How To Estimate Your Canadian Retirement Budget

Estimated reading time: 11 minutes

Your retirement budget is just as important as your working days and something to work on before you retire.

Why should you prepare so far in advance?

Well, you want to ensure that you can afford to continue living the lifestyle you are currently on or a different one based on finance.

How To Estimate and Plan Your Canadian Retirement Budget-1
How to estimate and plan your budget for retirement.

All We Can Control In Retirement Are Spending Habits

We overestimate how much money we will need in our retirement years when we are healthy.

Often people tend to have this bucket list of things to do and want to make sure the money is available.

The sad part is that not everyone will get to cross off places they want to visit or things they want to do.

Reasons for this may include;

  • Unavailable finds
  • Health decline
  • Travel insurance is too expensive

When my father-in-law passed away my mother-in-law was left to pick up the pieces which was a terrible mess.

Shortly after she was deemed unable to care for things so we had to step in and do her finances.

This is how dementia starts to slowly rob you of your independence. Although, we can look back and now see it has been happening for years.

The only income she had at the time was a small Canada Pension Plan, she managed to get early.

Had she been in the right state of mind that likely would not have happened.

Illness Can Control A Retirement Budget

Her dementia is based on money and she needs it all the time.

It’s quite phenomenal, to be honest as I’ve never seen anything like it in my life.

Thankfully survivor’s benefits are $1800 but only until she turns 65 and then that will be reduced.

To control the money she gets an allowance which is more than she needs considering she no longer drives.

Her retirement budget does not balance yet and it’s hard to control what is happening.

In the mean-time, she gets $100 twice a week deposited to her bank account for necessities.

Where Does Her Retirement Money Go?

That totals $800 a month that she gets to spend on whatever she wants.

What does her $800-month target in her retirement budget?

Let’s have a look.

  • Groceries and any household items she needs
  • Clothing or other health and beauty related needs that are basic
  • Discretionary Spending

Retirement Budget Savings Account

Any other costs above and beyond comes out of her retirement budget savings account as she has no investment savings.

That means if the filter on the furnace needs changing, home maintenance fees and so on.

She doesn’t understand that she is getting far more than she needs or that most people get without any retirement savings.

You can’t dispute this with someone who has dementia and often it’s easier to just give in to demands.

Since she is diabetic she gets her eyes tested yearly costing $120 xrays that we pay out-of-pocket but the eye examine is free.

Her toenails get professionally clipped which costs $75 as needed.

She hardly buys clothes and any health and beauty is basic since she used to coupon back in the day and has a nice stockpile.

I’m sure she mostly buys hair colour at Shoppers Drug Mart and other medications as needed.

Prescriptions Costs

We’re still struggling to get Trillium to cover part of her meds since we have to jump through hoops to get her Revenue Canada online code to access her information.

Soon, we hope to see this complete so we can perhaps get some back payment or at least some help moving forward until she turns 65 years old when most meds are covered for her.

Paying For A Mortgage During Retirement

What about her mortgage?

Thankfully there was an unknown pension amount that was able to cover paying off the mortgage.

For both of them so close to retirement that was still quite a bit of money to be tied to.

Coincidentally, this is the norm as people struggle to pay to live going tough times.

Selling The Family Vehicle

The vehicle is on the market to be sold so hopefully, that will generate more money to put towards her retirement budget when needed but after that all that, is left is the house and any government pensions.

All of you already know those are very slim with money if you haven’t saved for retirement on the side over the years which makes any retirement budget very tough.

Now that she doesn’t drive we’ve hired a driving companion who picks her up a few times a week to take her around the city shopping and to do things she likes going to bingo, eating out, grocery shopping and sight-seeing.

These things are fun for her and when you see her smile you know it’s worth it.

This needed service is coming at a cost to her and again more money from her retirement budget that she really doesn’t have.

The tough part about dementia is that until you have to deal with it you don’t really know how difficult it can be on everyone in the family.

It’s easy to say what you should do but it often goes beyond that until power of attorney has to control over the situation.

It’s a sad state for many in Canada who are stuck in this situation.

Our mental health services certainly could use a boost for those affected with dementia and those suffering with them.

Increased Financial Options For Retirement

Currently, her options would be to sell the house and buy something smaller but she doesn’t want to move.

