Not sure if you are financially stable enough to retire? If you can check off most of the following items chances are you’re ready.
1. Your home is paid for. Most people live on a reduced fixed income during retirement, so being mortgage-free will help eliminate financial stress and provide you with a safety net. If you are lucky enough to maintain your income, the money previously earmarked for home payments can now be used for other things like travel or social memberships. Furthermore, if things get tight you can rent out part of your home, downsize altogether, or use a line of credit to access the equity you have built up over the years.
2. You have a workplace pension plan. Only 44% of Canadians have a workplace pension plan, so if you have contributed to one over the years, you are one of the lucky few. These plans supplement the government income programs and depending on the type of plan may guarantee you income for life.
3. You are 65 years old. At this age you qualify for an unreduced Canada Pension Plan (CPP), Old Age Security (OAS), and possibly the Guaranteed Income Supplement (GIS). These plans can provide you with an income of approximately $25,000 per year. Lower-income earners may receive even more. That kind of money can go a long way, especially if you are not used to a lavish lifestyle.
4. Your children are financially independent. At some point, you have to stop worrying about your kids and hopefully, someday they will start worrying about you. In a perfect world, neither parent nor child should have to continually provide financial support, but life is not perfect. If you are still financing your child’s lifestyle, you might not want to stop working just yet.
5. All your friends are retired. Are you the only one in your social circle still working? Time to ask yourself why; and be honest, is it because you need the paycheck or is there another emotional reason? Whether you decide to call it quits or keep working you need to do it for the right reasons.
6. Your job is affecting your health. Stress is one of the major contributors to all health issues. Close to one-quarter of men (22.8%) and women (22.9%) left work before they planned; due to either their own or their spouse’s health or disability. None of us can control how we age, and changing your plans to ensure a long, healthy retirement may be one of the best things you can do for yourself.
7. You have saved enough money. Many people believe they need more than $1 million to retire which is simply not true, especially if you have a workplace pension. Some of the formulas found on the internet are based on pretty simple math, for example, they say if you need $40,000/year income, using a standard 4% withdrawal rate the calculation 40,000/4% does equal a $1,000,000. However, if you subtract what you would receive from CPP and OAS the amount required is quite different 40,000-25000=15000 – 15000/4% = $375,000. These types of formulas also don’t take into account lifestyle expenses, equity in your home, working part-time, or receiving an inheritance just to name a few things. Everyone’s magic number will be different depending on your lifestyle, age, health, and marital status. Hiring a Certified Financial Planner is the best way to help you determine whether you have saved enough money to stop working.
If you checked off several of the above points and want to stress test your retirement plan; give me a call. Retirement income planning is my specialty and something I love to do.
Have a great weekend,
Tracey & Paige
Sources: https://www.moneysense.ca/save/retirement/10-signs-youre-ready-to-retire/
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/benefit-amount.html
https://www150.statcan.gc.ca/n1/daily-quotidien/230801/dq230801a-eng.htm
Photo by Luca Baggio on Unsplash
Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp. 4665 Yonge Street, Suite 309, Toronto, ON M2N 0B4 t 416.964.0440