Jon Chevreau and Rob Carrick have weighed in on the latest Fidelity study that finds that “Canadians are on track to replace only 50% of their pre-retirement income once they retire”. Fidelity continues to insist that this is well short of the “recommended 80% level” despite the shaky assumptions in their original research and another extensive study by Malcolm Hamilton showing that the replacement level on average is closer to 50%.
I don’t have a lot to add to their comments, since we’ve talked a lot about this topic already but you might find the nifty online “Retirement Readiness Snapshot calculator” interesting. The calculator allows you to play with different assumptions and check to see if you are on track for retirement. You can ignore Fidelity’s math and just enter the income you think you’ll need in retirement. For example, I figure we’ll need $60,000 per year in today’s dollars to retire when I am 55, so I entered $75,000 as my current annual income. The calculator tells us that we’ll need about $2 million in savings (in future dollars), which works out to $1.3 million in today’s dollars if inflation is around 2%. Despite the drawbacks of the study, Fidelity’s retirement number seems to be a reasonably conservative estimate (given that CPP/QPP and OAS benefits are estimated for an individual and not for a couple).