In Step 2 we reviewed how much you need to retire. I encourage you to read this Step as its simple yet fulsome. However, if you’d like a quick estimate:

How much do you spend each year on your lifestyle? Say you spend $5,000/month or $60,000 per year ($5,000 X 12 months).

Now deduct what you expect to receive from CPP, OAS and or a company pension or retirement allowance every year after tax. Let’s assume you expect to receive $20,000 per year from your retirement sources.

Then in this example, we are left with $40,000 per year that has to be funded by your portfolio.

To estimate what size portfolio you need divide what you’re left with by 0.04.

Therefore in this example ($60,000 less $20,000) = $40,000 and therefore $40,000 divided by 0.04 equals $1,000,000. So in this example, this family needs a total portfolio value of $1 million to retire with the same lifestyle.

Let’s assume this family is close to retirement and has $400,000 in RRSPs and $200,000 in TFSAs and other investments. They therefore feel uncomfortable with this estimation as their total portfolio is $600,000 and thus they require another $400,000. There are a few things they can do:

- Work longer to save more money
- Downsize their home and put their savings into their portfolio
- Reduce the income they need in retirement
- Consider working part time in retirement to reduce what they need from the portfolio
- A combination of all of the above

What is important is that the more you know, the better prepared you can be for you circumstances. The better prepared you are, even if not perfect, the more in control you will be and the happier you will be in your retirement.

Please read Step 2.