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Getting an Early Start on Retirement

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Looking forward to retirement after several decades of hard work represents a rewarding time for many Canadians. It’s a chance to make a big move, travel and enjoy the fruits of your labour. For Janet O’Brien, 52, and her husband John Rivers, 50, planning this special stage of life began early. Both work for a software company that builds financial services systems, and they’ve learned that doing your homework far in advance can pave the way to a successful retirement.

“Planning can’t be spur of the moment; it takes some time to get organized,” says O’Brien.

“My father, an accountant, always instilled that you can do anything you put your mind to, and that you’ve got to be financially independent, so he always encouraged that. He didn’t want us working until we were 80.

In fact, this couple is firmly on the “freedom at fifty-five” plan of early retirement, thanks to advice from O’Brien’s father and her own education – an MBA in finance and a Chartered Financial Analyst designation.

“We also have a financial planner, and we started this plan way back. There are a lot of tools out there to estimate what kind of expenses you’re going to have and how much income you’ll need after retirement, but we didn’t really do that,” she says.

“We made a budget for what we’d reasonably be spending in retirement, given what we know about our housing situation, our travel plans and things we know we’ll be spending money on, and then we added a percentage to bump it up to make sure we had enough income.”

Setting the stage

The couple will phase in retirement beginning in January 2022, cutting their work hours by 40%. Then, they’ll keep scaling back year to year until they get to zero, hopefully by 2025 or perhaps even earlier.

“Frankly, we can go to zero now, but we’re not sure if we’re ready to totally cut the ties; we feel some degree of commitment to the company we work for,” says O’Brien. “We can’t just up and leave because we’re senior resources there; we want to give them some time to adjust as well.”

Over the years, the couple has shored up their retirement fund and savings plans. Their wills are up to date, too.

However, they still need to arrange life insurance to replace the plans that are tied to their employment, because once they start cutting back their hours, they’ll need to increase their coverage, says O’Brien. They will also figure out the best way to decumulate their savings.

It’s important as you prepare to retire that your life insurance coverage is sufficient in case you’re still paying off a mortgage or other debt.

A different lifestyle

Because their three children are out of the house – either in university or already working – the couple began looking for a bungalow which would be easier to manage as they got older because they want to age in place. In 2019, they bought a home, renovated it and moved from Mississauga to Niagara-on-the-Lake last year. Although they are just an hour away from their previous home, this move represented a change in mindset, not just location.

“It was also about slowing down our lifestyle, getting out of traffic, and living somewhere with a slower pace,” says O’Brien. “We have a bigger property and a similar-sized house, but it was a lot cheaper. Our day-to-day expenses haven’t really changed, though.”

Travel plans ahead

The couple loves travelling, and had to cancel several trips due to the pandemic. So their retirement plans will definitely include exploring the world.

“We want to go back to Hawaii; we named our dog Kona, after a city there,” says O’Brien.

“We missed out on Ireland and a bunch of road trips, and I think we’ll assess year to year. I’d like to do a European trip every couple of years and we do have a bucket-list trip to Australia, but we definitely have to be retired for that, because we’ll be gone at least a couple of months.

One thing about retiring early is that you’ll hopefully be enjoying a nice, long retirement. That means more years where you’ll be supporting yourself versus retiring at 65 or later, so it’s important to be strategic before tapping into government pension programs, says O’Brien.

“Because we work for a financial services company and I’m embedded in all those Canada Revenue Agency rules, it’s not like anything is a surprise, but it’s still a lot to manage, so we’ll consult our financial advisor, too,” she says. Getting professional guidance will also help figure out the best life insurance plan as you prepare to retire.

Quotes have been edited for length and clarity.

This article is intended as informational only and should not be taken as financial advice.