Survival map for future retirees

Do you want to retire:

• Before age 65?
• At age 65?
• Or later?

Traveller's tip: Think about your answer carefully because your retirement income will likely vary according to your retirement age.

If you want to retire before age 65, for instance, you will:

• have less time to put money aside;
• need to invest more capital to provide pension payments for a longer period of time; and
• receive lower benefits from the government.

Next stop? Go straight to Goals' Peak Mountain. Or, take a short detour and learn more about your retirement benefits from the Concordia Pension Plan at different ages.

When you retire, do you want to:

• travel around the world?
• have a second home?
• play golf every day?
• buy a boat?
• start a new career?
• simply relax at home?

Or, do you have other plans?

Your answer will have a major impact on how much money you will need during retirement.

Traveller's tip: Most experts agree that to maintain your current standard of living when you retire, your gross income during retirement should be approximately 60% to 80% of your gross annual pre-retirement earnings.

This is because your living expenses most likely will be lower than when you were working.

• Expenses that could decrease or disappear altogether when you retire:
  • contributions to government plans;
  • work-related expenses (business clothing, transportation, etc.);
  • contributions to retirement savings (including the Concordia Pension Plan); and
  • taxes
  
  
• Expenses that will likely increase at retirement:
  • health care;
  • travel; and
  • entertainment and leisure activities.

Next stop? If you have an idea of your financial goals at retirement, pursue your journey and take a dip into Penny Lake;

If not, we suggest that you discuss your financial goals with your family or a financial advisor before going further.

Retirement income normally comes from the following sources:

• goverment plans; and
• personal savings.

For added sources of retirement income, eligible employees of the University may turn to:

• their very own registered pension plan - the Concordia Pension Plan; and
• the Concordia Group Retirement Savings Plan (RSP).

These are 2 extra sources of income worth knowing!

Government plans

The actual benefits you receive from the government plans described below will vary according to your particular circumstances. The amounts we have indicated are the current maximum benefits payable.

	Québec or Canada Pension Plan	Old Age Security
The government provides ...	A lifetime, taxable pension based on: your retirement age; your earnings' history; and the number of years you contributed to this government plan. The pension is designed to replace about 25% of the earnings on which you contributed to this government plan.	A lifetime, taxable pension, based on a flat rate and subject to residency requirements.
When benefits begin	At age 65 (or as early as age 60, for reduced benefits).	At age 65.
Maximum benefits	$844.58 per month in 2006.	$484.63 per month in 2006.
Reduction payments	You can choose a reduced monthly benefit as of age 60 Your pension is permanently reduced by 6% for each year before age 65. For example, if you retire at age 60, your government pension will be reduced by 30%.	You must repay part or all of your Old Age Security benefits if your individual net income at retirement exceeds a certain amount. In 2006, this amount is $62,144. In this case, the amount that you must repay is normally deducted from your monthly payments before they are issued. If your net income at retirement is $100,900 or more, you will not be entitled to any Old Age Security benefits.
Adjustment of payment*	Annually	Quarterly

*Benefits are adjusted to reflect increases in the cost of living, according to the Consumer Price Index.

Personal savings

Personal savings can include

• savings from any personal RRSPs that you may have;
• cash;
• investments (e.g., stocks and bonds); and
• other assets that you expect to sell to generate income at retirement (e.g., art, antiques, jewelry and properties).

You may also want to include your spouse's personal savings.

Next stop? Explore the Treasure Cave and learn about the "dollars and sense" required before you can reach Retirement Island.

If you visited Goals' Peak Mountain, you probably have a general idea of the gross annual income you want at retirement. To determine how much you need to save, let's first determine the income you already know will likely be coming in when you retire.

There are two sources to consider at this stage:

• government plans: (Québec or Canada Pension Plan and Old Age Security); and
• your Concordia Pension Plan (plus other benefits from previous employers, if applicable).

Refer to your personal annual statement from the University to find out:

• the maximum benefits currently payable from the government plans;
• how much you have earned under the Concordia Pension Plan to date; and
• how much you may receive from the Concordia Pension Plan if you retire at age 65.

If you plan to retire from Concordia before age 65, try the Pension Projection Tool for an estimate of your benefits.

How much more do you need to save?

Take the annual income you would like to have at retirement and deduct your annual income from the government plans and the Concordia Pension Plan. The difference is equal to the income you still need.

Beware! There's a BIG difference between annual income and how much savings you need to provide it. As a general rule of thumb, experts agree the cost of annual retirement income is about 10 to 15 times the amount desired.

This means that lifetime retirement income of $50,000 per year would likely cost anywhere from $500,000 to $750,000 in accumulated savings. Admittedly, that's a big range. How do you know if the cost is closer to 10 times the amount desired or 15 times?

The actual cost will depend on factors such as:

• your age when you retire;
• the rates of return on your savings;
• increases to your pension during retirement to help keep up with the rising cost of living; and
• benefits payable to your survivors.

For instance, the cost will likely be closer to 15 (rather than 10) times the amount desired if you decide to retire at 55 and your savings are producing low returns over the long term. On the other hand, if you are obtaining higher returns on your savings and intend to retire at 65, the cost will likely be closer to 10 times the desired amount.

How do you save the extra dollars needed to achieve your goals?

If the annual income you would like to have at retirement is equal to your annual income from the government plans and the Concordia Pension Plan, congratulations! You should be able to enjoy Retirement Island! To be sure, however, you may want to consult a financial planner or advisor.

On the other hand, if there is a shortfall, you could consider a number of options beforehand:

• increase your savings amount;
• re-evaluate how your current savings are invested;
• change your goals, and perhaps live on less at retirement; or
• plan to retire at a later date, when you will have saved more money.

Let's assume that retiring later and living on less are not your first choices!
What can you do to ensure a stronger financial picture at retirement? First and foremost, speak to a financial planner or advisor.

Also, be sure you are putting money aside on a regular basis. The sooner you start saving, the smaller the amounts you will need to contribute to reach your financial goals at retirement.

Monthly savings required to reach $100,000 at age 65 (based on an annual return of 6%)
The age at which you begin to save	25	35	45	55
Your monthly savings	$52	$103	$221	$615

There's no doubt about it ... it's a lot easier to save $52 a month, than $615.

Traveller's tip:

Compound interest is another important aspect that can affect the accumulated value of your savings.

Interest is paid on your savings, and then interest is paid on the total of your savings plus your interest, and so on. You continue to earn interest on money you never had to contribute in the first place.

This compound effect results in greater savings over time, regardless of the amount you put aside.

The difference you can make when you begin investing early on and contributing regularly may surprise you. Check it out!

Example of compound interest effect

Person "A" invests $1,000 a year at 6% for 30 years.
Person "B" invests $3,000 a year at 6% for 10 years.

Each person invests a total of $30,000. Who will be further ahead?

	Person "A"	Person "B"
Annual contributions for the first 20 years	$1,000	$0
Annual contributions for the next 10 years	$1,000	$3,000
Total contributions	$30,000	$30,000
Value of accounts	$81,000	$41,000

It is easy to see that saving early pays off in a big way down the road!

Whatever you do, we suggest that you consult a financial planner or advisor. With professional financial help, you will be able to develop a solid plan, review your investments periodically, and make necessary adjustments along the way.

You thought that you would find a picture of a tropical island, a golf course, or a lakeside home?

We suggest you print the page and draw your own little Retirement Island. After all, no one knows - and sees - it better than you do!