Retiring? You could be better off than you think

Two-thirds of Canadians are worried about their financial wellbeing during retirement, according to a recent survey from ING DIRECT.

When asked what concerns them most about their later years, 56 per cent put not having enough income to sustain a good quality of life at the top of their list.

Here’s some good news: They may not be that badly off after all, according to a new book entitled The Real Retirement: Why You Could Be Better Off Than You Think, and How to Make That Happen.

Have you ever realized that you left your wallet in the car, only to rush back and find it sitting there untouched? That’s the feeling many people get when they step back and really look at their impending retirement, authors Bill Morneau and Fred Vettese maintain.

For years, Canadians have been told the threshold they need to hit is roughly 70 per cent of what they were making before they left work.

However, Morneau and Vettese suggest that replacement ratio is much closer to 50 per cent, particularly if you haven't been making all that much money to begin with.

The truth is, both numbers might be correct — for somebody at least. It all comes down to how you view your future.

If you focus on your expenses, rather than what you’ve been making, you may be surprised at how many of them will actually disappear.  

For example, once you’re no longer working, you won't be required to make contributions to CPP, EI, or, if you have one, any company pension plan.

You'll also save on commuting, clothing and other work-related costs such as union dues. And, hopefully, both the kids and your mortgage will be gone.

What’s more, because of the rules that allow pension income splitting among spouses or common-law partners, you may be able to trim your tax bill — at least compared to what you were paying on your highly taxed employment income.

The result is that some people find they can live on much less during retirement than they thought they would be able to — in some instances, as little as half of what they were making, the authors maintain.

Over the long haul, of course, inflation is a constant threat to everyone’s retirement security, particularly as you should be looking out over a 20- to 25-year horizon.