by Tim Williams, SCSBC Director of Finance ◊
The average age of SCSBC school teachers is approximately 42 years. About 16% of teachers are above 55 years and another 13% are above 50. Therefore I thought it would be prudent to discuss some financial and other tips for retirement planning.
Most Canadians do not have the benefit of a pension plan nor do they have an employer that contributes to a pension or RRSP. They are on the Freedom 85 plan – they will need to work until they die unless they have been prudent or lucky.
Teachers are very fortunate that their employers generally do contribute to their retirement beyond just the CPP contributions. In some ways this gives teachers some excuse for not thinking too hard about their retirement. Recent changes to the CSI pension plan and new retirement age rules for CPP have brought this issue to front of mind for many teachers.
How much do I need to retire?
Currently teachers put 4.95% of the first $52,500 of their salary to CPP and this is matched by their school. In addition, schools often match up to 8.05% of salaries in a pension plan for teachers. The net result is that an equivalent of 20-25% of the teacher’s salary is being set aside towards retirement. Financial planners consider this sufficient for a very comfortable retirement, assuming your home is paid off and you have no major health issues and your funds are invested prudently.
How much do most people need to retire?
Financial planners generally consider that 70% of your pre-retirement yearly salary is needed to live comfortably. It’s important to make realistic estimates about what kind of expenses you will have in retirement. Be honest about how you want to live in retirement and how much it will cost. These estimates are important when it comes time to figure out how much you need to save in order to comfortably afford your retirement.
One way to begin estimating your retirement costs is to take a close look at your current expenses in various categories, and then estimate how they will change. For example, your mortgage might be paid off by then, and you won’t have commuting costs. Then again, your health care costs are likely to rise. There are many online retirement calculation tools but it normally is helpful to seek the counsel of an investment advisor.
What ministry does the Lord have for me when I retire from paid work?
Many teachers are healthy when they retire and of course they are very gifted. Teachers will miss the relationships they have with staff and their students as soon as the first September rolls around after retirement. My counsel is to ensure that you have budgeted for the new ministry that you will have when you retire. If you are overseas teaching on the mission field, or helping to run a thrift store at home, or perhaps driving the RV to look after the grandchildren, it would be prudent to plan your future ministry. Better to “wear out than rust out”! The retiring baby-boomers may be responsible for the largest explosion of missionaries of all time.