Retirement isn’t necessarily associated with older age. Typically, the idea of the Canadian dream is to work actively at your daily job – preferably one with health insurance and benefits – until reaching the standard Canadian retirement age of 65. Then, one typically retires and begins to live off of their earned pension. The pension age in Canada has traditionally been set at 65, but this is changing as more people explore early retirement options.
After retiring from work, such persons may decide to travel across the world, learn and participate in new hobbies, and pursue other passions. This is the mental picture that many Canadians have thought out for themselves when considering their retirement timeline.
However, that’s not the plan for all Canadians, which is why some are beginning to adopt the idea of early retirement in Canada. Many are asking questions like “Can you retire at 50 in Canada?” or “How to retire at 55 in Canada?” as they seek alternative retirement strategies.
Also known as the FIRE (Financial Independence, Retire Early) movement, the concept of early retirement is becoming increasingly popular. This movement involves making good investments and saving up enough money while actively working to cater to one’s needs later on in life. Effective retirement planning and building substantial retirement savings are key components of this strategy.
This requires one to be prudent with spending. There is no specific early retirement age in Canada as you can decide to quit working anytime, as long as you feel there is enough money to live off.
Even though the concept of early retirement in Canada has been gaining much attention lately, some people are still not very informed about it. Here, we will discuss everything that relates to retiring early to give you a better understanding of the relatively new trend.
FIRE means Financial Independence, Retire Early. It is a concept that allows you to properly adopt the idea behind early retirement to enjoy the latter part of your life. This approach often involves careful financial planning and consideration of various retirement income sources.
This lifestyle involves making prudent financial decisions during working years, such as saving for retirement and making profitable investments. The FIRE movement is desirable for those who want to quit work early, shift their retirement age forward, and quickly attain financial freedom.
However, you must note that FIRE does not necessarily entail having no income. In fact, many people who adopt this concept are known to make more money in retirement than before. It is worth noting that there is no set early retirement Canada age; it’s more about achieving financial independence that allows you to retire when you choose.
Early retirement in Canada has many benefits. Here is a list of reasons why many people may take early retirement packages in Canada.
If well planned, one can achieve financial and personal freedom before hitting 50 years. This is especially beneficial to those who don’t find fulfillment in their jobs and are keen to retire as early as possible. Early retirement allows you to spend time with your family and travel to places you have always wanted to visit. In the end, you will likely be able to check most activities off your bucket list of things to do.
Retiring early can boost your health to afford you some peace of mind. You may sleep better without having to worry about waking up promptly in the morning to prepare for work. You may have more time to look after your health and focus on personal wellness goals.
As earlier stated, the FIRE movement doesn’t necessarily mean halting work entirely. For example, you could choose to change careers when you retire early and begin that business you have always wanted to run. Some retirees opt for part-time work or consulting roles to stay active and supplement their retirement income.
Although there may be many theories regarding early retirement, the whole concept depends on the person. When drawing up plans, everything might seem simple but realistically, stopping work before the age of 65 is not necessarily straightforward. For this reason, you must make adequate preparations before making this decision. This includes understanding CPP eligibility and other government benefits that may affect your retirement strategy.
For this, you can follow any of these three methods to estimate your retirement expenses:
This rule says those who want to live comfortably after retiring early will need at least 70% of their pre-retirement income to spend every year after stopping work.
There’s the variable rule for those not comfortable with the 70% rule. The rule says that the higher your pre-retirement income, the lesser the percentage you will need when you stop working.
You can also make detailed budgeting. As you approach retirement, you should become more precise with your budget. This is because, at this time, you are expected to have a better picture of how your life will pan out during retirement.
The Old Age Security (OAS) and the Canada Pension Plan (CPP) are the primary Canadian government retirement payments. It’s pretty difficult to estimate your CPP payments, and can vary based on circumstance, while, OAS payments are easier to calculate, and if your income is very high, you will get an OAS claw back. Understanding Canada Pension Plan eligibility and CPP requirements is crucial for planning your retirement income. You might ask, “When can I apply for CPP?” or “What happens to CPP if you die before collecting?” These are important questions to consider in your retirement planning
For this, you can use a ballpark estimate and a retirement calculator. After making the calculations, you can compare the two results side-by-side to estimate the amount you will need to retire. Consider factors like pension contributions, tax considerations, and potential pension reduction if you’re planning to retire early.
By now, you must have adequately understood the concept of early retirement in Canada. For young and older people interested in this new trend, you should start planning as soon as possible. However, it is worth noting that this FIRE movement will require you to live frugally for a longer-term benefit.
Whether you’re wondering about CPP at 60 vs 65 vs 70, or considering options like phased retirement or the 85 Factor for an unreduced pension, it’s important to explore all your options. Remember, retirement eligibility and benefits can vary, so it’s crucial to stay informed about your specific situation.
At Seasons Retirement Communities, we offer different retirement living packages in Canada for older residents in Ontario and Alberta. With years of experience, we have developed a culture committed to providing residents with exquisite care and service. Contact us today for further information about our retirement benefits and how we can support your retirement strategy.