# Will my friend be able to retire

1. Jun 14, 2015

### StatGuy2000

Hi everyone. I have a good friend of mine who lives near Toronto, Canada and has a great job ($90000 per year) in an area that he loves and feels passionate about. However, due to some unfortunate choices in years past, he is now 40 years old and has no savings whatsoever, nor does he own any significant property (he's currently renting a condo at around$1500 per month -- fortunately, he works from home so he saves money on commuting).

(2) My friend is indeed paying into the CPP, but that is hardly enough money to live on (even by the definition of living above the poverty line). Is $480000 in addition to the CPP enough to live on? 4. Jun 14, 2015 ### dragoneyes001 1) the living further out would be a must to get an affordable house but you said he works from home so that should be a possibility. 2) CPP is a joke even with a good annual income to pay into it its little more than a stipend. the 480k would make it a livable wage/month for a number of years depends on life expectancy. say he expects to live to the average of about 85 or 20 years beyond retirement. that would give him 24k/year + CPP which would be a comfortable existence but no splurging. it could also cover the costs of a home (taxes repairs ...etc..) 5. Jun 14, 2015 ### dragoneyes001 something i should add is your friend should (as soon as possible) invest in a good post retirement health insurance one that will cover medical AND pharmacy costs. 6. Jun 14, 2015 ### Vanadium 50 Staff Emeritus If he invests his money and gets 3% over inflation, he will have at 65 an income of ~$37K per year, plus whatever he gets from the government - I assume this is what CPP is. At 70, it will be ~$48K per year. Whether he can retire on that or not is something only he can decide. 7. Jun 14, 2015 ### dragoneyes001 CPP= Canadian pension plan. the pay out is based on amount payed in over a 30 year period. I wont speculate on how much he would be entitled to it can vary widely. 8. Jun 15, 2015 ### Astronuc ### Staff: Mentor That's insane! If one can, one should buy an affordable dwelling, ideally close to work to save transportation costs, or otherwise, working at home, as well as saving as much as possible. 9. Jun 15, 2015 ### dragoneyes001 yeah it is but you can stay reasonably close to Toronto and have much more realistic pricing or head towards the Quebec border maybe about 1 hr away from TO towards the farmlands and the prices will be much lower. 10. Jun 15, 2015 ### jtbell ### Staff: Mentor If he saves$2K per month for 25 years (to age 65), and increases it to keep up with inflation, that's a total of $600K in contributions (in today's dollars). After my first 25 years of saving into my 403(b) account (tax deferred retirement account), my total accumulation in 2010 including growth was about double my total contributions. Note that 2010 was about a year after the bottom of the most recent stock market crash. This period also includes the "dot-com crash" in about 2000-03. About 60% of my account is a very broadly-diversified stock mutual fund. The rest is a stable-value fund which has returned 3-4% per year. If he gets similar results to mine, he will have around$1.2M at age 65. A common rule of thumb says that he can start by withdrawing 4% ($48K) a year at that point, thereafter increasing that dollar amount to match inflation, and have a very good chance of the money lasting for 30 years (age 95). Add to that his CPP. Would that be at least in the same ballpark as Social Security in the US? Someone earning that much money would get more than$20K per year in Social Security starting at age 65 (in today's dollars, adjusted for inflation); more if he delays collecting, up to age 70. (This is under current law of course, which is likely to change sometime during the next 30 years.)

$48K +$20K gives $68K per year. If he's saving$24K per year out of $90K salary, he's actually living right now on...$66K.

Working a few years longer would of course increase the amount he ends up with, and decrease the number of years it has to last.

Last edited: Jun 15, 2015
11. Jun 20, 2015

### Borg

It's all about money in and money out. It seems obvious but the best way to save is to cut expenses. Your friend's salary is $7500 per month which I'll guess is around$5000 after taxes. Subtracting the $1500 rent and$2000 savings means that he is probably spending at least another $1500. That isn't too bad but he should still look at those expenses to see where he can save. I have lots of co-workers who go out to lunch every day. They're spending hundrends per month for meals that they could make far cheaper at home. As for the cost of housing, when I moved to DC, my job did not pay well enough to afford much. I didn't have the income or savings to buy a house and paying a thousand or more per month in rent would have delayed my being able to save enough for a down payment. I chose to purchase a cheap but nice mobile home. I paid it off quickly and had only the lot rent of a few hundred each month. It's amazing how quickly you can save when you get rid of your housing costs. When I was finally ready to buy a house, the mobile home was nice enough that it sold quickly. I think that your friend could cut around$2000 per month in spending and double the amount saved.

12. Jun 20, 2015

### dragoneyes001

i have to agree with the idea of a mobile home as an alternative to rent just one issue and that's a TO winter which is much colder than a DC winter. although modern RV's can be kept pretty warm even in winters there. just costs more for a few months.

13. Jun 22, 2015

### StatGuy2000

The thing is, mobile homes are (as far as I'm aware) rare in Canada, at least in Ontario (things could be different in other provinces) -- I have never met anyone in this country that owns a mobile home, nor am I aware of too many places in the country with lots to rent.

14. Jun 22, 2015

### Borg

I did a Google search and got 13 hits in the Yellow Pages link.

15. Jun 22, 2015

### dragoneyes001

Ontario has some pretty big RV parks the last tornado in Ontario hit right beside one.

16. Jun 23, 2015

### StatGuy2000

Well, I live in Toronto (and my friend lives near Toronto), so this may skew my perspective on this.

Borg, I saw your Yellow Pages link, and the 13 hits you got were all near Montreal -- perhaps Montreal is different from Toronto in that respect (among many other differences).

17. Jun 23, 2015

### Borg

Hmm. I don't know why I put Montreal in my search instead of Toronto.

18. Jun 24, 2015

### dragoneyes001

you were thinking of nightlife not RV's thats why

19. Jun 26, 2015

### George Jones

Staff Emeritus
I grew up in southern Ontario, and I remember trailer parks, but, since 1998, I have only lived two years in Ontario (2003 - 2005), and according to a 2014 Toronto star article, things have changed

http://www.thestar.com/news/gta/2014/04/12/is_this_the_end_of_the_urban_trailer_park_in_ontario.html

I lived in Saint John New Brunswick from 2006 - 2011, and there was a nicely maintained trailer park there. Also, here in Prince George BC, I have a friend (a widowed senior) who lives in a nicely maintained trailer park.