Thinking Rationally About Retirement

How can you become better prepared for your golden years? Retirement planning is like any kind of forward-thinking exercise, you need to start with an end goal. In this case, it means working out a target figure you want to have saved for when you retire.

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To do this, you first need to estimate the income that you will need in retirement. Most experts suggest that this will be between 70 and 90 per cent of your pre-retirement income. Next, multiply this figure by the average number of years people spend in retirement, which is 15, and then don’t panic! This target figure is a necessary wake-up call and should help you to take retirement planning seriously.

You might wonder why such a high percentage of your pre-retirement income is recommended as your target. While certain living expenses may go up or down in retirement, the amount of money you need to get by in retirement doesn’t change a great deal.

What expenses will decrease? Most people aim to pay off their mortgage before retirement so that will be a monthly outgoing you can hopefully eliminate from your budget. Then there are the work-related expenses such as transport, wardrobe, dry-cleaning bills, etc. that also can be cancelled out.

Do some expenses increase in retirement? In retirement your health insurance premiums or even long-term care expenses may increase as the sad reality is that you could be in poor health in your autumnal years. Also, remember there will be additional expenses to include in your future budget depending on your aspirations and what you want your life in retirement to look like. Maybe you want to move abroad, travel more internationally, set up a business or take up a new hobby like golf or sailing.

On the bright side, however, you are likely to have multiple streams of retirement income. For starters, there will be your Social Insurance (Government pension). Then there will be your personal pension – you may have more than one if you have changed jobs a number of times. Add to this interest you are paid on savings and deposits, dividends paid on company shares, rental income you generate and any other likely revenue streams you may have.

If you are married, discuss retirement with your spouse and find out what benefits he/she anticipates receiving at retirement and when he/she expects to retire. You should take into account that your spouse may have different goals for retirement and a compromise may be required.

Argus offers a number of free online financial tools designed to help members of the public work towards their retirement goals at

With careful planning, you can make sure your retirement is the best years of your life.

This guide is not a substitute for professional advice, you should always consult with your independent professional advisor. A longer version of this article first appeared in The Bottom Line ‘magazine in March 2012