How Canadians Estimate their Cost of Living in Retirement
Planning for retirement is an exciting time in preparing for your Golden Years. A lot goes into this complex financial plan.
Here, we share some considerations Canadians have when estimating their cost of living in retirement and provide guidance on how to forecast your retirement income needs.
Consider Economic Factors Impacting Retirement Costs
One of the main ways Canadians estimate their cost of living in retirement is by taking into account the economic factors that will impact their income.
Inflation
Canadians must grapple with the ever-present challenge of inflation when planning for retirement. As of December 2023, Canada’s inflation rate was 3.40%, which is higher than the long-term average of 3.15%.1 Estimating the impact of rising costs on goods and services is crucial to maintaining a comfortable lifestyle throughout retirement.
Housing Market Dynamics
The Canadian housing market is a significant player in retirement planning. Many retirees own their homes, but factors like property taxes, maintenance costs, and potential downsizing considerations can come into play.
The average price of a home in Canada was nearly $700,000 in 2023.2 But, according to the Canadian Real Estate Association, national home sales had jumped 8.7% month over month as of December 2023.3 Analyzing housing market trends helps Canadians make informed decisions about their living arrangements during retirement.
Government Benefits
Canada boasts a robust social safety net that includes the Canada Pension Plan (CPP) and Old Age Security (OAS). Understanding the role these programs play in retirement income is fundamental for accurate cost estimates. Canadians often factor in these government benefits, along with any workplace pensions, when planning their retirement income.
Plan for Healthcare Costs
In addition to considering economic factors, Canadians should also anticipate the cost of healthcare in retirement.
Canada’s public healthcare system is a source of pride for its citizens. In addition to primary health care services, the provinces and territories also provide supplemental coverage for seniors.4
However, retirees often need to consider additional healthcare expenses not covered by the public system. Private insurance, prescription medications, and long-term care are integral components of retirement cost estimations.
Lifestyle Choices and Hobbies
Lastly, Canadians planning for retirement should also budget for the things that make retirement some of the best years of our lives, such as travel, hobbies, and new experiences. How much you spend on other hobbies and interests will depend on your specific activities.
Retirement planning is an exciting milestone but one that requires diligent planning. Many Canadians work with a financial professional to help them set realistic goals, design tailored savings plans, and optimize their portfolios for long-term success.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.