Raggedly Rich

Canadian Finances, Musings, and Art

Your Financial Story Arc: Retirement

What’s plot got to do with personal finance? Everyone’s financial journey resembles a story arc, complete with plot twists, plot holes, drama, and conflict. We’ve gone through how to start earning money, and some tips for that. And there was a post on building net-worth, and the steps in accomplishing that. Now we’re going to talk about retirement, and how to figure out where that climax of your financial story arc is.

Ahhh, the golden goose. Or something. I imagine my own retirement will look more like a raggedly, deranged owl, but who’s to say?

Retirement seems like a pretty easy topic to tackle – you finish your working years, and you retire. Jazz hands, right? Sailing away into the sunset and lounging around relaxing all cool, shooting some b-ball outside of the school, when a couple of guys who were up to no good, started making trouble in the neighbourhood – I digress. But! Mr. Smith has a point.

You can be coasting along, minding your own business, get caught up in bad timing or emergencies, and end up having your whole life ‘flip-turned upside down’. You need to anticipate for the unexpected to happen, and do your best to avoid it, so you can retire and lounge back and deal with those trouble-makers without a sweat.

The obvious place to start, then, is figuring out how much money you need to retire.

The Math Behind The Number…

… which I’ll leave to the experts.

Mr. Frugalwoods, over at Frugalwoods says, “The simple answer is 4% a year from a portfolio of 75% stocks and 25% bonds.” You can check out his math here, but he seems like a pretty good math-er.

Mr. Money Mustache agrees by saying, “4% is a perfectly good answer, which means 25 times your annual expenses is a perfectly good goal to save for”, and you can check out the entire post here.

Now I suck at math. I’m really, really, really bad at math. But everyone seems to agree that to retire, you need about 25 times your annual expenses, and I’m inclined to believe them. I’ve read the math, I understand the math – I cannot explain the math. But I’ll wait right here if you need to go check for yourself…

What perspective I can offer though, is:

How to Calculate Your Annual Expenses

The first step to figuring out your finances, is calculating your annual expenses. This is every dollar and cent that comes in and out of your accounts, whether it’s from income, dividends, expenses, debt payments, trips for .05 candies for kiddos and adults alike. In order to figure out how much you need to save, you need to figure out how much you currently spend.

When I’m abroad, living by myself, I usually spend about $1,500 a month (which includes $600 – $700 in rent/utilities). Now, I wouldn’t want to live in crappy apartments with ornery roommates in my retirement, so hopefully by that point I have a place of my own, or rent a nice place.

But say I retire with my current lifestyle, how much would I need?

$1,500/month x 12 months = $18,000/year

$18,000/year x 25 (25 times your annual expenses) = $450,000 in stocks and bonds to retire

Grab a pen and paper, and figure out how much you spend each month. Take these points into consideration:

I probably couldn’t enjoy this on my $18k a year

  • Am I eating out as often as I will when I retire? (you might have more time to cook in retirement, or alternatively, want to eat out more)
  • Will my transportation costs stay the same? (do you travel far to work? Or work from home and anticipate more travel when you have time to go places?)
  • Will my vacation and activity expenses stay the same? (are you aiming for a jet-setting retirement filled with travel? Or a modest retirement where you stay home and read books all day?)
  • Will I own my own home, or will I rent? (this might be a huge expense you no longer have to worry about if you own your home – but it will be replaced with regular home maintenance, which could run you just as much as rent)
  • Will I have to invest in a health plan? (this is also different for those south of the border – but even in Canada, the cost of prescription drugs as you grow older might make insurance worth looking into, which will likely be paid out of pocket)
  • Are you going to have family and friends you want to dote on, and be able to help support them? Are you going to want to be able to finance vacations, parties, and get-togethers?

How To View Your Retirement

Are you going to be sitting around at home doing nothing? Spend your time volunteering? Continuing your income generating AirBnB, coding business, baking hobby? Tending to a passive income project?

Retirement doesn’t have to mean you stop working. And if you’re planning on dabbling in some part-time work, your retirement figure might not be as high as you think it is. I don’t think I’m ever going to stop working, but how I engage in that work will likely shift the older I get. I think I’ll always be writing barring something crazy happening, and I’d like to work in the arts / organization and planning industry for as long as I find it enjoyable.

