Saving for retirement: How much is enough?

Chew on this: the Canada Pension Plan was designed to replace only about 25% of the average industrial worker's income upon retirement. That's just $11,800 annually based the 2010 industrial average salary of $47,200.

Between the CPP and OAS the government will pay out a maximum of $17,400 a year to the average 65-year-old.

That's just $1,450 a month to cover basic expenses including rent or mortgage (if you have one during retirement), condo fees, taxes, insurance, food, clothing, transportation, entertainment, and long-term care expenses if necessary.

So much for carefree sailing around the globe.

Haven't got a cozy pension plan to make your retirement dreams come true? You're not alone. Only 38% of all paid public and private employees in this country have a company-sponsored plan to fall back on in retirement, according to The Bank of Montreal's most recent assessment.

BMO says Canadians are confused when it comes to financing their retirement. They find the range that people feel they need to maintain their current lifestyle ranges from $550,000 to more than $1 million.

Robert McCullagh, vice chair with the Advocis Board of Directors, and a financial advisor with more than 25 years experience, says aiming to replace 70% of your income serves as a good rule of thumb for a couple of reasons.

Not only is it the "magic number" that guides most company plans (2% of income per year for 35 years) but it's also the what's left over when most Canadians subtract their mortgage costs (typically 30% of income).

Rob Brown, professor at the University of Waterloo's Department of Statistics and Actuarial Science, said shooting for that 70% target might not be necessary for everyone, especially those who own their home with the potential for a reverse mortgage income.

About 55-60% net would probably suffice as of the day you stop working, he said.

"There is no one-size-fits-all solution, and common retirement savings theories should be carefully reviewed before being adopted," says Tina DiVito, director of retirement strategies at BMO Financial Group.

It also depends on the age you want to retire, the lifestyle you want to lead, your health, outstanding debts, and retirement expenses.

Also people always underestimate their life expectancy, so plan for a lengthy retirement.