When we ask a Canadian individual about the average retirement age, they will probably say around 65. This is because pension programs still mention retirement age at 65, with retirees receiving benefits under the Canadian Pension plan and Old Age Security.
What Is An Early Retirement In Canada?
However, times have changed as the Canadian government lowered the retirement age to 63.5 years. Therefore, retirement below the age of legislation is categorized as early.
The life expectancy has also increased against the reduced retirement age. A Canadian, on average, will live for 82.5 years, meaning more time to spend after retirement at the age of 50 or later.
If you wish to retire early in Canada, you must own two things:
- Firstly, you must have ample retirement savings to live post-retirement comfortably. The retirement savings must be sufficient enough to cover basic expenses such as rent and food.
- Secondly, you must categorize the savings by doing retirement planning. Do you wish to travel? Do you wish to invest? Or do you wish to relocate to a remote part of Canada and live your life in peace?
Requirements For Retiring Early
- Early retirement gives you a plethora of options to choose from since you have so much time in front of you. However, you must spend more than you make for early retirement to be successful. It is truly about staying disciplined and avoiding spending nonsensically. You do not wish to raid through your savings and look for an underpaying job at an old age.
- The secret of living a lavish early retirement is deferring luxury spending. You can sell cars you no longer drive. Create a budget to stick to. If you wish to successfully retire early, then we suggest saving aggressively and investing. You can hire the services of a financial planner to help you guide through investment challenges and plan for substantial returns.
- Assuming you have moved up the career ladder, you are likely earning more. Furthermore, you might be receiving bonuses too. Instead of spending it on expensive cars or clothes, invest the remaining money. Allot a specific portion of the salary, bonus, or inheritance directly into retirement savings.
- Secondly, set up a retirement savings account in the bank. It will make a significant impact with compound interest, yielding increased returns than each previous year. Set up the savings amount and forget it. The interest and principal amount will continue compounding over the years until you decide to withdraw. However, study the contribution limits and bank guidelines before setting up the retirement account.
How To Retire Early?
Retiring sounds like a dream. However, an early retirement requires financial planning in advance and a consistent source of income. Furthermore, it requires patience and dedication, which most severely lack. You can loop around the strategy by investing early. Invest the returns into the bank account to earn compound interest, which is your new best friend.
The Downfalls Of Retiring Early
Early retirement relates to numerous opportunity costs. You will have to forgo going on expensive holidays with your friends, limiting daily expenditure on food and alcohol, and strictly adhering to a schedule. It creates a prison-like lifestyle that is psychologically tedious.
Furthermore, there is also the added pressure of making prompt credit card payments to avoid high incurring interest rates. You will also have to trade in your car for a downsized model to eliminate lease payments. Such activities will keep you distracted from retiring early.
Do You Wish To Retire Early?
Retiring at an early age in Canada means foreseeing income against expenses. It involves saving more and spending less. If you are having trouble sticking to the plan, schedule an appointment with Merrick Financial Inc. We offer fee-only financial planning services by assessing situations presented by the clients.