Friday, August 10, 2007

Planning For Retirement Study - Are Canadians Saving Enough? University of Waterloo

The on-line report does not contain all the calculation or data details.

Some key points include:

They used data from Stats Canada.

A two senior Canadian household, in 2003, spent $43,717 on food, shelter, clothing, transportation, health care, energy and taxes.

Two thirds of Canadians are not saving enough to retire at age 65.

Assuming one starts at age 40, the required savings rates for a $40,000 income household, for age 65 retirement are 14-20% for one person and 30 % or more for a couple. These savings include the increases in home equity, in some form.

CPP is in excellent financial shape for the next 75 years.

They dealt with home ownership equity by assuming the home was sold at retirement and converted to an indexed annuity so home ownership could be viewed as retirement income (If I understand this correctly).

Income sources included Old Age Security, CPP or QPP, Workplace Pension Plan and other savings such as RRSP and money from home ownership equity.

My initial questions/thoughts:
How good is the $43,717 number?
One car or two?
Newer or older cars? This makes a big difference.
Any vacations included?
How did they obtain the cost of shelter for households that own a home? If it was just total income, then the cost of shelter would only be operating and maintenance costs.
I'm very skeptical about the two-thirds of people not saving enough for retirement.
By their definition...How many retired people don't have enough for retirement now?
No mention of government income over and above OAS and CPP such as supplements.

The home ownership component is the part that I find difficult to fathom. It is a large component and one must be sure to make a valid comparison between the $43,717 spending in 2003 and the required retirement income that translates into a required savings rate. This was a big part of our savings for retirement. The $43,717 per year for a couple, seems to be in-the-ball-park, especially if a couple owns their own home.

1 comment:

S. B. said...

Great to see you posting again!