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Tips for an Early Retirement

Early Retirement Planning Tips: What You Need to Plan for Now

July 26, 2019

Are you planning on an early retirement? Early retirement in Canada is a huge ambition for many people. According to Stats Canada, 45% of Canadians intend to retire before they reach 65. So if your answer was yes, you’re not alone!

Popular early retirement blogs like Mr. Money Mustache tell us that early retirement is within our grasp – so long as we build and follow a plan. But why are so many people looking at how to retire early in Canada – and how can you make it happen? These early retirement planning tips can help.

Why is early retirement in Canada so appealing?

There are many benefits of early retirement in Canada. Financial and personal freedom are top of the list. For people who have a stressful job or who are not passionate about their work, retirement often can’t come soon enough.

Freedom from work allows you to follow a hobby, go back to school, or spend more time with your grandkids. You could volunteer, dedicate yourself to gardening, start up your own business or travel the world. Other benefits of early retirement are that you get many more work-free years and you could also live longer, because you’ll have more time to keep fit.

If early retirement in Canada sounds like a sweet deal, how do you go about achieving it?

How to retire early in Canada – start off with a plan

Early retirement planning requires a strategy. First, it’s important to work out how much money you’ll need. A retirement calculator can give you a good idea of how much you’ll need to save to have a comfortable retirement.

Early retirement calculators for Canada, like this one, take into account CPP and OAS payments, along with company and private pensions. These calculators can work out your retirement income goal and how much you’ll need to save every month to meet it.

Once you have an idea of how much you need to retire early in Canada, it’s time to put your retirement plan into action.

Save more by cutting back on your spending

One way to bring about your early retirement in Canada is to reduce your outgoings and free up more income for saving.

Early retirement planning tips include saving money by renegotiating your mortgage when it comes up for renewal or using a broker to get a better deal. A rate of just 0.2% lower can save you tens of thousands of dollars. It’s the same with car/home insurance and cell phones – shop around and you’ll save hundreds of dollars a year.

Other early retirement planning tips include saving big on your weekly groceries. Loyalty programs can save you as much as 5-10% and digital flyer apps like Flipp can consistently reduce your shopping bill. They provide flyers from over 800 retailers, tell you which stores offer the best deals on your grocery list and can be used at price-matching stores like Walmart and No Frills.

Take a coffee with you to work and leftovers for lunch, and use cash-back credit cards to pay for everything (but never carry a balance). By spending less, you’ll reach your retirement savings goal quicker and also stretch your retirement income.  

How to retire early in Canada: boost your income

Many early retirees save faster by growing their income. One way of doing this is to negotiate for regular pay raises or promotions.

Another early retirement planning tip is to get a second job or start up a small business on the side. Focusing on a business that you’re passionate about and which uses your skills and experience will help bring in extra money.  

Investments that grow your money fast

Another early retirement planning tip is to invest extremely wisely. You ideally want a return of upwards of 8% to see your savings grow rapidly. Financial advisors, investment companies or robo-advisors can help you to reach this goal, over the long term.

Make the most of your company’s pension plan, especially if it matches your contributions. Maximize options like RRSPs and TFSAs, which allow for tax-free savings growth.   

How to retire early in Canada: start saving when you start earning

By saving for retirement early, you’ll give yourself the best chance of being able to retire early. It’s not just that you’ll have more years of adding money to your savings, but you’ll also have more years to enjoy compound interest.

This is where you start making interest on interest already earned. While this is not a large amount initially, after 20 or 30 years it can be huge. To help you visualize, it’s similar to the way a snowball rolling down a hill takes on more snow and grows faster the further down the hill it gets. Get it?

If not, here’s an example, if you start saving $1,000 per month at age 25 and get an average annual return of 8%, by 55 you would have saved around $1.36 million*. If, however, you started saving at age 35, you would need to save around $2,475 per month instead of $1,000 to save the same amount.

How your home can become part of your early retirement planning

Many people use the equity in their home to help finance an early retirement in Canada. Some Canadians decide to sell their family home to move to a smaller, cheaper home, often in a more remote area. They then use the profit from the sale to finance their early retirement.

What if we told you that you don’t have to move out of your home to cash in on some of its equity? The CHIP Reverse Mortgage® allows you to borrow up to 55% of your home’s value without having to make any regular mortgage payments. You get to use your home’s equity to boost your retirement income and retire early, without any negative impact on your cash flow.

Contact us at 1-866-522-2447 or use our reverse mortgage calculator to find out how much you could borrow to help finance your early retirement.

* According to this retirement savings calculator.

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