When you have an illness deemed not viable enough to be put into a home it’s a tough.

Until she is unable to care for herself her ticket to care in Ontario is slim to none.

The struggle is when there is no one there to care for her and the kids have moved away.

These are things people don’t think about as they age.

We believe our children will be around to help us but that’s not true.

I’m certainly not around for my parents and if you just so happen to need care that your child can’t offer then moving in with them may not be an option.

Selling the house would free up cash for her and her retirement budget would balance a bit better but at this time we are at a stand-still.

Also, the problem with this is that she may believe she has lots of money to spend which turns into a big conflict.

She’s on the ball with her money and knows what she has, that hasn’t changed but she forgets what she did yesterday.

Moving Into Long-Term Care

When you are ill and most likely will be put into a long-term-care facility at some point as your health declines you need money to get the best care.

Sad, but true. If you want to live it up in a retirement home that is cushy with all frills then you need the money otherwise you get what you get with what the government sends your way.

In her area, the costs of living in a home would run her retirement budget $3500 a month but with dementia, we would see that number go up.

We must be prepared for these types of things, at least that’s what this entire year has taught both Mrs. CBB and me.

Not everyone will die peacefully at home without health issues.

That’s almost like winning the lottery of life.

Passing away in your sleep peacefully without the stress of machines, medications and everyone crying over you is the ideal way to go.

Retirement Planning Worksheet

Many older people fear they will outlive their retirement savings but the older you get the less money you will need.

By the time you are in your 80’s staying home or visiting with family and small trips around town seem to be the norm although you may differ.

Preparing for your retirement budget starts far before you retire which means there are a few things you need to consider before you can plan for the future.

Retirement Worksheet Documentation

Creating a retirement worksheet is a vital part of estimating your retirement needs.

One critical point that I’m sure you’ve already guessed is important to consider is your health.

Your health could take a turn at any time, or perhaps it already has, and you must think about how this will affect you potentially moving forward.

Situtations To Consider

  1. Determine your retirement age- What age would you like to retire? Not everyone wants out at 65. Not everyone can afford to retire at 65.
  2. What expenses will you have in retirement- This is where a retirement budget comes in. Whether you are retired or not, create one and see where you will stand in the future. Remember your rate of return on investments, inflation, extra money or earnings, guaranteed pensions, and taxes. (see budget categories below)
  3. Where will the money come from to pay for your retirement budget?- Document all of your sources of income, whether it’s savings, investments, or pensions. You should be able to estimate what you expect to receive. *See the Canada government retirement calculator to quickly guide you through this process.
  4. Compare your projected income with estimated needs- This is interesting because you should always consider your needs and income ahead of time, whether you are retired or not. So, once you know how much money you will net each month in retirement, compare it with your estimated retirement budget to see if you are indeed balancing or at least close to balancing. If not, then you need to make adjustments or save more money by working longer, side income, home business venture, downsizing your home, rent rooms, etc.

Estimate Your Retirement Income Needs

Using a Canadian Retirement Income Calculator you can estimate what your financial needs will be, but the only category you have control over is your personal spending.

This hasn’t changed and will never change whether you are retired or not.

The Canadian Retirement Income Calculator will provide you with retirement income information, including the Old Age Security (OAS) pension and Canada Pension Plan (CPP) retirement benefits.

You will need to work through a series of modules in order to estimate your retirement incomes from various sources. 

Compare them to your goal income.

It also allows you to see the impact of changes in savings behaviour.

The calculator will help you better understand how each pillar of the retirement income system will contribute to your future financial security.

Retirement money is in full swing in the late ’60s and ’70s when retirees are off and away from doing all the things they planned to do with their money if they are still able to.

That is the problem with retirement plans because you just don’t know what your health or life will be like once you reach such age or the time when you retire.

If you still have a mortgage be prepared that you will have to fund the mortgage with any pensions or guaranteed income that comes your way.

No one says you have to retire at age 65, so you see plenty of people still working.

Many older people just like to get out of the house to make extra cash and to chat with people.

I don’t blame them, but if you have enough retirement savings, your options are far more attainable.

You are able to do the things you’ve always wanted to do but didn’t have the time or money because you were socking it away in your retirement savings.

Retirement Budget Categories

Whether you rent during your retirement years or still live in your family home there are costs involved.

