Retirement "Planning", Bank Style

Having passed the terrible age of 40, I've been paying slightly more attention to what the heck I'll be doing after my last employer shuffles me out the door. Because I've been working in software for the past twenty years, I don't have any pension entitlements from any of my various employers (most of whom are no longer in business, at least under the original names). I could, of course depend on the Canada Pension Plan and Old Age Supplement from the government.

Okay, now that we've had a good laugh. . .

There's almost no chance that I'll be entitled to anything from the CPP, because by the time I'm old enough to draw from it, it'll be so far into the red that they'll be doing everything they can to exclude claimants and increase claw-backs. Anyone over the age of 35 who's depending on the Canadian government's largesse will be eating cat food and scouring rubbish piles by retirement age, unless they take some provision for themselves.

I've been saving money in my registered retirement savings plan, although I've never been able to afford to put away the legal maximum for my income (I've come close, but never hit the max). This is literally the only tax dodge available to Canadians earning less than $200,000 per year: the money you save in that year is deducted from your taxable income and the interest it earns is also tax-deferred until retirement.

This means I'm saving a theoretical 14% of my pre-tax income as provision against starvation once I retire. Sounds reasonable, no?

According to the banks, no. If you go to any of the major Canadian bank websites and look at their online retirement planning tools, you'll discover that no Canadian can ever really afford to retire. In my case, going on the (doubtful) assumption that I continue to earn the same as I do now until I retire, I need to save approximately 105% of my pre-tax income in order to barely maintain my standard of living after retirement. If I manage to stay employed for a few years after age 65, I cut that down to needing to save only 94% of my pre-tax income.

In the most hopeful scenario, where I work until age 78 and die the same year, I won't go bankrupt.

Okay, I'm exaggerating, but not by much. I've always found it depressing to do this sort of planning, and the bank websites (which of course are biased to encourage you to keep more money with them) sure don't help. For example, the CIBC retirement calculator says I need to save just over 75% of my take-home pay every month in order to be able to retire at 65. Aaaaggghhh!!!