Hello and welcome to Novella Wealth channel I'm Cynthia I'm Edmond My name is Henry On this channel, we cover a wide range of Canadian financial topics If you are planning to return or immigrate to Canada And have any health insurance, investment, and financial questions Welcome to contact us Support us and subscribe to our channel now Don't forget to turn on notification bell Without further ado, let's begin today's video Have you ever given any thoughts about your retirement? I have a lot of clients who come to me and say they have no idea how they can retire But how much does it really cost to retire? They don't have a clue. When I told them how much it would cost to retire, they were very shocked I agree, for example, if we save money now But we put away savings now but we also need to spend it now So when we reach the age of 65 or above Will there still be enough money to retire? That's uncertain. At the same time, you may think that when you are older Because we pay mortgage for our houses now, and after it's been paid off, we would be able to downsize when we retire. There should be some money left from that, but by the time When you retire, you should be able to enjoy life and not worry so much about saving money Or worry about moving to a smaller place when you have used to be living in a bigger house Then I guess these are the problems that may need to be considered I have some clients who are returning residents to Canada or new immigrants They think that because Canada has a lot of benefits They don't really need to plan for retirement and will have enough But what happens when they actually retire? Only then did they realize that there isn't enough retirement savings at all I would tell them that they can't rely on government benefits alone They need some planning So today's video is to explain How much do we need to retire in Canada? What to look out for and what to do when you retire A survey was conducted in Canada interviewing Canadians 90% of Canadians have not planned for retirement The survey also asked them how much money they think they need to retire Respondents think they should be able to retire with around $750,000 But when it comes to how much they have actually saved The average retirement savings is only about $180,000 That's quite far away from the number they thought they need So next we will analyze with you Three different levels of retirement lifestyle So that you can see for yourself how much you need actually for your ideal retirement life When I think about retirement, let's say it's the most simple and bare minimum lifestyle What do we actually need for the most basic retired lifestyle? I would say the basics are clothing, food, living and transport For example, when it comes to food, it can be so simple Cooking own meals at home all the time, eating basic food Let's say on average about $700 a month If you want to live in a condo, nothing luxurious, and assume it's been paid off A basic one or two bedroom flat, you'll still have to pay strata fee Around $300 In addition to the strata fee, there's also property tax, say around $200/mo There are also utilities, electricity, other auxiliary expenses such as cable tv, we need to watch TV, right? Gas, mobile, internet charges, misc., altogether say $300+ And you might go visit your grandchildren or children after you retire Let's say you don't drive then you'll need to buy a bus pass, which cost about $100-$200 All together will add up to around $2,000 The situation Henry has just described is based on a very basic, minimum spending lifestyle But then again, let's talk about on average I also calculated for an average retirement lifestyle I think it will cost about $4,000 a month Let's see how I come up with this number Let's say instead of always cooking at home, maybe we can go out to dine one or two days a week So for food, let's budget around $1,500/person For house, let's assume it is not a condo but a townhouse We are talking about an average strata fee of over $500 per month then In addition, you have to account for internet, mobile phone, electricity, water and gas, etc. All those bills I think it will be around $700 [correction: $400] or so Plus property tax, averaging around $250 per month And then for transportation, in Henry's case was riding bus; in my case let's say you have a car Assuming it's been paid off, but you still need to pay for insurance and gasoline, which adds up to about $700 or so Finally, I may also want to go travel the world with my family when I retire, So let's account for a travel budget, one trip per year So let's say another $250 per month Also, we need to buy clothes, go shopping and dress up An additional $500-$600 will be added to the total All these figures add up to at least $4000 a month for the average lifestyle [Premium lifestyle] Let's say I'm going to live in Vancouver area when I retire, and honestly, for my average well-off client Their house is around $2 million Their property tax is around $7,000 - $8,000 a year That's about $600 per month Say I want to go fine dining two nights a week with my wife And go out for lunch most of the time and only eat at home for breakfast and sometimes dinner In fact, that will cost about $4xxx a month for a couple (around $2000 per person) For detached house, there's no strata fee but there will be maintenance expenses It's really hard to mow the lawn and clean up all by yourself so you hire help Budget about $1000 per month to fix this and that, maintenance, repairing external walls and roofs etc. There are other miscellaneous expenses, such as mobile phones, and usually some entertainment. That might cost about $500 per month And the usual shopping, I really like shopping so I will budget for it All this adds up to around $8,000 per person per month Also, that is assuming we will not get sick. If we are sick, we may need extra emergency savings For those unexpected happenings in life That's all quite expensive! How can we rely solely on government benefits?! There are only a few public pension benefits available in Canada, what are they? One of the benefits in Canada is the CPP (Canada Pension Plan). Canada Pension Plan is a contributory, earnings-related social insurance program We work here to earn money and the government requires us to put away money into the scheme The aim is to provide us with a retirement income This plan is similar to the MPF scheme in Hong Kong The difference is that the MPF in Hong Kong You can choose your own investment portfolio, to invest or not invest CPP does not allow you to choose, the government is the one to decide what to invest in Usually more conservative Hence they can control how much to pay