A while back I contacted a gentleman who used to work for the government in the CPP department. He offers his services, for a small fee, to calculate what your CPP will be at different ages. I asked him to calculate what I would get at age 60 and 65. My CPP situation is a bit complicated because I am also receiving a CPP Survivor’s benefit and the formula CRA uses to calculate that puppy is way complex.
Anyway, he told me that if I started getting CPP benefits at age 60 I would get a combined benefit of $828.48 until age 65, at which time it would drop to $740.05. If I wait until 65 to start getting CPP, my combined benefit would be the maximum, which is currently $1012.50. CPP is indexed for inflation, so these figures are all in 2013 dollars.
He calculated that if I die before age 79 I would be better off taking it early, but I die after age 79 I would be better off taking it age 65.
So, based on these figures I sat down yesterday and did some spreadsheets with different scenarios. I am using $30,000 per year as what I need to live a fairly normal life, close to what I live now. So, that is $2500/month. My target retirement nest egg is $350,000.
If I were to retire at 60, I would have to work part time until Old Age Security (OAS) kicked in at age 66. Here is what that scenario looked like.
|Age||Part time work/month||CPP Combined benefit||OAS||Draw down from investments||Total|
Then I looked at what it would look like if I worked until age 65. Note that the previous scenario took me to age 90, and this one goes to age 95. Not sure why I did that. I guess because I based them both on 30 years.
|Age||CPP Combined benefit||OAS||Draw down from investments||Total|
Then I did some number crunching to see how much I would need to save between now and retirement to reach these goals. The results are a bit scary, and were based on some assumptions that may or may not come to pass such as downsizing my home to get some equity out and pay off about $50,000 of the heloc. Also being left with 30-40 K of the life insurance after paying out my late husband’s share of the house.
Anyway, to semi-retire at age 60 (I am currently 54) I would need to save about $2700/month between now and then. That is a big number, but not entirely out of the question. In addition to my wages I have a side hustle that brings in about $1000/month. I also get a CPP Survivor’s Benefit of $375/month. So, out of my net pay I need to save $1325. My net pay varies from month to month because I make an hourly wage, so it depends how many working days are in a month, but on average I probably bring home about $3200 per month. So $1325 is roughly 40% of my take home pay. Which is doable, especially if I don’t do stupid stuff like buy clothes that I don’t need or get take out food. I am also saving $200/month towards a future car purchase, $100 per month for vacations, and $150/month for insurance and other big expenses. But, I don’t calculate these into my retirement savings as these are short term savings and will be spent eventually.
So my challenge for November is to save $2700 to see if I can do it. This is on top of the $1000 I pay on the heloc every month. I am going to have to watch my spending very closely. No stupid purchases. Take my lunch every day. The car is full of gas, but I don’t know if I can make it a full month on one tank. I have never paid that much attention to it. Only buy groceries I need, no junk food.
I guess the thing is, now that I sit down and write this all out is that I wouldn’t mind working until 65 (or even 66) if I was working at a job I enjoyed. I like working, I just don’t like my current workplace. It’s values and ethics don’t match mine. I feel it is bringing me down. But the pay is pretty good, especially for my level of education (never finished university) and field of work (bookkeeping). I peruse the job ads every day and the wages being paid are all less than what I make. The only way I could make more would be to go back into accounting, which I didn’t enjoy. So, maybe the answer lays in finding a job that I enjoy more, even if it pays a little less. Or start my own bookkeeping business, but that is a scary thought.
If I didn’t have the damn heloc, and I didn’t have to pay out my husband’s share of the house my finances would be a lot easier. I guess we have to pay for past mistakes sooner or later.