The cost of retirement
You have probably heard the rule of thumb that you'll need 70 per cent to 80 per cent of your current household income to maintain your lifestyle in retirement. Forget the rule of thumb and take a good look at your personal retirement goals and current financial situation. What will it cost to retire?
What income will you need?
Will retirement be less expensive: one car instead of two, no commuting costs, no business wardrobe to maintain, and perhaps most importantly, no need to save for retirement?
"Retirement may be more costly if you plan to travel extensively, retire out-of-country or purchase recreational property," says Dave Ablett, Manager, Advanced Financial Planning Support at Investors Group. "Additional uninsured health care expenses or the need to care for an elder or other dependant can all mean you'll need extra income."
Inflation impact
A key factor to remember is the impact of inflation. Even a two per cent inflation rate will reduce the purchasing power of your money over time. If you are concerned with maintaining the same anticipated lifestyle throughout your retirement, you'll need to build in inflation protection. "That may mean saving more for investment purposes or adjusting your current investment strategy to generate a higher return over the long-term to offset the effects of inflation," advises Ablett.
Defining retirement income
Once you've determined your needs, you can assess sources of retirement income, including registered and non-registered personal savings, company pensions and government benefits. Talk to your Consultant about how Investors Group’s suite of Dividend Funds could help provide a steady income stream with considerable capital growth to help you attain your desired retirement lifestyle.
"If your assessment does not meet or exceed your income needs, you may have to adjust your saving or investment decisions," says Ablett. "The sooner you act, the more time will allow for your investment returns to compound and grow."
Software help
Your Investors Group Consultant is equipped with Personal Financial software that can help you calculate your current expenses and project them into retirement. The software allows you to customize assumptions about inflation and project investment returns.
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This article, written and published by Investors Group, is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
© Copyright 2007, Investors Group. All rights reserved. Do not reproduce without the express written consent of Investors Group.
