I was very happy to get my latest issue of MoneySense magazine (Feb/March 2008) yesterday because of one article in the back which showed what retires were really replacing from their working income while in retirement in Canada. It was found the number was around 45 to 55% (they published a wonderful table of %’s which are broken down by pre-retirement income).
So perhaps we can finally kill this stupid idea you need somewhere around 70% of your pre-retirement income to leave work. Yet if you keep reading the article it gets better. Did you know the saving rate of most retirees are just behind that of those working people in their 50’s at the peak of their savings? So why are retirees are saving? Basically most people are over saving for retirement. They can’t spend it all so they save it.
Therefore the article suggested people retire with two different chucks of money. The first to cover from their retirement date till their 70’s where you will have your most active lifestyle and do those once in a lifetime trips and then lower amount to cover their more relaxing years closer to home.
Overall not a bad idea. Yet I would like to suggest we push a good idea further. Why don’t we suggest more people retire earlier? After all if most people can’t spend it all perhaps we just need more time to start spending our retirement money. Of course I’m bias and I’m planning on a number closer to 40% myself.
So what’s your % number?