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The 5 steps to follow to plan your retirement
Determining the retirement age
Whether you wish to retire at the age of 55, 60 or 65, you should be aware of the financial consequences as well as any unforeseen circumstances that could affect the choice of your retirement age. For example, health and family constraints could be important factors when deciding at what age to retire.
Determining the required retirement income
According to several experts, to maintain the same lifestyle during retirement, we need about 70% of our average annual gross income for the last three years. However, this percentage could change if some expenses decrease while others such as healthcare costs increase. Will you be able to maintain the same lifestyle at retirement?
Determining the source of expected retirement income
You can finance your retirement with several sources of income, including:
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The federal Old Age Security plan; |
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The Québec Pension Plan; |
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Supplemental pension plan; |
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Personal savings. |
Comparing the predictable income with estimated needs
Comparing your predictable income with your estimated needs is also essential for determining your savings needs. You can then determine the impact of inflation on your retirement strategy. For example, if you currently spend $20,000 every year, assuming an annual inflation rate of 3%, you will spend $31,159 in 15 years.
Determining the required savings
Why must we take inflation into account? Simply because you are looking not only to save enough money for your retirement but above all, you want to maintain your purchasing power. Accumulated savings must increase faster than inflation for you to fully benefit from your retirement savings.
The same holds for those clients who are already retired. They depend on a fixed monthly income for as long as they need. Since retirement will be increasingly longer, shouldn't clients' income also increase at least at the same pace as inflation? |
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