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Dale Jackson

Your Personal Investor

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Two-in-five Canadians say they are financially unwell. That’s the latest reading from the Manulife Financial Wellness Index. Among the unwell, 82 per cent identify debt as the ailment and 67 per cent say their financial situation has them stressed out.

Eighty-three per cent in the financial infirmary say they are not prepared for retirement.

You don’t need to be a doctor to know the best prescription is debt reduction, but getting out of the red and building up the black takes a long-term plan.

The best way to do that is with a retirement calculator. Most financial websites have them in one form or another. They generally require seven pieces of information that could involve some serious questions you need to ask yourself and discuss with family:

Years to retirement: How much time do you have before you want to retire? If the numbers don’t add up in the end, you may have to go back to this question with another answer.  

Years in retirement: The average life expectancy in Canada now is about 90 years but genetics and medical history are probably a better indicator for you.

Retirement income: How much money do you need to live this year? Experts say the average retiree needs 60 per cent to 80 per cent of pre-retirement income and it diminishes as you get older.

Income sources: How much do you currently have in your registered retirement savings plan (RRSP), tax free savings account (TFSA) and company pension? Don’t forget to include Canada Pension Plan (CPP) and Old Age Security (OAS) Payments. You can find detailed information on your personal CPP standing through the Canada Revenue Agency website.   

Estimated contributions to retirement: How much do you expect to save between now and the time you retire? This is another figure the might need to be adjusted once the final result is tallied.

Inflation: This is anybody’s guess but some calculators will automatically suggest three per cent.

Rate of return: This is something you should talk to your financial advisor about. A well-diversified investment portfolio should be able to return an average seven per cent or eight per cent annually.

Many Canadians will also own their own homes in retirement. That makes living expenses a non-issue when determining retirement income. The equity in a home can also be an income source depending on the individual situation.