This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
Every once in a while I will spend a considerable amount of time (to the point where I think my wife thinks I’ve become obsessed) researching various interests. In the past year or so I have researched the following topics to death: my diet, different gambling topics, investing strategies, and optimal exercise routines. Over the past couple of weeks, I have spent some time playing around with retirement calculators (mostly firecalc), trying to figure out (again) my end retirement goals.
I realized three things when I did these calculations:
1) The amount that I need to retire is not really all that high: If I set my spending level to $25,000 (the approximate level that I spend currently), I should easily be able to retire by age 45 with a buffer of money available if I need it to an age of 103 (just in case I live significantly longer than average). If I had no other inflow of cash coming in during retirement, I would need about $685,000 to maintain the lifestyle I currently lead (adjusted for inflation).
2) Other money coming in significantly reduces the amount I need to have invested: For example, the additional inflow of CPP and my company pension plan significantly reduces the amount that I actually have to have save for retirement. According to the government of Canada, average CPP payments in 2010 were $502 – even at half that amount, my spouse and I would receive approximately $6000 per year combined (I think that half is conservative). Add in around $1000 per month of my expected company pension plan and I don’t really need a large amount of money from age 65 on. For security’s sake, I won’t really count these pension amounts in (as a buffer to possible spending increases in old-age), but realistically I should have a significant portfolio going into my later years.
3) I’m still on track with my current plan: I find it useful to have periodic checks on my plan every year or so. Between those periods I don’t really even think about what I’m doing money-wise as it is all automatic. It is nice to know that I am still on pace to retire when I want to and I should be fine when I get to that point.
My plans could of course change significantly in the next few years, I might find a career that is significantly more enjoyable, but pays a lot less. Yet if it was my choice, prior to changing jobs I would probably run the numbers again and find out what impact this change in pay would have on my future plans.
Have you ever done these sort of retirement calculation checks? If so, do you have any idea whether you will have over/under saved for retirement?