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Pattie Lovett-Reid: How much do you really need to retire?

ANALYSIS: It has long been touted that Canadians would need to have 70 per cent of their pre-retirement income just to maintain their living standards after they’ve stopped working. I would argue that was a pretty arbitrary, somewhat inflated number, and yet I agree it seemed like a good starting point.

A new report published by Sun Life Financial reveals that Canadian retirees are living on 62 per cent of the income they had before retiring, despite this prolonged period of slow economic growth in Canada. The study also found that the majority of retired Canadians (88 per cent) described life in retirement as positive, with 32 per cent saying their biggest financial surprise of retirement is how they were able to manage on a reduced budget. Another 10 per cent said they are spending less than expected.

With many boomers in retirement, and others on the cusp, understanding their numbers is not a new concept. It all begins with assessing your lifestyle considerations, and determining your fixed costs for expenses such as food, housing healthcare and taxes. These fixed costs are your costs and it doesn't matter whether you are male, female or take marital status into account.

The next step is to understand where your money is going to come from. Are you counting on the government, private pensions, non-registered savings or registered plans such as TFSAs and RRSPs? A cash flow statement identifies gaps and that’s where the budget comes into play. The greatest fear continues to be the risk of outliving your money. It is a balance of living for today and recognizing there will be a tomorrow. It isn't an either/or it is an "and:" You can and should do both.

I would argue if you pushed further there will be many who live quite comfortably off 50 per cent of your pre-retirement income and here's why:

The years prior to retirement are when you are often most flush with cash. Children are close, if not completely financially independent. Your mortgage is likely paid off and debt reduced if not eliminated. You have a lot more disposable income than you likely ever had in your life. But think back to when you had a mortgage, children living at home, and you were attempting to fund their educations – and the list goes on. How was your quality of life and did you live on a budget quite happily? Most would say yes.

If you don't get too comfortable living the standard of life you enjoyed right before retirement and back it up about a decade, you will find living on less, living within your means and paying attention to your health can lead to a pretty satisfying retirement.

Scare tactics around retirement planning don't work. I like the idea of setting realistic goals that help you develop a retirement plan that meets your individual needs and not an industry standard that encourages you to save for the sake of saving.

As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV CTV Two CTV News CTV News Channel BNN - Business News Network CP24