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Amount for retirement

December 22nd, 2009 at 09:59 am

Is it possible to live on $25k pre-tax/year when retired?

We would be 100% debt free by then. Our debt is a line of credit that we are whittling down. DD's education fund will be about $40k by the time I retire. My plan is to retire in 10 years at age 55.
I've recently started putting aside 50% of my aftertax income. I'm risk averse so the majority of it is in money market rather than mutual funds.
I don't have to worry too much about health care since I'm in Canada.

I hope I'm not being unrealistic.

5 Responses to “Amount for retirement”

  1. ceejay74 Says:

    Would you have a paid-off house or be renting? Would you work part-time to supplement the retirement income? Does Canada have a Social Security-type government benefit that you haven't factored in?

    It seems like with rent that would be a stretch, but if you had virtually no housing expenses it could be done pretty easily...

  2. Joan.of.the.Arch Says:

    How long till retirement? You have a very young child, so I imagine you have a long time to go before you plan to retire. Do you expect your expenses to go down with retirement? If you are already living pretty guardedly, you might not be able to live on much less than you are now.

  3. disneysteve Says:

    None of us can answer that question for you. You need to sit down and list all of your anticipated expenses during retirement.

    You also need to consider inflation. A 45-year-old putting all money into a money market has no chance at all of outpacing inflation, meaning your annual income in retirement would decrease a bit each year. If you really want to make early retirement a possibility, you need to invest for growth, not safety.

  4. Analise Says:

    Why don't you try living on $25,000 a year, adjusting for bills you currently have but won't when you retire? Then you'd have a better idea if it's a realistic plan.

    Be sure to address inflation. Investing in a MMF, while safe, won't keep pace with inflation, so at least diversify your investments. Also, in retirement you may actually have MORE expenses (than your pre-retirement ones), especially if you plan to travel or take up hobbies.

  5. Waterfall Says:

    Thank you for your responses, especially regarding inflation.

    Excluding the payment to the line of credit and to savings, we are currently living on about $25k per year. Canada has the Canada Pension Plan plus Old Age Security. But they won't be very much.

    I would also have a pretty big amount in emergency savings in 10 years. My husband also has retirement savings that we will try not to touch until age 65. He is just a year older than me. His work is seasonal right now. He is pretty good at fixing up cars so I'm not worried about having to waste money on vehicles.

    I expect to be some type of part time work after retirement. The house is paid up so there won't be any rent.

    I'm sure of the math, so I will have $25k from retirement savings and company pension coming in. I would have to supplement it with other income after retiring to cover inflation.

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