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Financial advisers often say you will need a retirement income equivalent to 80 per cent of your pre-retirement income. But is that too much? Could you get by with less?

A wealth management study from the Bank of Montreal released in June revealed that Canadian retirees spend an average of just $2,400 a month, or $28,800 a year. Housing accounted for the largest single monthly expense. On the other hand, 55 per cent have spent $10,000 on more on a single splurge during retirement, including the purchase of a new vehicle, home renovations or a gift to a family member.

Given these expenditures, the company behind the study feels 80 per cent is still a good figure to aim for.

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"Even though we came out with a dollar figure instead of a per-cent number, when you do the math, $2,400 a month per retiree is quite reasonable. It's not as low as many Canadians believe it is," says Robert Armstrong, vice-president of BMO Global Asset Management.

In fact, on average, Canadians have that amount to spend in their working years, according to the BMO study. The average working Canadian earns a little more than $49,000 a year, according to a Statistics Canada report from February, and once income taxes are accounted for, the remainder is close to the $2,400-a-month mark that the BMO study found.

Of course, individuals should envision the kind of retirement they want, then draw up a plan that allows them to reach their specific goals.

One expert suggests that you retire to something rather than from something. Daniel Roy, founder and chief executive officer of Praxis Wealth Management in Ottawa, is a certified retirement coach, financial planner and author of The Essential Guide to Retirement Readiness. Pre-retirees should figure out what kind of lifestyle they want to have and then break it down into three distinct stages: the go-go years, the slow-go years, and the no-go years.

Retirees typically need more money to partake in all the activities of the go-go years, while the no-go years may require more health-care funds.

"You need to have the financial structure in place that's going to pay for those things," Mr. Roy says. "Does it mean [you will need] 100 per cent of your pre-retirement income? In some cases I've got clients that are at 100 per cent, others are a lot lower than that.

"You have a wide range of possibilities there, but definitely somewhere between 60 and 100 per cent of your pre-retirement income is what you should be looking for."

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While some spending will be lower in retirement, such as the money spent on commuting and business attire, he says that a lot of parents – particularly those who have children later in life – will be paying for their offspring's education or helping them with the down payment on a property.

People in the "sandwich generation," meaning those who retire in their 50s and 60s and end up on the hook for paying for care of their aging parents as well as their children, are going to need 100 per cent of their pre-retirement income, he says.

Those who give money to a family member should consider that it may never be repaid, so it shouldn't be part of financial retirement planning.

Another situation that can jeopardize retirement planning is carrying a mortgage, says Mr. Armstrong.

Having a mortgage paid off can reduce the amount of income needed in retirement by 10 to 15 per cent, says Charles Farrell, a financial planner and author of Your Money Ratios. That should be reason enough to pay it off or downsize or continue working in retirement to make the payments.

"If interest rates do get higher in a year or two, I think there's going to be a lot more pressure on people to definitely take one of those actions to get out of a mortgage in retirement," Mr. Armstrong says.

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Another way to ensure a sufficiently funded retirement is to save 10 per cent of income, which is fine for those who start early enough, but a lot of people don't, meaning they may not have enough to continue their preferred lifestyle. Those who love gardening and spending time at home with friends and family may get by, but those who dream of travelling the world may have to reassess those goals.

Patrick French, director of retirement and financial planning for Edward Jones in Mississauga, says 70 per cent of the clients he meets have not calculated how much they will need for retirement. "I guess 80 per cent is going to be fine, but it depends on what you want to accomplish, what you want to achieve."

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