Eat the cake, go on the trip, buy the car.  Because you only live once. That’s the message that modern marketing and our society is embracing, and I’d be lying if I said I wasn’t the kind of person that indulges in this kind of thinking (and spending) every once in a while.

But there is a flip side. The part of me that knows my husband and I should be making significant efforts towards retirement planning so that we can maintain a comfortable lifestyle and make sure we do not outlive our money into our senior years.

I know we aren’t alone in balancing act of trying to live well now but still save enough for later.

The average Canadian believes they will need about $750,000 to live in retirement, but have you ever taken the time to figure out what your personal retirement number really is? There are few people that actually do.

Know your number

Knowing the real number we will need at the end of our working careers to continue living the lifestyle we love has been one of the most motivating and grounding pieces of financial information for my husband and I. It can also be a real kick in the pants.

Whether or not we are on track to meet that ultimate goal, it gives us a good framework in which to make decisions about our money. Making a call about whether to take that vacation or upgrade a vehicle gets easier when you can weigh the long term consequences as well as the satisfaction it will bring today.

How much do you need?

Finding your “number” depends on a  lot of personal factors that don’t necessarily fit into an online calculator. As financial advisors, how we find your number is a combination of conversations that assess your values and your expectations along with the use of some advanced software.

Of course we can’t know exactly what the future holds, but it gives clients a good starting point that can be adjusted as life, markets, and tax legislation changes. Here are a few things to consider if you want to know your number.

What does retirement mean to you?

We have some clients that say they will NEVER retire, and others that think they want to retire at 50. This is not a hard and fast decision you need to make today, but your attitude towards retirement is the starting point.

The client who will never retire still needs to save enough to prepare for the day they may be unable to work. The client that wants to retire at 50 needs to be clear on whether they actually want to quit working entirely at 50, or if what they are really seeking is the ability to choose a more laid back or satisfying career later in life.

Retirement is a much more fluid concept than it used to be, and you need to figure out what it means to you. Gone are the days where retirement only meant you worked at the same job until the day you were 65 and collected a pension cheque from that day going forward.

What are your lifestyle expectations?

How much do you think you can, or do you want to live on when you finish your working career? Whether you are planning on travelling the globe, flying south for the winter, or babysitting your grandkids full-time, you need to know what your income needs in retirement will be.

A good place to start is by assessing your income now and what you think you can live on assuming you are mortgage free (I would suggest this is a good goal to have for retirement) and then add any lifestyle perks you are expecting to indulge in on top of that.

What is your risk tolerance and understanding?

Here is where the rubber really hits the road with your financial advisor. A good advisor will be able to assess your risk tolerance and also help you learn about the different types of investments that would be suitable for you.

You need to have a realistic expectations of returns on investments that fit your investing style to accurately estimate how much you will need to save over your working years. This has a huge impact on your “retirement number”.

What are you willing to sacrifice?

No person that has reached a comfortable retirement will tell you they have done so without a certain measure of sacrifice. More and more, people come to us that would like to blindly throw one or two hundred dollars a month into an RRSP in hopes that will be enough when the day comes. And while those efforts will help in the long run and are better than nothing, this is not a sound financial plan.

With all the information above, we can fairly accurately come up with a monthly amount you should aim to contribute to meet your goals. Then the question of the hour is whether you are willing to do what it takes to get there. Are you willing to take a simpler vacation or drive your less than new car for a little longer to meet your savings goal for the year?

The balancing act of living life in the moment and being prepared for the future is not one I take lightly. Every person has to decide for themselves what they can live with and what they can’t live without. Having a clear picture of your “number” and whether you are on track towards it is a great way to make decisions realistically. It can give you the reality check you need when you go off the rails with live in the moment thinking, and it can also give you the freedom and self-permission to do the things you want to do when you are on track.

Make your Dream a Reality