The costs may differ slightly based on the rental agreement if you rent and whether or not your mortgage is paid off.

By the time you retire, you shouldn’t need life insurance any longer as your home will be paid in full.

You may however still have investments that need managing either by yourself or with a financial advisor.

I’d strongly suggest making sure your Will is up to date and completed by a reputable lawyer.

After much investigation, Mrs. CBB and I have realized we don’t really need a unique retirement budget so we can continue to use the CBB Budget with slight modifications.

Consider These Retirement Expenses

Your needs will change as should your retirement budget categories so adjust them as you age or as you see fit.

  • Credit Card Debt or other debts
  • Charitable Contributions
  • Mortgage/Rent
  • House or rental insurance
  • Property Taxes, Condo Fees, etc.
  • Groceries
  • Entertainment
  • Dining out
  • Memberships
  • Holidays (Birthdays, Christmas, Easter, etc.)
  • Vehicle maintenance if you still drive (registration, sticker, plates, oil change, and other repairs)
  • Vehicle Insurance
  • Transportation costs may include hired help/companion drivers or community assistance; bus passes; parking passes or taxis, etc.
  • Telecommunications which may include telephone, cell, internet, cable
  • House maintenance may include anything to do with maintaining your homes, such as repairs or replacement costs, landscape care, etc.
  • Health and Beauty (any meds or personal care not covered)
  • Weekly or Monthly Allowance (discretionary spending including travel)
  • Utilities – Gas, Hydro, Water, Water Heater, and any insurance

Expenses After You Retire Are Important

Just because you retire and your mortgage is gone, you still have a bit to take care of financially, so ensure retirement savings is critical.

Some older people may have no other option but to sell and move into an apartment where costs are within their retirement budget.

Discussion: What other considerations have I missed that you want to add to this post?

Please leave your comments below.


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  1. sorry, another thought, if she has diagnosed dementia she would also quality for the disability exemption on her income tax, correct? ann l.s.

  2. I can’t help wondering why you say your M in Law was “left with a small Canada Pension only” when her husband died … why would she not have Old Age Security payments coming in, and if in financial stress add the GAIN???
    ann L.S.

  3. Hi Mr. CBB,
    I have read your blog off and on for some time now but have never commented before. My husband is going to be retiring at the end of this year and we have worked hard at our retirement plan up to this point. It is difficult as you say with all the unknowns, there are the things we hope to do and the things that might happen to change those plans. I have a question with regards to your statement “By the time you retire you shouldn’t need life insurance any longer as your home will be paid in full”. In your view is the only reason for life insurance to cover a mortgage? I am curious because we have had our mortgage paid off for many years now, but have maintained a life insurance policy through my husband’s work and also one on our own. We have been wondering if we should beef up the non-work one as he will lose that when he retires. Is it smarter to invest the money that has been paying for the insurance policy, hopefully getting some decent interest?

    1. Hi Ann,
      That’s a hard question but certainly one I would bring up with your financial advisor as I don’t know what your current policy entails. Your age also plays a role in what route you go. We have term insurance. The purpose of our insurance policy was to have income just in case one of us died. Since our mortgage is paid in full and we are nearing our mid-40’s our advisor is wanting us to go the route of permanent but offered us a few options. The reason for this is that it will be cheaper in the long run, no medicals needed and pay into it for x amounts of years. Even if we don’t use it we still get the money paid back. If we do use it then it is worth more than what we put in from the start.
      Good luck and let me know what you find out.

    2. Ann,

      My first thought is why do you have the life insurance? Is it to cover a debt, to cover the funeral costs, provide additional income for a surviving spouse or possibly to leave a sizable amount for your children? Being clear about your intentions for the insurance will help determine whether you need more, less or any insurance.

      I am 63, my husband is 58 and we have no children and no debt. Our current term insurance expires in 2025 when I am 69 and hubby is 64. I do not plan to renew the insurance because our post-retirement income should be 100% of our current income without touching our non-registered savings or TFSAs. We will have a bit of a buffer with those 2 savings vehicles…if there are medical costs to cover. I also don’t plan to make our heirs wealthy as we depart this world, so my need for insurance is diminishing with every year that hubby gets closer to retirement.

      It’s just my opinion but maybe you need to be absolutely crystal clear about what you want the insurance for before you can decide if you need more, less or any.

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