Ellen Roseman, a personal finance columnist for the Toronto Star, was on The National tonight. The special segment, which may be still be posted here, asked the question: “Why aren’t Canadians saving enough for retirement?”
Well, one reason is because we do not know how much to save. Ellen tells us that we should look at the income that we think we will need at retirement and multiply that amount by 20. That amount, if taken out at a safe withdrawal rate of 4 percent, should produce the desired income without fear of outliving the capital.
The example is captured below. To produce $50,000 per year, you multiply that amount by 20. And you arrive at $2 million. Hmmm.
I guess Ellen Roseman and the CBC do not know how much to save for retirement either.
What was most interesting is that neither the anchor nor the columnist showed any surprise at the result. I guess they did not have a calculator with them.
Yes. That should shock the viewers into saving for retirement. Who cares whether the math makes sense. $50,000 times 20 is $2 million. Job done. On to the next story.
Little wonder Canadians are confused about financial planning.