Do you know what it may take to create a secure retirement? Use this calculator to help you create a simple retirement plan. View your retirement savings balance and your withdrawals for each year until the end of your retirement.

Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.