Retirement is one of those things that many people look forward to. After spending multiple years working, it feels good to relax and enjoy. But the cost of retirement can be a source of worry. Given that it varies from one location to another, it’s only right to ask about the cost of retirement in Nova Scotia.
Nova Scotia is one of the best provinces to retire. The cost of living here is affordable, and the price of real estate is low all over the province. The average cost of living in Nova Scotia is CAD2,101.22 per month which means the annual cost of retirement is between CAD17,650 and CAD25,214.
However, there’s more to retirement than knowing how much it’ll cost. There are several factors at play, and you need to plan. This article discusses the cost of retirement in Nova Scotia, Canadian preparedness for retirement, and how you should plan your retirement.
How Much Does It Cost to Retire in Nova Scotia?
Determining the cost of retirement is relatively easy using a rule of the thumb, which is that retirement will cost each individual between 70% to 100% of their pre-retirement income. This means in a place like Nova Scotia, where the average cost of living is CAD25,214 (without rent), you will need at least an average income of CAD17,650 to maintain the same standard of living you had pre-retirement.
How to Calculate Retirement Income
In arriving at an exact amount, you need to consider that you’ll be spending less on transportation to work, housing, savings, tax, etc. But you may also have to spend more on utilities, healthcare, and hobbies. You also need to consider the retirement age and life expectancy.
Although there’s no statutory age for retirement, 65 is generally considered the retirement age in Canada. That’s when you can enjoy the full benefits of Old Age Security (OAS) and Canada Pension Plan (CPP).
If you retire at that age, you need to consider the life expectancy in Canada, which is 81.95, then multiply the amount you need for retirement by the number of years between 65 and the life expectancy. That way, you have an idea of how much you need to save while working to maintain your standard of living when you retire.
How Prepared Are Canadians for Retirement?
A Scotiabank survey released in 2020 shows that most Canadians believe they need savings of at least CAD 697,000 to retire. While it’s true to an extent, the cost of retirement differs from one place to another. In addition, it appears that most Canadians aren’t prepared for retirement. This is primarily due to the lack of employer-sponsored pensions and the low returns from government retirement initiatives.
A meager 34% of the Canadian workforce have employer-sponsored pensions. The number is 38% in Nova Scotia. But it remains low when you realize that the rest of the workforce have to depend on the Old Age Security (OAS) and/or Canada Pension Plan (CPP) or save for their retirement.
The best option, of course, is saving for their retirement. However, merely relying on the CPP and/or OAS is risky. It could lead to a massive decline in the standard of living or even a life of poverty after retirement. In order to be eligible for CPP, you must have contributed to the plan while working. Not only that, the maximum payout you can get per month is CAD1,100. This means your whole annual income post-retirement, if you’re relying on CCP, is CAD13,6000. This is a far cry from how much you need to retire comfortably.
How to Prepare for Retirement
Here are some tips to help you prepare for retirement in Nova Scotia:
1. Know Your Cost of Living
The cost of living is highly essential as it’ll determine how much of your retirement savings you spend on living expenses. Whether you’re moving from another province, country, or you’ve always lived in Nova Scotia, the difference between the cost of living may be higher or lower.
However, you don’t necessarily have to spend more when retiring in Nova Scotia. This is because the cost of living in Nova Scotia is generally one of the lowest in the country.
2. Calculate How Much You Need for Retirement
While there are national and provincial averages, what eventually determines your retirement need is your expenses. You can use a retirement calculator to get started, but that cannot replace an expert’s opinion. Therefore, use the services of a financial planner to determine your retirement plans.
3. Start a Retirement Plan
If you’re working in the public sector, chances are you’ll have a solid pension plan. This isn’t surprising considering that 88% of those working in the public sector have a pension. Moreover, the returns on a pension are usually good since the pension plan is financed by both the worker and taxpayer money.
It’s those working in the private sector that’s actually in need of pensions. Only 25% of those in the sector have a pension, and those people are usually working with big companies that can afford pension plans. Small and medium-scale companies rarely have the capacity to fund pension schemes. It’s, therefore, vital that you make retirement plans from the onset of your job.
It’ll also help if the government can also extend tax fundings to pension plans from a private company. Opening the RRSP account very early will also prove very helpful in achieving your retirement goals.
Nova Scotia is an excellent place to retire its low cost of living, low taxes, choice of real estate property, and pleasant weather. The healthcare system is also great and particularly suitable for the elderly. However, for you to enjoy your retirement in any part of Canada, especially Nova Scotia, you need to know how much retirement will cost you and start planning for it early.