Retirement is an event for which everyone must plan carefully. However, the exact amount needed for retirement varies widely due to differences in desired lifestyle. Retiring in Canada is no exception. Although Canadians have the advantage of socialised health care, they also have a high tax burden that cuts into their retirement savings.
The cost of living in Canada is approximately equal to that of the United States, although it varies widely between cities and rural areas. If you are covered by Canada's socialised health care system, you will not have to worry about medical costs, but remember that the higher taxes cut into your savings as much or more as medical insurance might.
Many people find that their living expenses decrease during retirement because they no longer incur work-related expenses like commuting, business clothing, lunches out, etc. However, if you have expensive hobbies like travel, wine or antiques, you may find that your living expenses are greater once you have time to participate more fully in these activities.
Canada recently began offering tax-advantaged retirement savings accounts (similar to IRAs in the United States) to all of its wage-earning citizens. If you are a citizen of Canada, be sure to take advantage of these savings vehicles.
Most experts consider 4 per cent a safe annual rate of withdrawal from your retirement savings accounts, meaning that by withdrawing no more than 4 per cent annually you will preserve your principal and allow it to grow slightly, creating protection against inflation. If you have a nest egg of £0.6 million, this means you can safely withdraw about £26,000 per year from your retirement accounts.
If you are retiring to Canada from another country, remember that you will not receive the social benefits that Canadian citizens receive. Currency values fluctuate wildly, and while the Canadian dollar is currently worth less than the Euro, Pound and American dollar, this may not always be the case. The Canadian government may also require you to prove that you are financially able to support yourself before allowing you to set up residency in Canada.