“How much?” The most common question that financial advisors hear.

By MLD Wealth Management Team –

A question I regularly hear from new investors is, “how much money will I need for my retirement?”

It’s the most common question beginning investors ask, and my response is almost always the same: “It depends on what do you want to do.”

The amount required is different for everyone. The reality is, your goals and desires will dictate your need for capital. If you can articulate those goals and aspirations and create a plan to realize them, then you are far more likely to lead the life you designed.

A recent Study by CIBC Wood Gundy surveyed Canadians as to what they thought they needed for retirement — and that magic number was $756,000.

Unfortunately, few individuals are close to accumulating even a significant fraction of that $756,000. Canadians on average have saved $184,000 — not ideal, but much better than the abysmal retirement savings levels south of the border. According to the Economic Policy Institute, almost half of U.S. families have no savings at all, the median amount is US$5,000, and the median for U.S. families with savings is just US$60,000.

Another survey by the Financial Post concluded that the average Canadian believes they need to work longer to get the money they need to make up for the shortcomings in their retirement savings. Many retirees are taking on part-time jobs or downsizing their homes and moving to more rural and affordable areas to make their retirement work.

With the stagnation of wages in the last three decades, Gen X and Y workers note they are struggling more than their parents to save. They’re having children later in life, and housing costs relative to income have more than doubled, both which take away from their savings for retirement.

Designing a comprehensive plan with an advisor can pay considerable dividends in the long run. There is a myriad of variables to think about during planning, such as tax implications, children’s’ education, property holdings, and optimizing investments and care planning.

The first step is determining your projected retirement date and living expenses. A quick way to find this out is by using our retirement calculator.

And you can’t forget about health care. Health expenses, including medications, home care, and other needs, are some of the most overlooked needs in retirement income planning.

Creating a plan, saving and investing, should start as early as possible so you can leverage the magic of compounding interest. Your plan should begin no later than seven to ten years ahead of your retirement — and ideally much sooner.

At the age of 45 to 55, many people reach the milestones of paying off their mortgage and having their kids leave the nest. At that point, discretionary income increases dramatically, giving many people the ability to accelerate their saving or catch up on savings goals they didn’t achieve. If there’s no plan in place, then it’s easy for spending to get out of control and for money to slip away — both the detriment of your retirement.

Determining what you do with your discretionary income surplus could be the difference between a comfortable retirement or being forced to work well into your golden years. Financial planning doesn’t need to be an arduous exercise, but it does have to initiated early and revisited often. Anyone can start this process by visiting an advisor and asking the simple question: “How much do I need for my retirement?”