And who knows, maybe I’ll find something I like even more than that, like flipping houses or becoming an editor. Don’t pigeon-hole yourself into a future when you don’t know what that future will be. Life changes, things change, and while you probably have a good idea of where you want to be in retirement, keep and open mind and remember to be flexible.

When Does Retirement Happen?

The answer’s going to be different for everyone. I like to say that my parents are ‘basically retired’. If they walked away from their jobs today, I think their finances are in a place where they would be okay. But they keep working and saving money, investing, and take 4 – 6 weeks of vacation time every year. It’s what works for them, and they’re both waiting to ‘officially’ retire until they reach the age where they’ll be eligible for their pensions.

I took this photo!! the dream: start a B&B here and get my family to join me for at least 6+ months a year

As always – be honest with yourself, with what you want, and how you can get there. Being raggedly rich doesn’t mean you deprive yourself of the nice things – it means picking and choosing what’s important to you, and seeing the value in things beyond the cosmetic. It’s all about priorities, and having the patience and determination to get what you want out of life.

Do you think the 4% rule will work for you? What are you hoping your retirement situation will be like? Let me know!!


  1. I think the 4% rule is a great place to start! For us, we may even try to pull what the folks at Slowly Sipping Coffee (great blog BTW!) call a Fully Funded Lifestyle Change (FFLC). FFLC is more of a shift vs retirement. The goal would be to save enough in investments, then quit jobs and supplement your investment income with enjoyable job/passion project income. I think that is how “retirement” (aka- retirement from the 9-5) would look if we take the earlier route 🙂 We’ll see!

    • Ooh I love this idea, Mrs. AR! That’s sort of our plan with becoming location independent. It isn’t a fully funded retirement, but it’s definitely enough to live on with a supplement!

      I just read a Motley Fool article that cracked me up, on how to figure out how to save for retirement. Advice was, “Either save 20% of your income until 65, OR save a million dollars, and you’ll probably be ok, OR calculate you’ll spend 80% of your expenses, OR try and figure out how much you’ll need in retirement.” I was shouting at the computer, “OR just save up 25x your annual expenses, dudes!!”

      My dad asked me this question this summer and it was so fun to be able to have such a simple answer. But, of course he didn’t know their annual expenses. So he’s been tracking… (progress, however slow, is still progress).

      • Ms. Raggedly Rich

        August 31, 2017 at 4:20 pm

        … that’s so complicated. How is anyone supposed to get fired up about saving if they can’t understand what they’re aiming for? Reading that article would have me sticking my head in the sand, if that was my first exposure to it!

        Way to get him on tracing expenses! That really is the best first step. And the nice thing is, if you’re aware, you can always adjust here and there during retirement to wiggle that 25x around a bit : )

    • Ms. Raggedly Rich

      August 31, 2017 at 4:18 pm

      Ooo, that sounds perfect! I feel like I’m gunning for the Fully Funded Lifestyle Change right off the bat 😛 If I can save enough of what I make, and live a modest enough lifestyle, I should be able to just do what I love all the time… it might be a pipe-dream, but so far it’s going okay!

      Thanks for the blog rec! I’ll definitely check it out 🙂

  2. I think the 4% rule is perfectly fine for most everybody. Of course, since it is 25X your expenses the number is different for everyone.

    When I am finally retired I think I would be happy to hang out at home and do things that interest me. When I get bored, well I can jump on any travel opportunities that appear. Would be great to be able to jump on the travel deals whenever you wanted to since you own your life and don’t have to work. Off season, special deals, that sorta stuff.

    I am a bit of a different case though, as I will have a decent pension to go along with my investments.

    • Ms. Raggedly Rich

      August 31, 2017 at 4:22 pm

      Expenses and lifestyle are so dependent on so many different things, I feel like a percentage / x amount is the best route to go. Mine is gonna be a lot different than basically any of my friends and family!

      Ooo, you’re so right. Wouldn’t it just be amazing to be able to scoop up that ‘Hawaii for $100 round trip!’ deal. I haven’t thought about that plus side of the flexibility!

      Thanks for stopping by 🙂

  3. I can identify with your honesty “I’ve read the math, I understand the math – I cannot explain the math.” Thank you! 🙂

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