Planning the right time to ensure a secure retirement
Knowing exactly when to retire is a tricky question. In Canada there is no mandatory retirement age (except in those professions that have a “bona fide occupational requirement,” such as an airline pilot). So, when is the “best” time to retire?
What is the retirement age in Canada?
The standard age for receiving the Canada Pension Plan is 65. However, you can take a reduced pension from the age of 60 or an increased pension up to the age of 70.
Most prefer to retire earlier than 65, with 63 being the average retirement age in Canada. But this is only part of the story.
When is the right time for you to retire?
With Canadians expected to live to 82, on average, there are several things to consider when working out the best time to join the ranks of the retired.
Affordability is obviously one factor. How much do you have saved and how long will it last? If you retire at 65 and live to 821, that’s 17 years that you’ll be living on your savings. A good starting point is to work out how much you need and how long your savings will last.
Do you love your job? If you do and you can physically cope with its demands, you might want to keep working long after your 65th birthday. If you loathe your job, retirement may not feel like it’s coming soon enough.
Have you considered a career change? Many people start a completely new job after retiring, often to indulge in something they’re passionate about. This could mean an earlier “retirement” from your current job, as the continued income will boost your savings.
If you’re looking for an active retirement that includes travelling and a healthy social life, you’ll need considerable savings. A more relaxed retirement will require less money.
Moving away or moving down
By moving to a smaller, cheaper community, you can cash in some equity on your home and benefit from a lower cost of living. While this can help financially, you do need to consider the support available as you grow older.
Moving away from family and friends could make independent living more difficult as you age and increasingly need in-home support.
Will there be sufficient transit in your new town to get around and avoid being isolated? Will your new home be able to cope with potential mobility issues as you grow older? And will your new community be able to provide the activities that you will want to enjoy in your retirement? Are local health facilities adequate?
You can also consider downsizing as a way to cash in on your home’s equity and make your savings stretch further.
The downside of downsizing
Before planning a move, it pays to be fully aware of the expenses involved with downsizing. Realtor fees alone can cost you tens of thousands of dollars. In most provinces, land transfer tax will add thousands to your closing costs.
When you consider legal, inspection and appraisals fees, moving and storage costs, the amount adds up substantially. Moving from an average-sized home to a modest condo could cost you over $50,0002. And if you downsize to a condo, this will have an impact on your disposable income: condo fees can range from $300 – $1,200 per month.
Boost your retirement income and retire on your own terms
While there is no fixed Canadian retirement age, there is a way for you to take earlier retirement by boosting your income.
A CHIP Reverse Mortgage® can provide you with either a lump sum or regular payments to supplement your retirement savings so you can retire when you want to, not when you have to.
Two of the big advantages of reverse mortgages are that you don’t have to make any regular monthly mortgage payments, so you have improved cash flow and second, it’s tax-free, which means it won’t increase your tax bill.
For more information on the CHIP Reverse Mortgage® and how it could help you to retire earlier, call us on 1-866-522-2447.
1.The average life expectancy in Canada is 82
2. Moving from an $800,000 Toronto home to a $400,000 Toronto condo would cost approximately $40,000 in realtor’s fees, $8,750 in land transfer tax and around $1,500 in legal and appraisal fees. This doesn’t include any costs to fix up your home to sell it, staging costs or removal expenses.