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The Real Retirement: Why You Could Be Better Off Than You Think, and How to Make That Happen by Bill Morneau, Fred Vettese

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Appendix C: NRIT Charts

The neutral retirement income targets (NRITs) shown below have been prepared under various scenarios and for a range of income levels. They include RRSP savings rates needed to reach those targets and the account balance you should be aiming for within your RRSP by retirement age.

Common Assumptions

1. The household includes a couple, both of whom are wage-earners.
2. The focus is on households in the upper three income quintiles: the bottom two quintiles earn less than the average national wage; most can expect additional pension on a means-tested basis.
3. The couple own a home and have paid off the mortgage by retirement.
4. The mortgage payments represented 25 per cent of their gross household income for 25 years.
5. Contributions are made to an RRSP at a constant percentage of pay starting at age 30.
6. The RRSP earns a return after fees of 5.75 per cent per annum.
7. The RRSP is transferred to a RRIF at retirement and earns the same 5.75 per cent annually.
8. The income that is withdrawn from the RRIF increases annually with inflation, assumed to be 2.25 per cent per annum.
9. The couple receive a CPP pension that is 10 per cent less than the maximum payable at their earnings level. The 10 per cent reduction reflects more years of low earnings than the 17 per cent dropout provision allowed by CPP.
10. Any expenditures not incurred every year in the pre-retirement period are assumed to be spread evenly over 35 years up until age 65.

Scenario 1

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