I am writing this blog today because I believe that most Ontarians don’t know what they will face in retirement. I also believe that as a professional in the financial industry it is my duty to provide a wakeup call.
According to a recent study up to 50 percent of households are not saving enough to maintain their standard of living even when home equity is taken into account. I am not sure if this is because they believe that the government benefits will take care of them or not. So for those who are unaware or simply don’t know I will break down what would happen if you retired today with no savings.
First I would like to start by quoting the baseline for poverty in Ontario 2015, which for a single adult would be $19,930.00 ($1660.00/per month).
Now let look at the average benefits provided by the government:
CPP average: $640.23/month
OAS Average: $569.95/month
Combined this is a monthly income of $1,210.18.month or $14,522.16/year, as you can see this is $5,407.84 short of the poverty line. Now I would like to stop here and point out that this calculation also does not take into account that taxes still have to be deducted from these amounts.
But let’s move on. There is also another benefit called the Guaranteed Income Supplement (GIS) and depending on your income, if you were single you can apply for up to a maximum of $772.83/month. This would provide an additional $9,273.96/year. This brings the grand total to $23,796.12/year before taxes or $1,983.01/month.
Pretty good, right? Wrong!
The average rent in Ontario runs from $518.00 - $896.00/month or average $707.00/month
The average house hold grocery bill in Canada is $7,980 (2013 figure) or $665.00/month
The total together is $1,372.00/month, leaving $611.01/month.
Pretty good, right? Wrong!
You forgot about the taxes you have to pay, which in Ontario is Federal 15% and provincial 5.05%. So let’s run the numbers.
$23,796.12 x 20.05% = $4,771.12 which will leave you with $19,025.00/year or $1,585.41.
So taking our rent and food into consideration again $1,585.41-$1,372.00 leaves us a grand total of $213.41/month for any other expenses you might have. Now let’s take it a little further and say that you like to get around and need a monthly TTC Metro pass which costs $141.50/month, are new total is $71.91/month.
As you can see from the numbers solely relying on government benefits is not going to cut it for most people. According to statistics the average annual retiree income should be between $40,000.00 and $42,000.00 in order to live comfortably. This by the way also assumes that you will be healthy and able to take care of yourself after retirement and for a lot of us that will not be the case.
To discuss more about investments or retirement goals give me a call.
  www.protectingwhatmattersmost.com.
Edgar Schuchardt
416-806-5813