Retirement soul searching

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
1 60 1000 828.48 671.52 2500
2 61 1000 828.48 671.52 2500
3 62 1000 828.48 671.52 2500
4 63 1000 828.48 671.52 2500
5 64 1000 828.48 671.52 2500
6 65 1000 740.05 759.95 2500
7 66 740.05 546 1213.95 2500
8 67 740.05 546 1213.95 2500
9 68 740.05 546 1213.95 2500
10 69 740.05 546 1213.95 2500
11 70 740.05 546 1213.95 2500
12 71 740.05 546 1213.95 2500
13 72 740.05 546 1213.95 2500
14 73 740.05 546 1213.95 2500
15 74 740.05 546 1213.95 2500
16 75 740.05 546 1213.95 2500
17 76 740.05 546 1213.95 2500
18 77 740.05 546 1213.95 2500
19 78 740.05 546 1213.95 2500
20 79 740.05 546 1213.95 2500
21 80 740.05 546 1213.95 2500
22 81 740.05 546 1213.95 2500
23 82 740.05 546 1213.95 2500
24 83 740.05 546 1213.95 2500
25 84 740.05 546 1213.95 2500
26 85 740.05 546 1213.95 2500
27 86 740.05 546 1213.95 2500
28 87 740.05 546 1213.95 2500
29 88 740.05 546 1213.95 2500
30 89 740.05 546 1213.95 2500
31 90 740.05 546 1213.95 2500

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
1 65 1012.5 1487.5 2500
2 66 1012.5 551 936.5 2500
3 67 1012.5 551 936.5 2500
4 68 1012.5 551 936.5 2500
5 69 1012.5 551 936.5 2500
6 70 1012.5 551 936.5 2500
7 71 1012.5 551 936.5 2500
8 72 1012.5 551 936.5 2500
9 73 1012.5 551 936.5 2500
10 74 1012.5 551 936.5 2500
11 75 1012.5 551 936.5 2500
12 76 1012.5 551 936.5 2500
13 77 1012.5 551 936.5 2500
14 78 1012.5 551 936.5 2500
15 79 1012.5 551 936.5 2500
16 80 1012.5 551 936.5 2500
17 81 1012.5 551 936.5 2500
18 82 1012.5 551 936.5 2500
19 83 1012.5 551 936.5 2500
20 84 1012.5 551 936.5 2500
21 85 1012.5 551 936.5 2500
22 86 1012.5 551 936.5 2500
23 87 1012.5 551 936.5 2500
24 88 1012.5 551 936.5 2500
25 89 1012.5 551 936.5 2500
26 90 1012.5 551 936.5 2500
27 91 1012.5 551 936.5 2500
28 92 1012.5 551 936.5 2500
29 93 1012.5 551 936.5 2500
30 94 1012.5 551 936.5 2500
31 95 1012.5 551 936.5 2500

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.

 

Advertisements
This entry was posted in Uncategorized and tagged , , . Bookmark the permalink.

8 Responses to Retirement soul searching

  1. Janette says:

    You are living my largest fear.
    Did you think to ask your IRS for forgiveness of part of your husband’s tax? I don’t know how Canada is about that—but it worked for my sister when her hubby died in the US. She just told them how much she thought she could pay and they settled for payments.
    Humm—I get $968 instead of 936. for your drawdown of $350,000 over 30 years?
    Sounds to me like a side hustle for as long as you can would help things a great deal. Book keepers are valued employees. Holding off to get pension seems like the best bet for a longer success (says the woman who has a pension of $300 a month….)
    I look forward to watching you grow out of this situation. I am truly sorry for your loss.

    • jlgund says:

      I didn’t think of asking the CRA to forgive part of the debt. I kind of panicked when I realized how much it was. I have never heard of someone doing that here in Canada, so I’m not sure if it would have worked.

  2. janesavers says:

    My debt is less than yours and I am a little bit younger but I only have $10,000 saved so far. I can’t possibly save more than $1,000 per month because I just don’t make enough. With only 10 years to go until my hoped for retirement date at age 60 I am prepared to retire with what I have.

    I think you will have enough to retire at 60 if you want to. If you enjoy work then continue that but your late husband reminds us all that you just never know and that we need to take advantage of every minute of time that we have.

    • jlgund says:

      It’s true that we never know what is around the next corner. I would just like to know that I will have enough money to enjoy my retirement without worrying about being able to pay my bills. When I see PF bloggers aiming for savings of 1 million or more, I get scared.

  3. My father recently retired at 62 and took himself down to half-time first, before becoming fully retired. I think it was beneficial for him because he let himself get used to the change of pace step-by-step.

    Does the life insurance you don’t include in your net worth cover more than buying out your husbands half of the house? And will that help with your retirement goal?

    • jlgund says:

      I am hoping that after everything is said and done I will still have 30-40 K left from the life insurance money. But, I am afraid to touch it for now because I just don’t know for sure what is going to happen. It is all sitting in a savings account with Achieva at 1.8%. Yes, it will definitely help with my retirement goals.

  4. Ree Klein says:

    I wish I could rename your blog to something like My Journey to Healing and Prosperity. The reason I say this is because this is really two stories…one of recovering from the blow of losing your husband and the other is working to achieve your vision of prosperity so that you can retire and live a life you’d be comfortable living.

    Your story has power in so many ways and can really help others who have found themselves in a similar position. My partner lost his wife in a tragic auto accident five years ago; she was in her early 40s. It was devastating both emotionally and financially for him. Watching his journey has been painful because there is only so much an outsider can do to help.

    Your blog offers a space for a community where others who are going through something similar can be comforted and learn how to recover both emotionally and financially through your posts. Your solid grasp of what it takes to build a secure financial life after such a loss can be a huge inspiration. This particular post and the detail you provide supporting your thinking is a perfect example of what I’m saying.

    I’m so sorry for your loss…but on a positive note, I am rock-solid certain that you will end up retiring with enough money to be comfortable. Thank you for sharing your important story/journey.

    Ree

    • jlgund says:

      Ree, thank you so much for your heartfelt words. I really appreciate your confidence that I will be able to retire with enough money to be comfortable. I am really working towards it, some days more successfully than others. The extra money that I make from my side gig is key because I just make an average salary.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s