This October, Steadyhand took The Commons across the country, seven cities, from Victoria to Ottawa. (If you missed it, read the recap). Lori Norman and I led the session on financial planning, and one question came up in almost every room: how much do you actually need to retire? 

We're going to keep answering some of your questions here over the next few posts, starting with this one. 

A common rule of thumb says you'll need about 70% of your pre-retirement income. It's easy to remember, but it can miss your real number in either direction. Here's why, using two real-shaped Canadian households. 

Diane and Paul are in their late fifties. They've rented the same apartment for twenty years and don't have children. Diane has tracked their spending in a spreadsheet for as long as Paul can remember. 

Jordan and Amira are in their early fifties, with three kids and a mortgage. They put everything they can into their RRSPs and the kids' RESP, and they have no idea what they spend in a month. 

Both couples had heard the same 70%-of-income rule. It's a common guideline, not the result of any single study, and it says nothing about how either couple actually lives. 

Starting from a budget 

Because Diane and Paul already track their spending, they could work straight from their budget, the most accurate way to find your number. Line by line, they asked one question of each item: will this still be here when we retire? 

Most of it will. Rent continues. So do groceries and most other bills. The main thing that ends is their saving, and the travel and higher health costs they're planning for more than replace it. 

They bring home about $7,000 a month today. Their real number came out to about $6,800. 

The 70% rule would have given them about $5,700, roughly $1,100 short of what they'll actually need. 

Starting without a budget 

Jordan and Amira don't keep one, and most people don't. There's another way in: start with what lands in your account each month, subtract what will stop when you retire, and add back what will start. 

What they'll need, after tax: about $5,000 

That's roughly half their take-home pay. The 70% rule would have pointed them toward about $7,900, which could have them saving harder, or working longer, than they actually need to. 

The same rule, two different answers 

One household's number came in under the rule. The other came in well over it. A single percentage can't tell those two situations apart. Starting from what a household actually spends can. 

If you already keep a budget, use it, it's the more precise method. If you don't, this shortcut gets you close enough to plan with. As I said at The Commons: approximately right beats precisely never. 

What comes next 

Once you have a number, the next question is whether your savings, pensions, and government benefits can actually cover it, and for how long. As Lori likes to say, a plan is just a point in time. Yours will need updating. 

If you'd like help working out your own number, your Steadyhand Wealth Advisor can go through it with you. 

The examples in this article are hypothetical and for illustration only. They are not a projection, financial advice, or a recommendation, and your own numbers will differ.  Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.