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Thread started 03/19/10 8:29am

Ace

For your retirement, you should be saving...

From a Canadian article, but I would think the basic premise (see my bolding) would be valid no matter where you live:

March 18, 2010

Save more, Dodge urges

CBC News


Canadians need to rely far more on personal savings if they want to retire comfortably, David Dodge, former governor of the Bank of Canada, said Thursday.

In a study done for the C.D. Howe Institute, Dodge said even those who think they have great company pension plans and solid RRSPs should re-examine their assumptions.

He said that in order to maintain the same standard of living after they retire, Canadians need to set aside between 10 and 21 per cent of their pre-tax earnings every year, starting from the time they're 30.

"This fraction is likely far higher than many Canadians believe and higher than is set aside in most employer-based group RSPs or defined-contribution plans," Dodge writes in the paper, co-written with Alexandre Laurin and Colin Busby.

"It is also higher than the effective contribution over time of employer-sponsored defined benefit plans. And for high-income earners, [it] exceeds the annual limits placed on RRSP contributions."

"For middle and upper-middle income earners, the amount of saving they need to do ... constitutes a much higher proportion of their earnings than people have been saving, or think they need to save, in order to produce a retirement income that is of a reasonable standard - 60 or 70 per cent - of their final earnings," Dodge told CBC News.

Canadians over 30 who have not kept up with their savings, he said, will need to put aside far more than 20 per cent of their income for a smooth retirement or they will have to work well past 65.

"Our findings provide Canadians with a reality check about the saving rates required to meet their retirement goals and inform the choices they could have to make between working longer or consuming less and saving more," Dodge said.

The study assumed Canadians would want to replace 70 per cent of their working incomes when they retire, and that they would retire at the age of 65.

Even under the scenario of a later retirement and only 60 per cent replacement of pre-retirement income, however, it found that savings needed to be substantial.

"That is a matter of choice. You may want to work a little longer," he said. "Or you may choose to have a non-standard income in retirement - say 50 per cent of final earnings - in which case the numbers look a lot more manageable."

Their research lends weight to those who say the country's pension system needs major reform, especially as large chunks of the population prepare for retirement.

Other research suggests that Canadian savings may not be as paltry as some policy makers and analysts fear. Once assets such as housing are taken into account, the net worth of the majority of Canadians is substantial enough to allow for a decent retirement, according to work led by University of Calgary economist Jack Mintz.


http://www.cbc.ca/money/s...aving.html
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Reply #1 posted 03/19/10 9:04am

luv4u

Moderator

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moderator

The government has been screaming for yeaarrs that there might not be any CPP
canada

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Reply #2 posted 03/19/10 9:08am

CarrieMpls

Ex-Moderator

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I’ve been setting aside 5% since I was 22-ish and the company I work for matches that – so that would make 10%.

I should be OK as long as the money in my 401k is managed well. I’ve already recouped a LOT of what I lost last year, so I’m doing alright.
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Reply #3 posted 03/19/10 9:11am

JustErin

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Dude, I heard that this morning on the radio.

Basically, if things stay the same for me....I'm fucked. neutral
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Reply #4 posted 03/19/10 9:38am

Poiple

Ace said:

From a Canadian article, but I would think the basic premise (see my bolding) would be valid no matter where you live:

March 18, 2010

Save more, Dodge urges

CBC News


Canadians need to rely far more on personal savings if they want to retire comfortably, David Dodge, former governor of the Bank of Canada, said Thursday.

In a study done for the C.D. Howe Institute, Dodge said even those who think they have great company pension plans and solid RRSPs should re-examine their assumptions.

He said that in order to maintain the same standard of living after they retire, Canadians need to set aside between 10 and 21 per cent of their pre-tax earnings every year, starting from the time they're 30.

"This fraction is likely far higher than many Canadians believe and higher than is set aside in most employer-based group RSPs or defined-contribution plans," Dodge writes in the paper, co-written with Alexandre Laurin and Colin Busby.

"It is also higher than the effective contribution over time of employer-sponsored defined benefit plans. And for high-income earners, [it] exceeds the annual limits placed on RRSP contributions."

"For middle and upper-middle income earners, the amount of saving they need to do ... constitutes a much higher proportion of their earnings than people have been saving, or think they need to save, in order to produce a retirement income that is of a reasonable standard - 60 or 70 per cent - of their final earnings," Dodge told CBC News.

Canadians over 30 who have not kept up with their savings, he said, will need to put aside far more than 20 per cent of their income for a smooth retirement or they will have to work well past 65.

"Our findings provide Canadians with a reality check about the saving rates required to meet their retirement goals and inform the choices they could have to make between working longer or consuming less and saving more," Dodge said.

The study assumed Canadians would want to replace 70 per cent of their working incomes when they retire, and that they would retire at the age of 65.

Even under the scenario of a later retirement and only 60 per cent replacement of pre-retirement income, however, it found that savings needed to be substantial.

"That is a matter of choice. You may want to work a little longer," he said. "Or you may choose to have a non-standard income in retirement - say 50 per cent of final earnings - in which case the numbers look a lot more manageable."

Their research lends weight to those who say the country's pension system needs major reform, especially as large chunks of the population prepare for retirement.

Other research suggests that Canadian savings may not be as paltry as some policy makers and analysts fear. Once assets such as housing are taken into account, the net worth of the majority of Canadians is substantial enough to allow for a decent retirement, according to work led by University of Calgary economist Jack Mintz.


http://www.cbc.ca/money/s...aving.html


Damn, 10 to 21%? I guess I'll be working til the day I die. I've always said that the US Social Security system will be defunct by the time I get old enough to collect.
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Reply #5 posted 03/19/10 9:49am

prb

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Poiple said:

Ace said:

From a Canadian article, but I would think the basic premise (see my bolding) would be valid no matter where you live:



http://www.cbc.ca/money/s...aving.html


Damn, 10 to 21%? I guess I'll be working til the day I die. I've always said that the US Social Security system will be defunct by the time I get old enough to collect.

I have already resigned myself to that fact. sad
seems that i was busy doing something close to nothing, but different than the day before music beret
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Reply #6 posted 03/24/10 12:33am

matt

Sr. Moderator

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I think 30 is too late, because you need time for compound interest to work its magic. Look at this:

http://www.pianorth.com/T...-28-07.pdf

If you're over 30, you've (probably) still got time, but a lot of catching up to do.
Please note: effective March 21, 2010, I've stepped down from my prince.org Moderator position.
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Reply #7 posted 03/24/10 6:46am

Genesia

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I'm never going to be able to retire. disbelief
We don’t mourn artists because we knew them. We mourn them because they helped us know ourselves.
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