Sure you love your job, but do you want to be doing it when you're 90?

You keep hearing it, and it's true: it's never too early to start putting money away for your retirement. But how much? Whether you're years from turning in your employee pass card or already making your retirement travel plans, this guide will help you estimate your retirement income and make a savings plan. Excerpted from What Every Canadian Should Know About Family Finance (Canadian Securities Institute, 1999), it will tell you how to trade in your briefcase for your golf bag.

Three steps in retirement strategy
1. Estimate your total retirement income. The first step is to determine how much after-tax income you will get when you retire. Include income from all government programs such as Canada Pension Plan (CPP) and Quebec Pension Plan (QPP), employer-sponsored pension plans, other retirement income programs and other sources such as investment and rental income and part-time employment.

2. Estimate your retirement needs. The second step is to decide how much after-tax income you'll need. This largely depends on your chosen lifestyle and your age at retirement. If you aren't sure what your needs will be, it's best to pick a target based on a percentage of your preretirement income. Although most financial planners suggest a target of 70 per cent, it's probably wise to shoot a bit higher if you can. People are living longer and it's surprising how fast money can go when you have time to spend it.

Generally retirees find certain expenses are significantly reduced, while others are higher.

Once you've had a chance to consider the effect that retirement will have on your living expenses, compare your estimated income and deductions just before retirement with those just after retirement. For example, if your goal is to generate 80 per cent of your preretirement net income and your estimates reveal that you'll need more than that to fund the lifestyle you want, the difference between the two figures will have to come from personal savings.


Page 1 of 3 - Learn why you should start saving for retirement as soon as possible on page 2.

3. Establish a retirement savings program as soon as possible. The final step is to establish a program to help you reach your savings goal. Most important is to decide what percentage of current income you can set aside to meet your savings objective and how long it will realistically take to achieve it. Next you must decide how your savings will be invested. Finally, retrace these steps every few years to ensure that your retirement plan is still on target.

Analysing your retirement income needs
Next you need to estimate your own retirement income and expenses as well as any savings that might be required to meet your objectives. While it's fairly straightforward to pinpoint what your RRSPs, investments and savings are worth today, the calculations to project their value when you do retire - which could be some time down the road - are rather tricky. Similarly, while it shouldn't be too hard to estimate your retirement expenses in today's dollars, the math to project those costs in retirement is again rather advanced. We suggest that instead of wading through complex formulas, you check out Web sites of banks and other financial institutions. Many, if not all, of these sites have special calculators or programs that will crunch the numbers for you once you supply the required information. When you have the numbers you need, simply add them in the appropriate spaces on the worksheet. For more suggestions, check out your bank's Web site.

Page 2 of 3- Learn what you can do to help bridge the shortfall on page 3

Meeting the shortfall
If you are like most Canadians, this exercise will probably identify a shortfall of how much you'll have available to fund your retirement. Remember, too, that this is only a snapshot. The amount of income you can depend on from government sources may be much lower by the time you retire, so it pays to go through this exercise at least every few years.

If you have identified a shortfall and you aren't planning on winning the lottery, you'll have to develop one of the following strategies to solve your problem.

1. Make maximum use of your RRSP or pension plan. If you aren't already making the maximum allowable contribution to your RRSP or pension plan, do so. These are the most effective places to direct your savings.

2. Resolve to start saving more. Increasing the amount of money you save will probably entail a thorough review, and possibly a reduction, of monthly expenditures, but it's not the end of the world. A more austere budget will force you to choose between nonessential current expenditures and a better standard of living at retirement.

3. Consider increasing your equity exposure. If you have the time to ride out fluctuations in the market, a hard analysis of your current situation might cause you to consider moving more of your investment portfolio into more aggressive assets such as equities. They entail a higher degree of risk than fixed-income and other types of investments, but the rewards, if you have enough time to wait for them, can significantly boost your retirement income.

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Excerpted from What Every Canadian Should Know About Family Finance published by the Canadian Securities Institute and the not-for-profit Investor Learning Centre of Canada. For more investment education and information, visit www.investorlearning.ca or call 1-888-866-2601.