Cassie wrote a post called "I don't think I want to be rich" wherein she looked at where she'd be if she didn't change a thing and continued to do what she is currently doing.
This made my planning heart smile, and I wanted to see what I'd be looking at if I did the same thing.
For the purposes of these calculations, I'm going to assume I retire at 65 and that I will live for 25 years in retirement. While I do hope to retire early, I think that dying at 90 is about right. My maternal great grandmother lived to be 96 (I think) and my paternal grandmother is in her late 80's.
I'm also going to assume a 4% rate of return on both my pension and my RRSP. This is fairly conservative.
As it stands, I have a pension of 16% of my wage. I contribute 6%, and my employer contributes 10%.
Assuming I never get a raise, and that I never leave my job and keep working away and contributing to this pension at the same rate, this is around $306/month.
My pension will be about $544,746 if I never do anything differently.
I also have an RRSP. This is a vehicle that I contribute to alone. I contribute about $100/month, which isn't a ton but will increase eventually I'm sure.
But assuming that I continue to contribute only $100/month for the rest of my working life, at a rate of 4%:
My RRSP will be about $181,717 if I never do anything differently.
This is a combined total of $726,463, or $29,058.42/year if there is no return on the remaining balance at all.
I'm a huge advocate for home ownership, and can't imagine renting for life. Because of this, the boy & I plan on buying a home in early 2013.
Assuming that we get a house for $450,000, and the market does absolutely nothing in 40 years (for the purposes of this post. I don't actually think it's going to be stagnant for 40 years, or even 1 year), and we stay in the same house for the entire time and never move (unlikely, but let's just pretend), and we don't do any improvements on our home at all, we would have $450,000 in real estate when we retire.
If we buy a house in 2013, I'll be 24 when we bought it and, assuming we don't try at all to pay it off more quickly than the 25 year amortization period, we'll have the house paid off when I'm 49 and the boy is 52.
Assuming that we won't want to upkeep our house when we're in our 60's, we'd likely sell and buy a condo or a townhouse, which are substantially cheaper. So I'm sure we'll come out ahead, but:
By the time we're 49 and 52, we'll have $450,000 worth of equity in our future house.
I don't like including vehicles and the like into net worth calculations because frankly, they're a depreciating "asset" and to me it's like including my coffee machine in my net worth calculation. Yes, I could sell it for money should I be desperate enough but would I? Likely not.
So, I'm not going to include them. In retirement, I'm not going to be taking the bus with the hooligans (I don't even do it now - why would I do it when I'm 65?) and adding my car into this calculation really won't do much for me.
We would also love to eventually buy a recreational property near a body of water (how's that for a blank canvas) but because I've assumed in this calculation that I'm never getting a raise, I wouldn't be able to afford it anyway on my salary until after we paid off the house, so I'm not going to include that in this calculation either.
The assets from our real estate purchase will bring us to around $450,000, if there is no increase in property value at all in 40+ years.
Total: If I only have my savings and the value of the property involved, at retirement, I will be worth $951,463 (retirement accounts + 1/2 property value (other half going to the boy)).
Is this adequate?
I don't know. Assuming we never sell the house and live in it until death (no downsizing), and my retirement accounts grow not at all when I'm retired, and also assuming that we simply squander all of our would-be mortgage payments irresponsibly instead of saving it once it's paid off, I would be living on:
This isn't half bad since there would be NO mortgage payments at all, and this is not taking into account any government pension (in the case that it still exists) or my husband's retirement account. This is for JUST me.
Do you think $29,058.52/year is livable in retirement? What does your retirement forecast look like?