Save. Spend. Splurge.

What to consider when planning for your retirement

Retirement seems like a big grey area that seems to encompass so much.

Everyone thinks it’s just a number we need to reach in terms of savings, and okay, we all know about the FIRE number and how it has to be 25X your annual expenses which is this chart, basically:

To learn more about this chart, you can read: How much do you need to have saved for retirement by salary per year

You can also use benchmarks like this one:

  • Age 35 =1X your salary
  • Age 45 = 3X your salary
  • Age 55 = 5X your salary
  • Age 65 (retirement) = 8X your salary

But really, there’s more than just the salary you want at the end when you finally retire, and here are some other things to consider:

This is GROSS salary, not NET

Ergo, it’s taxable. If you take out more, or make more money, you will have to pay more in taxes.

$1000 is not taxed the same as $100,000 as we well know.

The type of income matters

If you take dividends, it is taxed differently from if you sell investments and incur capital gains. If you take a part-time salary while you also take dividends, it renders dividends less favourable in terms of taxation, etc.

We may live longer than we think

The latest report from Statistics Canada released in 2019, found that the average life expectancy in Canada is 79.9 years for men and 84 years for women.

That’s an average, which means if I can expect to live until 84 as a woman, it means I should actually factor in the following which are major risk factors:

  • I live in an urban not a rural area (for now anyway), and it means quicker access to healthcare
  • I take good care of myself and am conscious of my current health issues as well as family history of diabetes for instance
  • I am eating well and careful not to tip into the overweight/obese range
  • I do not smoke nor drink (I can sip wine but it isn’t my thing)
  • I do not have much stress as I have money to pay for care/leisure, and all of that
  • My maternal family has a long life expectancy, with great-grandparents living well into their 90s

…all of which tells me that 84 is the average, but I could very well be looking at 94, let’s say 100 as real life expectancy, at least, for now.

Inflation will mean we will need more saved

Your dollar today, and in 50 years, will not be worth a dollar any more.

If you’re thinking “hey $30K this year is enough for the rest of my life”, you may need $50K by the time you retire, to account for inflation.

The cost of things will also go up/change

On top of inflation, things will change. Already, food is starting to cost more money for instance, and unless you are planning on supplementing in other ways (e.g. a garden), rather than relying on grocery stores and the like, your rent (if you do not have a home or decided not to have one) you have projected (even with inflation) may be more than you think.

You may run into health issues

Everyone hopes to have a healthy, vibrant retirement but as you age, especially as you get much older into your 90s, things start to break, or not work as well as before. These health issues, cost money. It isn’t cheap for a hip replacement, or if let’s say you need to start hiring nurses or move into assisted living.

Today’s prices for an at-home nurse ranges from $30/hour – $50/hour which works out to about $60K/year or $100K/year.

The average in Canada for retirement homes in Québec are $6000 a year to $42,000 a year or $500/month to $3500/month. It could be more if you choose to go private as well, I’ve heard prices in the range of $6000/year or $72,000 a year for a very nice home.

You may be derailed with others’ care

Forget reaching retirement and having health issues of your own, maybe your own family members like mine, are starting to need extra help financially. Elder care for them, may not be in your retirement plans, but it may end up (as in my case), that you are shelling out $20K a year or more to help.

All of this means that you may need to work longer/more. I wrote a whole piece on this: Why early retirement FIRE people can be short sighted.

A lot of things can HAPPEN

Maybe you decided you’d live together with your spouse and retire, but they end up passing away early unexpectedly. Or you get divorced. SO MUCH can happen. Please remember you need to be careful when planning for the future because so much can change.

Maybe your children (grown) need help, and you never planned on it.

Your retirement may be mostly tied up in your house

This is a common issue of being very house rich, but cash poor. Long story short, you can’t eat your house.

If most of your retirement savings is actually locked up in your house, you need to basically consider liquidating your house if it gets to the point where you can’t keep it any longer.

This is the case with my parents, who have most of their personal retirement savings locked up in a house. To retire and use that money, they need to sell it.

Other options to consider

So … we need to do some work. What can we do?

Lower your expenses

If you aren’t already tracking your money consistently (at least for 3 months), you are missing out on some VALUABLE information on your finances and where you can trim the fat in your budget, so to speak.

Make more money

DUH. No but really. Make more money. Maybe to meet your goals, you need to make more money now, because saving and investing more money earlier, makes a BIG difference.

Let’s take a look – to have a million by 65, pay close attention below to the chart by age:

If you want to know more about this, read: How to become a millionaire at 65 starting at various ages

Move somewhere cheap

Not even just a low cost of living area, consider moving to a cheap country. A lot of pensioners flee to Thailand, Portugal, and Spain where you can live like royalty on $10K a year.

Don’t retire at all

The final option is to work well into your retirement age. Don’t retire at all.

Work until the day you die. That’s kind of the only option left if you aren’t able to meet your retirement savings goal and you don’t want to move.

Unfortunately, this is the path most of my extended family has taken. They have worked well into their late 70s until their bodies gave out, and now we are all helping them make their last days well.

Anything else I missed?


  • Fan

    What if you start out at 40 w 200k saved how does that work? Self employed make 3k a month.

  • Steveark

    I think the best solution is to make a lot of money, an awful lot. Then if you live moderately you’ll stack up more than you could ever spend and every single one of those possible potholes will be affordable. I realize that it is difficult for a lot of people to make high incomes, it requires a lot of self knowledge and some research to match your strongest talents with monetizable jobs or self employment, but I do believe that is the only sure way to have a solid retirement. You simply can’t save and invest enough on a low income to cover all the future problems that might arise. I never considered myself anything special, the single attribute I had that isn’t available to everybody is a very high IQ. But I think I could have still made bank without it, I just would have had to match another natural advantage to the marketplace. I do believe a lot of people who could make much more money simply don’t have a plan or the confidence to execute it, and that’s sad because they have so much potential.

    • Sherry of Save. Spend. Splurge.

      I agree with a lot of what you said. I once posted that to set boundaries at work, you should ask your managers what your priorities are so that they don’t overload you, and someone said glumly it wouldn’t work for 90% of people. I said if you thought it wouldn’t work, it wouldn’t. Honestly, you can just try it but people simply like you said, don’t have the plan or confidence to try. Or to even do something like ask for more money, especially women. So much of it is beyond our control – how our parents raised us, what environment we were raised in…. there’s a lot.

  • liteadventurer

    I think the key to success is keeping your fixed costs low. Stuff like housing, utilities, food, and other essentials you need to live.

    My own goal is to be able to withdraw $90,000 per year adjusted for inflation, but my core expenses only come out to about $25,000. If I retire and there’s a market crash that immediately follows, I’ll drastically cut back and live off of my bonds until the market recovers.

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