you when you retire How the CPP is calculated When we work and earn income, there's a maximum annual pensionable earnings For 2022, the limit is $64,900 The contribution rate is 11.4% (employee and employer 5.7% each) Which is the max cpp contribution If we contribute the max like that for 40 years By the time we turn 65 The maximum CPP benefit payment is $1,253.59/month (2022) But, for the average Canadian, the CPP benefit is only about $620 (2021) per person on average This is quite interesting, because actually a long, long time ago The contribution requirement is only about 9.9% or 10% But in 2018/19 Government started to require people to put more money in themselves It increased to 11% and then in 2023 It will become 11.9%, almost 12% So what is the government trying to say? That there is not enough money for this scheme? So you need to put more money in? Or is it because they think that people are really not saving enough money and want to force them to save more? In addition to CPP, there is another benefit which is OAS This is Old Age Security (OAS) If you have lived here for 40 years or more You can receive up to $642.25 per month (2022) But let's say you immigrated to Canada when you were 40 years old And only live here for 20 years or so, when you retire You can only receive about half, say about $300/month CPP and OAS are both taxable income So far, CPP is $600+ and OAS $300+, adding to only $900 or so That is not even enough to cover the $2000/mo retirement budget that I mentioned earlier But don't worry, let me tell you, the Canadian government Has one more benefit which is the GIS Guaranteed Income Supplement (GIS) In fact, if you are a resident of Canada and your income at retirement is really only CPP $600+ And OAS $300+, and no other income [annual income below $19,464 if you're single, widowed, or divorced] Maximum monthly GIS payment amount is $959.26 (2022) Adding all together it's about $2000 a month Right? So I guess it is just enough for the most basic, simplest retirement lifestyle It's like you can only just get by living the bare minimum That doesn't sound like such an enjoyable retirement life What the government actually provides us in terms of retirement benefits And the cost of your ideal retirement lifestyle, how much is the discrepancy? Of course, as Henry said If you only want the most basic, minimum lifestyle Then government benefits, $2000, may be enough But when we retire, do we really want to live such a frugal lifestyle? Wouldn't we want to be able to go dine out once in a while? If it was me, I would want to be able to enjoy my life when I retire If you take the average budget Like the calculations I talked about, the expenses would be about $4000 a month That is $48,000 a year Wwhen we calculate for retirement, it is generally assuming for 25 years When we do the math, $48,000 per year for 25 years That is, $1.2 Million is required at the time of retirement Am I saving enough to have $1.2 Million for myself now? I don't think many people are thinking about this issue Especially since, as we said at the beginning, most Canadians are only saving on average $180,000 But there are also many other factors that we have not considered yet What if we have health issues and get sick, we need to spend extra money Also, any unexpected happenings that require money Or, if we want to save up for our children or grandchildren You know it is so difficult to buy a house anywhere nowadays Say if you want to help your children with their property purchase, are you able do so? For some people, their assets are Enough to keep growing even as they are spending There are some people whose savings and assets will not become less even though they are spending Then, there are some people who only plan just enough to last until they turn 85 or 90 and will run out of money by then So we also need to be aware of these different scenarios Also, talking about retirement mentality, right now we are so busy working Monday to Friday Everyday is working, and then we relax on weekends We would go out to eat, shop and spend money What about when we retire? It is the 'weekends' every day That is, you would be spending money every day Some people don't realize this For example, if I am spending $8,000 a month now Am I putting aside this $8000 a month for the future To prepare for the same level of lifestyle at retirement? So we've talked a lot about the different benefits available in Canada and generally calculated the budget needed for three levels of retirement lifestyles In order to achieve our retirement goals, there are many tools we can utilize to help For example, you may have heard of RRSP and TFSA Or, we have also talked about segregated funds on our channel But the most important thing is to have a strategy for how to plan for when we retire Which is why you need a professional to help guide you There are so many different ways to do this. One concept is How we need to put the money we have, the money we make now, in three different "buckets" One bucket is for you to save up Second bucket for you to spend Third one is to help you earn more As we have illustrated The average person needs $1.2 Million to retire now That sounds quite scary But it is possible by using strategies We can help you plan how to save strategically in different places Right now we get a "Pay Check" salary, which we then spend But in fact we all need to save a 'Play Check' For future fun, because you can't just keep working all the time So when you find a professional like us We have ways to help you increase the value of your assets two-fold, three-fold, maybe even 4-times This is where we have a strategic plan to see how we can help you do this Watching this video, you may start to ponder When you retire, will you want the minimum retirement lifestyle Henry talked about? Or the average lifestyle that I talked about? Or maybe you want to live more comfortably like the premium lifestyle Edmond talked about? You can click (or scan QR code) the link in description box for a free 20 minute consultation with us You can talk to us about your retirement goals In this 20-minute consultation We can get to know each other a little bit more and let us know what your financial needs and goals are So we can see how we can help you achieve those financial goals How we can help you plan for your ideal retirement But of course, it's not possible to plan for retirement in just 20 minutes But most importantly, you can understand a little more about how to move forward Before you leave this video, support our channel and leave a comment, like, subscribe our channel, share this video with your friends See you next time, bye bye.
