The Rule of 20 states that for every $1 of retirement income you want, you will need $20 saved in your retirement portfolio. At first glance, I thought this might just be a “5% rule”. 1 Calculate how much the Government will provide you during your retirement years. 2  You can use the Canadian government calculator here. 3  The difference between 1 and 2 is how much income from savings (and/or company pension) that you will need. When you add up the total income you will need for your retirement, you might be surprised. Remember, this number totals your income needs over several years of retirement. For example, if you currently earn $40,000 a year, over ten years you will earn $400,000. Over 20 years you will earn $800,000, a big number. And that doesn't include any pay raises you might receive. As a rough way to adjust for early retirement, add your annual spending requirement for every year you retire early on top of the amount you would need for retiring at age 65. Say you need $500,000 to retire at age 65, you expect to spend $50,000 a year in retirement and you want to retire at age 62. Add $50,000 for each year of early retirement onto the $500,000 target, which would bring the early retirement nest egg to $650,000. Percent of income at retirement. The percent of your working year's household income you think you will need to have in retirement. This amount is based on your income earned during the last year you will work. You can change this amount to be as low as 0% and as high as 150%. The rule of 20 suggests that for every $1 of annual retirement income you would like, you’ll have to have $20 saved up. So if you’re looking for $20,000 over and above CPP and OAS, then you’ll want to have portfolio worth $400,000 by the time you retire. This is another rule that you need to be careful of. Since you have CPP and OAS to help you out, the amount that you actually have to base your retirement savings on (in our scenario) is $25,000 per year. Using The Rule of 20, you calculate that you will need a retirement portfolio of $500,000 in order to retire comfortably.
http://canadianfinanceblog.com/how-much-do-you-need-to-retire-the-rule-of-20/ http://www.milliondollarjourney.com/how-much-do-you-need-to-retire-in-canada-not-as-much-as-you-think.htm http://www.fiscalagents.com/newsletter/4retneed.shtml http://www.canadianbusiness.com/investing/how-much-do-you-need-to-retire-well/ http://www.dinkytown.net/java/CARetirementPlan.html http://canadianfinanceblog.com/how-much-money-do-i-need-to-retire/ http://canadianfinanceblog.com/how-much-do-you-need-to-retire-the-rule-of-20/
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