Retirement, or financial independence, ranks as one of people’s top financial goals. Despite that, in the face of so many immediate financial pressures, it’s easy to avoid thinking about the future. You may think you’re too young to be thinking about retirement or you’ve waited too long to plan for retirement, but it’s never too soon or too late to give yourself choices. So where to start?

Step 1: What does retirement mean to me?
Just as it is important to dream and set goals for your current life, it’s important to do the same for your retirement so that you can build a financial plan accordingly. Imagine what retirement will look like for you. Start with your dreams. Will you travel? Work part time? Next, set clear, attainable and true retirement goals, and then prioritize them.

Step 2: How much money will I need to live on in retirement?
The next step is to figure out how much money you will need. There is no magic number. Just as visions are unique, the amount you need for retirement is unique. The easiest way to estimate your retirement spending is to start with what you are spending right now and then think about what might change in retirement. Use the MCC Retirement Lifestyle Expenses worksheet available on our website moneycoachescanada.ca in the Resources section, UNSTUCK Worksheets.

Step 3: Where will my income come from?
Look at your potential sources of retirement income. Consider employer pensions, government pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS), registered savings, non-registered savings and other income.

Step 4: How much do I have to save now? (otherwise known as Gap Management)
To find out how much you need to save for retirement, use the MCC Financial Freedom Calculator on our website. You will need your estimated annual expenses figures and some of your income and investment information from Steps 2 and 3. The calculator will factor in: inflation, the estimated rate of return on your investments, when you expect to retire, and how long you expect your savings will have to last (It is a good idea to run retirement numbers to age 95 to ensure that you don’t outlive your money). Using the calculator, you can see what happens to the numbers when you change one of the many factors.

It is possible that there will be a shortfall or gap between how much money you estimate having in retirement (income) and how much money you think you will need to live the life you want (expenses). Don’t be discouraged if there is a gap in your current plan. There usually is. The important thing is that now that you know about it, you need to plan for it and act on your plan. Don’t worry needlessly – get the facts about how much you will need to retire comfortably. Maybe you will need more money that you think. Maybe less. The only way to know for sure is to get clear about your goals and to start crunching some numbers. Get financial advice from someone you trust if you don’t want to go it alone. But make a plan today—so you can enjoy tomorrow.