I read a lot about early retirement on blogs like the Frugalwoods and Mixing Maroons, and of course, most people reading any sort of personal finance blog know of Mr. Money Mustache… I know I have a long way to go before I can count myself anywhere near their frugality and financial awareness and responsibility, but I thought it might be a fun experiment to see what the calculations would tell me, and maybe it would be enough to get me motivated to increase the contributions to our RRSPs and TFSAs.
Using quick math and estimates, and the fancy shmancy retirement calculation from Networthify.com, I was told that with my current savings rate and expenses, I would be able to retire in 58 years. Yup. Probably going to want to retire before then. That is with my current and measly $200/month contribution to my RRSP. I know I need to increase that…
So I decided to get crazy… what if I am able to decrease my spending and expenses, and somehow only live off of 50% of my income, which seems to be a magic number in the personal finance world… I could retire in only 15 years! That is more like it! I could retire before I was 50! I’d only have to be putting away $3200/month. No big deal.
And while that’s fun and all, and something to work towards, I decided to figure out what I need to do in order to be comfortable retiring around 65 (the traditional retirement age). This should be the minimum that I contribute. So I ran the numbers again with 25 years as my target, and came up with around $2000/month as my minimum contribution. So I have to up my contributions by 10 times what I am doing now. And that is just to be on track for retiring at 65. Yikes!
I’m not sure if that is motivating, or discouraging…
As I mentioned in the review of my goals earlier this week, I have almost reached the $48,000 goal for my RRSP (thanks to “found” money) and have updated my goal to $50,000 by the end of the year. If I were to keep my $200/month contributions, I would be relying on market increases to get me past that goal, however, if I were to increase my contributions to $400/month I would be able to get to that goal without any help from the market (provided the market doesn’t tank).
While $400/month will help me with my 2015 financial goals, it still only decreases my years to retire to 53 years. But I think it is a good place to start. If I can get comfortable living off a little bit less, then I’ll be able to increase it again in the future.
So, that’s what I am going to do. I’m going to give my RRSP guy a call next week and increase my automatic withdrawal from $200 to $400. No excuses here. Please call me out on it if I don’t report back saying I’ve done it.
Have you ever played with the early retirement calculators? Are they motivating for you? Or does it seem overwhelming and discouraging?