What's Your Retirement Number?

Know what factors play into your retirement savings goal


Financial confidence comes from having a plan, one that keeps you spending within your means while saving for the things that are important to you. With this in place, you are better able to enjoy spending what you have, knowing that you are on track. For many people, retirement is a big piece of this plan. You might be aiming for a full retirement, partial retirement, or an early retirement. Whatever your goal, you’ll feel more secure if you plan for it.


Knowing how much you’ll need to save to fund the retirement you want forms the basis of your savings plan. The fastest way to get this figure is to plug some numbers into an online retirement savings calculator. You’ll get a number – but how meaningful is it? Knowing the factors that are taken into consideration can help you get a more relevant outcome, and can allows you to test out various scenarios.


Best guesses and assumptions


Coming up with “a number” requires many inputs, almost all of which are estimates and predictions. As with any financial prediction based on a model, the output is a guesstimate. It can be used as a guide, but should not be thought of as a hard and fast number.


Despite the slippery nature of a retirement number, having a target in mind is important. Using a set of estimates and assumptions that you believe to be reasonable today will give you a goal to work towards.


There is a fairly long list of factors that go into making an estimate of how much money will fund your retirement years. We can group these factors into two categories: external factors and personal factors.


External factors:

  • The rate of inflation

  • The rate of return you can earn on your retirement savings, both before you retire and during your retirement

  • Income you will received from CPP, OAS and other sources

  • Tax rates

Personal factors:

  • How much you will spend every year in retirement

  • How many years you will be in retirement (life expectancy minus your retirement age)

  • What you plan on doing with your home

  • Whether you want to leave an inheritance to your children


Online calculators account for most of these factors, but not all of them. You have to overlay considerations like the equity in your home and your children’s inheritance onto the answer the calculator gives you. You also need to consider how you will share your expenses with a spouse or partner.



Since the future is uncertain, try out different scenarios. What happens if inflation is 2% versus 3%? What if you take more or less risk in your investments – how does a 5% return change the outcome versus an 8% return?


The retirement budget


The biggest question, though, and one that you have some control over, is how much you are going to spend in retirement. This is the number you will enter into the “desired retirement income” box. Coming up with an estimate of how much you will spend in retirement is tricky. You don’t know how your retirement will unfold. What will your health be like? What about your partner’s health? Will your children move far away, requiring more travel money? I’d suggest that you imagine your ideal retirement and plan for that. Make a list of all the expenses you could incur in retirement (here's a comprehensive list from RBC) and take a guess at how much each will cost. Don’t underestimate your spending. Be realistic.


Also consider whether this number you are entering is before income taxes or after. Adding up your expenses gives you an after-tax number: the amount of money you’ll need after you pay your taxes. Check which number the calculator wants. Some don’t take taxes into consideration at all because it’s complex.


Your retirement number should be revisited every few years to see if the assumptions are still reasonable. As you get closer to retirement, you’ll probably have a better of idea of how you still spend your time so re-visiting your retirement budget is a good idea.


Helpful resources


It’s incredibly useful to come up with a retirement number. Although it’s not going to be completely accurate, it’s a starting point for you to plan your retirement savings. For a more personalized number, you can talk to a financial planner, who can help you take these other factors into consideration.


If you’re looking for a detailed analysis, I can also help you. I’ve created a retirement planning model that can account for all kinds of considerations like:


  • Spending changes in various stages of retirement. You might spend more in the early years as you travel or go out and do things, and less as you age.

  • Selling your home and how much equity you could have to help fund your retirement.

  • Income taxes, including an estimate of taxes on your RRSP/RRIF and pension income, while excluding “income” from your TFSA.

  • Varying rates of return on your investments, since you are likely to take less risk as you get older.


Online resources


This calculator is provided by the Government of Canada. It asks you a lot of questions and allows you to enter your own assumptions for every input.


Government of Canada Retirement Calculator


There are many calculators to determine how much your savings will grow to. I like this one from Calculator.net – it’s a little nerdy-looking, but has lots of inputs to choose from.


Savings growth calculator



RBC has a good worksheet to create your retirement budget.


Retirement budget worksheet