Are You Prepared to Leave the Workforce?
For many Canadians, retirement planning starts as a distant, almost abstract idea—something to be dealt with in the future. But as time passes and careers mature, the question inevitably arises: “When can I retire?”
It’s a simple question, but the answer is anything but. Retirement planning isn’t just about reaching a certain age or hitting a specific savings number—it’s about financial preparedness, lifestyle choices, and personal goals. And if you’re not thinking about it yet, it’s time to start.
Retirement: A Financial and Emotional Decision
At SBW Wealth, we frequently ask clients a fundamental question: “How do you see your retirement?” More often than not, this question is met with a blank stare. The reason? Many people don’t have a clear vision of what their retirement will look like. They know they want financial security, but they haven’t considered what their day-to-day life will be like once they step away from work.
This is why most financial planning is actually retirement planning—and why it’s crucial to take a structured approach to ensure a secure and fulfilling retirement.
The Brutal Math of Retirement
When considering early retirement, or even a more traditional retirement age, the math is inescapable. Your financial readiness is based on three key factors:
- Your Age and Income – Your current income level influences how much you can save and invest for the future.
- Retirement Savings & Pension Plans – This includes RRSPs, TFSAs, corporate savings, rental properties, and other investment accounts.
- Additional Income Sources – Canada Pension Plan (CPP), Old Age Security (OAS), workplace pensions, or other passive income sources.
Running a retirement readiness calculator can provide a rough estimate of how much monthly income you’ll have in retirement. It helps answer the key question: Can I retire comfortably at my desired age, or do I need to work longer?
How Much Do You Need?
A traditional benchmark in financial planning suggests you’ll need 70% of your pre-retirement income to maintain your lifestyle in retirement. But this is not a one-size-fits-all rule:
- Frugal retirees might live comfortably on 50% of their working income.
- Moderate spenders aim for 70%.
- Luxury-focused retirees may spend 100% or more, especially if they plan to travel extensively or maintain multiple properties.
The challenge? Inflation, taxes, and market fluctuations can impact your purchasing power, meaning that a “safe” amount to retire on is a moving target.
Adjusting Your Retirement Timeline
If your current retirement outlook isn’t ideal, adjustments can be made:
✅ Increase Savings – Maximize contributions to RRSPs, TFSAs, and non-registered accounts.
✅ Reduce Spending – Cut unnecessary expenses like unused subscriptions, excessive dining out, or a second vehicle.
✅ Eliminate Debt – Paying off a mortgage or high-interest debt can significantly improve cash flow in retirement.
✅ Downsize or Relocate – A move to a smaller home or a lower-cost city can free up equity and reduce living expenses.
✅ Work a Little Longer – Delaying retirement even by a few years can result in a significantly larger nest egg.
Retirement Is More Than Just Money
Even if your financial calculations suggest you can retire, there are non-financial questions to consider:
- Are you mentally ready to retire? Some people thrive without the structure of work, while others feel lost.
- What will you do with your time? Retirement should be filled with meaningful activities, whether it’s travel, volunteering, hobbies, or spending time with family.
- How will your social life change? Work provides a built-in social network. Have you considered how you’ll stay socially connected in retirement?
A Reality Check: Common Retirement Pitfalls
Many retirees find that their golden years aren’t as stress-free as they expected. Here are some common mistakes:
❌ Retiring too soon – Leaving work before having a solid financial foundation can lead to money worries later.
❌ Over-relying on risky investments – Market downturns can erode your savings if your portfolio isn’t structured for stability.
❌ Helping family too much – Financially assisting children or aging parents can deplete your retirement savings faster than expected.
❌ Not planning for inflation – A dollar today won’t stretch as far in 20 years. Your portfolio needs to account for rising costs.
Retirement Readiness Checklist
If you think you’re ready to retire, ask yourself:
✔ Are you debt-free? If you’re still carrying a mortgage, car loans, or credit card debt, your retirement finances may not be as secure as you think.
✔ Is your portfolio well diversified? A well-diversified investment portfolio can help ensure a smoother investing experience
✔ Are you financially streamlined? Consolidating accounts and simplifying your finances makes it easier to track cash flow and withdrawals.
✔ Do you still have dependents? If you’re supporting children or parents, factor these costs into your plan.
✔ Are you emotionally prepared? Beyond the financials, a fulfilling retirement requires purpose and structure.
Take Action: Run the Numbers
A great way to start is by running a few retirement scenarios:
- Test different retirement ages. Compare retiring at 55 vs. 60 vs. 65 to see how it impacts your financial picture.
- Identify and reduce financial leaks. Scrutinize your monthly spending for unnecessary costs.
- Make a plan for debt. If mortgage payments are holding you back, explore accelerated repayment options.
Final Thought: Retirement Is Personal
At SBW Wealth, we believe that retirement planning is about creating the freedom to live the life you want, on your terms. Whether you want to retire early, work part-time, or transition into retirement gradually, the key is having a clear strategy in place.
