As many members get older and are approaching “normal” retirement, I’m hearing this question asked more and more often these days. It’s a very good question, and the answer to that depends on a myriad of differing variables, each unique to everyone’s own particular situation.
There is no cookie cutter answer to this question, and I certainly do not profess to be an expert on this topic. However, there are many things to consider before making that big decision to retire. This one decision will affect you for many years to come, so it requires a very reflective and thoughtful approach.
There is much wisdom in obtaining some professional independent financial advice on how you finance your retirement.
In the meantime, let’s consider a few factors that will weigh into the timing of your retirement.
What will be your income level once you retire? Is it a fixed income that will be worth less and less over time due to rising costs and inflation? Is it a variable income that will be dependent on the ups and downs of the market? Where will your income streams come from (RSP, Pension, government sources [OAS, GIS, CPP, etc.])? Are you able to generate additional income from your home or other assets through rental income, reverse mortgage, sale of property? How long will your income level be sustainable in order to cover increasing costs? Do you have an emergency fund to cover unexpected expenses?
In retirement, some expenses go down (i.e. you only need one car), whereas other expenses go up (healthcare, travel). Look over your projected lifestyle in retirement and do a mock-up budget to see what your annual expenses might be. Don’t forget to add in inflation—a dollar 10 years ago does not equal a dollar today.
It is a lot to consider, and a financial planner is in the best position to help you determine how much you need to be comfortable in retirement. He or she will be able to advise you about when to retire once they know your unique financial picture. They can also provide guidance on when to start taking CPP as a deferred option, which can greatly increase payments over the long run. A good tax planner will also help you determine how to structure RSP withdrawals and conversion to registered income funds.
When to retire is a complex question. Many Canadians are electing to work a few more extra years past the age of 65, or are working part time in their retirement for additional income. Whatever your situation, it will take a lot of analysis and hard work to make the best decision.
Retiring too early could potentially be a catastrophic decision for you and your loved ones. Seek out retirement advice and take advantage of our CLAC retirement tools to help you plan your retirement. If you’re a member of a CLAC retirement plan, you have access to iAcquaint—a free unbiased online financial planning tool. In it, you’ll find resources to help you budget for everyday expenses, and plan ahead for all of life’s events.
iAcquaint has tools for everyone—whether you are at the beginning of your career, or near retirement. iAcquaint is easy to navigate and allows you to customize your learning based on your goals. It’s available 24/7 through your myCLAC account. Simply log in to myCLAC.ca, select My Retirement, and then scroll to My Financial Education for the link to iAcquaint.