Mobius Planning Corp. - Financial Planner Vancouver - logo in color

Calculating the Cost of Your Retirement

Retirement is a significant milestone in anyone’s life. After years of hard work, you finally get to enjoy the fruits of your labor and pursue the activities that make you happy. However, to enjoy a comfortable retirement, you need to have a solid plan in place.

One critical aspect of retirement planning is estimating the cost of your retirement. It’s crucial to know how much money you will need to support your lifestyle during retirement and what sources of retirement income you can rely on to meet your financial goals. If you need more reasons to develop a retirement plan, have a read of this article, Why Is Retirement Planning So Important?

This article will guide you through the process of calculating the cost of your retirement and exploring different retirement income sources and strategies. With this information, you can feel more confident and secure as you plan for your golden years.

Non-Discretionary Expenses: Understanding and Planning for Essential Retirement Costs

Non-discretionary expenses are the essential costs of living that you cannot avoid. These expenses include housing, food, utilities, and healthcare. To calculate the cost of your non-discretionary expenses, you need to estimate the cost of living in the area where you plan to retire. You can use online tools and resources to estimate the cost of living, such as the Cost of Living Calculator from WorkBC.

When estimating your housing costs, consider whether you plan to own or rent a home. If you plan to own a home, you need to factor in the cost of mortgage payments, property taxes, and regular maintenance, including professional tree services in Victoria for the upkeep of your property. If you plan to rent, you need to estimate the cost of rent and utilities.

Food and healthcare costs can vary depending on your lifestyle and health needs. You can estimate the cost of food by reviewing your current grocery and dining expenses. Healthcare costs can be estimated based on your current medical expenses and anticipated needs.

Discretionary Expenses: Balancing Your Retirement Budget with Fun and Leisure

Discretionary expenses are the costs of leisure activities and entertainment. These expenses include travel, hobbies, dining out, and entertainment. When estimating your discretionary expenses, consider your current lifestyle and how you plan to spend your retirement.

If you plan to travel extensively during retirement, you need to factor in the cost of transportation, lodging, and activities. If you plan to pursue hobbies or other leisure activities, you need to estimate the cost of equipment and membership fees. Dining out and entertainment costs can be estimated based on your current spending habits.

While it is important to enjoy your retirement, you need to balance your discretionary expenses with your non-discretionary expenses. This will ensure that you have enough money to cover your essential costs of living for an enduring retirement.

Inflation: Accounting for the Rising Cost of Living for Your Retirement Plan

Inflation is the rising cost of living (the loss of your purchasing power) over time. Inflation can have a significant impact on your retirement savings. The cost of living will increase during your retirement, so you need to factor in inflation when estimating your retirement costs.

Inflation rates vary, and have certainly been high in the recent 1-2 years, but a common estimate you may use is around 2-3% per year. You can use an inflation calculator to estimate the impact of inflation on your retirement savings. To protect your retirement savings from inflation, you may want to consider investing in assets that will keep up with inflation, such as stocks. Staying in cash and GICs is safe in the short term, but risky over the long term, as your money is likely to lose purchasing power as inflation grows against it.

Life Expectancy and Your Retirement Goals: Estimating Your Retirement Needs Based on How Long You Expect to Live

Life expectancy is the estimated length of time you will live. Life expectancy can have a significant impact on your retirement planning. The longer you expect to live, the more retirement savings you will need to cover your expenses.

To estimate your life expectancy, begin by referring to the Canadian Pensioners’ Mortality report prepared by the Canadian Institute of Actuaries. Next, consider the state of your health, your medical history, along with the age and health of your parents. Once you estimate your life expectancy, you can use this information to estimate the length of your retirement and the amount of money you will need to support your lifestyle.

It’s important to note that life expectancy is not an exact science, and there are many factors that can impact how long you will live. However, estimating your life expectancy can help you make informed decisions about your retirement savings.

Paying for Your Retirement: Exploring Retirement Income Sources and Strategies to Meet Your Financial Goals

Now that you have estimated the cost of your retirement, you need to figure out how to pay for it. There are several sources of retirement income that you can rely on, including:

Canada Pension Plan (CPP)

The CPP is a contributory, earnings-related social insurance program that provides a basic level of retirement, survivor, and disability benefits to eligible individuals. CPP is funded through mandatory contributions from employers and employees, as well as through investment income. The amount of benefit received from CPP depends on the individual’s contributions and years of contribution. CPP benefits can be claimed as early as age 60, but if claimed before age 65, the benefit amount is reduced.

Old Age Security (OAS)

OAS is a non-contributory, income-tested social assistance program that provides a basic level of retirement income to eligible individuals who are 65 years of age or older and who meet certain residency requirements. The benefit amount is not based on contributions but is instead determined by the number of years the individual has lived in Canada after age 18. OAS benefits can be delayed until age 70, with the benefit amount increasing for each month delayed. The OAS benefit is subject to a clawback for high-income earners.

Retirement savings

Retirement savings include RRSPs, RRIFs, LIRAs, LRSPs, LIFs, TFSAs and other investment accounts. You can withdraw money from your retirement savings to cover your retirement expenses.

Pension plans

Pension plans are retirement plans offered by some employers. Pension plans provide a guaranteed income stream during retirement.


Annuities are financial products that provide a guaranteed income stream during retirement.


There are many strategies you can use to maximize your retirement income. For example, while most Canadians choose to start CPP and OAS early, you may want to consider delaying commencement of your CPP and OAS benefits in order to receive a higher benefit amount. You can also consider working part-time during retirement to supplement your income.

You will want to coordinate your investment account withdrawals in a tax-efficient manner. Be aware that every decision has a ripple effect on other elements of your financial and tax situation. Coordinating such decisions in a life-conscious and tax-conscious way is critical to increasing your retirement income.

Calculating the cost of your retirement is an essential step in retirement planning. You need to estimate your non-discretionary and discretionary expenses, factor in inflation and life expectancy, and explore different sources of retirement income to ensure that you have enough savings to support your lifestyle. Not just for a few years, but for an unknown number of decade(s) to come.

While retirement planning can seem overwhelming, taking the time to plan and prepare can help you enjoy a happy and financially secure retirement. You can also schedule a free consultation with our retirement planner here.

Table of Contents