How To Retire at 60 With $45,000 In Income?

There are several ways you can set up your investments and drawdown strategy in retirement to accomplish this.

Let’s look at the 6 possible solutions. 

Here are a just few questions to guide you:

  1. Will the $45,000 come from RRSP/RRIF, TFSA, or non-registered accounts?

  2. When are you planning to start your CPP? Age 60, 70, or somewhere in between?

  3. Do you have children? Are you planning on leaving them anything?

  4. What rate of return are you expecting?

  5. If you’re spending $45,000 a year. at 60, will you be spending the same amount at 75?

Did you know that if you receive the maximum CPP and OAS you’ll have a combined income of $44,876/year at age 65?   

That’s almost all the money you need! 

Most of your savings will be used to get you from age 60 to 65.

Depending on the solution that matches your circumstances, you’ll need to save anywhere between $220,000 and $313,000 by the time you reach 60.

Now let’s take a look at some different solutions, and as we go, I’ll give you some things to think about.

Solution #1:

100% non-registered; Investment return 5%; CPP starting at age 65.

Amount needed to be saved = $231,000

Combined CPP and OAS = $44,876/year.

Bottomline: You’ll deplete most of your savings by age 60, and at 65 you’ll only have about $33,000 left. CPP and OAS will provide you with most of your income needs. With such a quick drawdown you may consider a more conservative portfolio and potentially lower return, requiring more savings.

Solution #2:

100% non-registered; Investment return 5%; CPP starting at age 60.

Amount needed to be saved = $235,000

CPP @ 60 = $21,760, OAS will kick in at 65 for $14,080

Bottomline: Starting CPP early means a reduced pension for the rest of your life, so you need to save a little more; however, you don’t have to draw your money as fast, and at age 65 you’ll still have about $161,000 saved.

Solution #3: 

100% non-registered; Investment return 5%; CPP starting at age 70.

Amount needed to be saved = $313,000

Combined CPP and OAS at age 70 = $53,688.

Bottomline: If you don’t draw your CPP until age 70 you will need to save a lot more to get you there. At age 70 your CPP and OAS will more than cover your income needs for as long as you live. This is a good option for those with enough savings to get to 70 and no pension.

Solution #4: 

100% non-registered; Investment return 3%; CPP starting at age 65.

Amount needed to be saved = $260,000

Bottomline: Back to the first solution but with a lower return. 

You need to save a little more, but it is the safer way to go when you’re depleting your savings so quickly over five years.

Solution #5: 

100% RRSP/RRIF; Investment return 5%; CPP starting at age 65.

Amount needed to be saved = $267,000

Bottomline: This one’s probably obvious to you. All RRSP/RRIF withdrawals are 100% taxable so you’ll need more savings to pay the tax. 

Be fair to the RRSP, if you’re able to save the non-registered amounts in the other solutions, then you should have a lot more in the RRSP.  

Solution #6: 

100% non-registered; Investment return 5%; CPP starting at age 65, stop inflating your spending at age 75.

Amount needed to be saved = $220,000

Bottomline: Most people spend less money in the later stages of retirement. Projecting fixed income need ($45,000 for life, inflated) will over-estimate the amount of money you need to save.

You should also be aware of what happens to CPP and OAS when your spouse passes.

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