How much does it cost to EAT in retirement?

It costs $410,625 to eat in retirement! That sounds preposterous, but it’s very accurate. I’ll show why in a minute. But why am I asking this? Why do you care? Simple, with so much going on in our lives today and all the access to information available, many people fail to look at just the basics when it comes to retirement.

I have read hundreds, if not thousands, of financial planning articles touting the merits of this solution or that one, RRSPs versus TFSAs, where can I find a tax break, what to look for in an advisor, different debt products, why I need insurance, telling me to save more for the kids education. As an advisor they all have great information, but I too, can get ANALYSIS PARALYSIS!

In previous writings, I have brought up the idea of preparing for retirement, that it takes time to find the things you are going to occupy yourself with, what they may cost, and why it’s important to build a plan. Those costs will vary depending on what you want your life to be like. I can’t tell you what those things are – it is YOUR retirement! My job is help you find what those things are, and show you how to pay for them.

Your home may be the one you’re in right now, or a condo, or for some it might be a palapa hut on a beach someplace warm. It may be an RV, coach or bus because you plan on traveling and seeing many different places. That again will be based on your ideas and dreams, and to achieve them will take planning. There is also potentially a surprise element, as you may find things and places along the way that you will want to experience but weren’t in your original plan. We’ll address this in another article.

One day, you won’t be here anymore and for some of you, a desire to do good for others may have been part of your plan. Whether you want to help family and friends, charities, schools or universities those decisions take time and proper planning to ensure your wishes are granted.

But the above is not why you’re reading.

I’m going to give you a formula so simple, many people say it can’t be true. I told you that it costs $410,625 to eat in retirement. I didn’t take into account many factors that you might or will come across in your life, but it’s a great base to build from. In fact once seeing it you may say the number is actually light.

Here goes:

  1. Primarily in retirement, we have to plan for two lives.
  2. Most people eat three meals a day.
  3. I think it is fair to assume we all have the same 365 days in our year.
  4. Many people today aim for a retirement of 60 this means 25 years of retirement (a couple on average living to age 85).
  5. According to Stats Canada, the average cost of a meal is $20.17, but for this example I used $7.50, which I feel is more realistic as seniors tend to eat lighter, not eat out as often, have better shopping habits etc. If we used $20.17 it would equate to over $1.1 million in food cost.

Now that you have the reasoning: 2 x 3 x 365 x 25 x $7.50 = $410625

The idea of needing over $400,000 just to eat in retirement is scary for some people and an eye opener for many. This doesn’t include any of the other needs or wants mentioned above. It isn’t your bills, entertainment, health costs, or housing expense. As CPP and OAS will only provide a maximum of $300,000, if you start collecting at 60 AND are fortunate to live to age 90, the above formula suggests that retirement planning needs to start early.

Food For Thought!

Daniel Frost
Financial Advisor – The Frost Group