10 signs you’re ready to retire

Telltale signs you’re financially stable enough to call it quits

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Not sure whether you’re ready to retire? If you can check off a number of the things on the below list, chances are you’re ready. Just keep in mind it’s always a good idea to run your retirement plan by a financial advisor, who can stress-test your portfolio under various scenarios.

1. You own a paid-for home

Everybody needs a place to live but when you’re mortgage-free you can use money previously earmarked for home payments in a variety of ways: for instance, to fund your travel lust, or to invest in dividend-paying stocks that will generate money for years to come. Plus, a debt-free home offers a financial safety net. You can always rent out a portion of your home if money becomes tight, downsize altogether and live off the proceeds, or take a reverse mortgage (although these come with hefty fees and restrictive rules).

2. You have a workplace pension plan

Roughly 32% of Canadians have a workplace pension plan, of which a smaller percentage have a defined benefit pension plan (versus defined contribution) which guarantees certain payouts in retirement. So if you’ve got an employee-sponsored plan(s) that you’ve been contributing to for years, you’re among the lucky few. These plans work to supplement the government income programs discussed in this next point.

3. You’re 65 and qualify for CPP, OAS and possibly GIS

Combined, the Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS) can provide a middle-class person roughly $15,000 per year. Lower income earners get even more. That kind of money goes a long way, especially when you’re not used to a lavish lifestyle. Find out which programs you’re eligible for.

4. You have $700,000+ in savings

This one is kind of a no-brainer but we’re including it because some people seem to think they need no less than $1 million to retire. MoneySense calculations show that’s just not true for most of us. In fact, the average middle-class couple only needs about $625,000 to retire comfortably.

5. Your children are financially stable and independent

At a certain point, you have to stop worrying about your kids and they, hopefully, will start worrying about you. In an ideal world, neither parent nor adult child should have to provide for the other financially—but life doesn’t always unfold as it should. If you’re still doling out cash to your kids, you might not want to quit working just yet.

6. You’ve test driven a realistic retirement budget

According to a recent BMO study, the average retiree spends $2,400 a month, with $668 of that going towards accommodation. Try living on that amount for six months. If at the end of that six-month period you weren’t scrounging for change and even had a few bucks left over at the end each month, you’re probably good to go!

7. You can weather a market downturn

Young investors should welcome market downturns because they offer bargain-buying opportunities with a long time horizon for growth. Retirees on the other hand, need almost immediate access to their money and can’t necessarily afford to wait for their investments to bounce back. Talk to your financial advisor to ensure you have the right portfolio drawdown strategy, asset allocation and other sources of income to withstand a sudden drop in stock market prices.

8. You have varied sources of income

A part-time job, freelance career and even rental income can really take the weight off budget and cash flow constraints. The ability to tap more than one source of income in retirement can mean the difference between a stressful and carefree retirement. The trick of course is layering each source to make your annual income and taxes as smooth and efficient as possible.

9. All your friends are retired

Are you the only one in your social circle still working? Ask yourself why. Is it because you need a regular paycheque or is there another more emotional reason? Whether you decide to stay in your job or not is less important than being honest with yourself and knowing your reasons.

10. Your job is affecting your health

Did you know that less than half of retirees left the workforce when and as planned? The rest retired earlier (48%) or later (6%) because of circumstances outside their control, a recent Angus Reid poll found. The truth is none of us can control how we age and there’s no shame in changing your plans to ensure the longest, healthiest retirement possible—especially if you’ve checked off a number of the above telltale signs.

25 comments on “10 signs you’re ready to retire

  1. Absolutely, I can !

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  2. What a bunch of platitudes! Take one: a paid off mortgage. If you are a Toronto or Vancouver home owner, you are likely sitting on close to a million dollar on home equity, not doing anything. Why not take out a HELOC and investing the money in the market? On the other side: what about the senior Canadians who are still renters? How many Canadians have a defined benefits plan, a paid off home AND 700K in investments?

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    • “How many Canadians have a defined benefits plan, a paid off home AND 700K in investments?”

      Probably those born in the heady days of post-WW2 and worked for the government, like my father. 20k for the home, good gov’t pension, and a million+ retirement fund that is now taking care of my mother. I won’t come anywhere close to that kind of wealth, if I stay in Vancouver, and mortgage a home.

      Current generations, starting from Gen X onward, and especially in TO and VAN, have a choice – detached home and raise a family or rent and save for retirement. Financially, unless you are the exception when it comes to household income, can’t have both without being strapped to a lifetime of debt.

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      • We have a paid off home,defined benefit pensions and over $1 million in savings and we are not even 50 yet.

        We are mostly a one income family for the last 15 years so I can stay home with our children. My husband doesn’t make a lot (under $100k) but we have always been frugal i.e. one car, seldom eat out, cheap vacations, no expensive toys. We decided to rent out our basement and when our mortgage was paid off, decided to borrow to invest. Currently, our rental and dividend income bring in about $4,000 a month.

        It is doable. You just have to work hard (multiple jobs if you have to) and be extremely disciplined to save, save and save.

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        • @ Mamma Bear – You clearly don’t live on the West Coast.

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          • We actually do live in the Lower Mainland

        • better spend it soon

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        • I agree. My wife and I have averaged about $75K per year in household income and, through frugal living and aggressive investing, we now, at 38 years old with two kids, have a paid for home, two paid for cars and a net worth of just under $900K. I also have the luxury of a defined benefit pension plan at work, but won’t be able to access it for another 22 years. Ha… like I’m going to work that long.

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      • It may seem a bit out there but most people can choose whether or not to live in TO or Van. Perhaps move somewhere else where housing is not impossible to purchase.

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  3. Modest retirement plans will go a long way to getting ready. Expensive travelling requires far more money than just paying monthly bills and finding economical activities within the community in which you live.

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  4. This article will scare the crap out of people. There are many, many Canadians who do not have a pension plan OR have $700,000 in savings.

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    • Today’s society is preoccupied with material possessions and the want to exceed the “Jones “. I do not have a defined pension plan yet fully retired with a 7 figure investment AND went thru a divorce where I split half of our savings with my ex. I topped up my children’s savings each year while they were at university so that they graduated with zero debt. I had a good, not excellent paying job with long hours in a non-union environment. To achieve this, required modest expectations in housing and day to day expenses, plus a disciplined savings plan. I have a conservative (ie couch potato) investment plan where I regularly put away a few dollars when I can and over the years it has returned better than what playing the market likely would have given me and far better than what mutual funds would have given. Keep your expectations modest, save frequently and watch for frivolous expenses and you will do fine.

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  5. I retired at 58. I satisfied 5 out your list of 10. Words of advice to young people starting out. Find a job you like. Live below your means, save 10% of your income. Don’t try to keep up with the Jonses and select your partner very carefully! And remember to have fun in life as we only go around once. YOLO! (ask your kids)

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    • Scary article-you bet! When I went out into the working world at 18, like most young people, thought I had the world by the tail! Never thought about RRSP’s, investments, and never worked for any company that had pension plans. Those company’s are few and far between now. I started my retirement savings late in life, ( my mistake) I am a single income household, have always rented, currently looking for work, over the age of 55 and try as I do, I will never come close to the $700,000. Where does that leave me in Retirement? Not sure, but it scares the heck out of me!

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      • My father more than satisfied the above-noted standards by age 65. He retired, expecting years of financial ease. He died of a heart attack at age 66. Live for today.

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        • I often hear people cite cases like this – people who work hard and save, and then die in their first few years of retirement. That’s bad luck, but not justification for everyone else in the world to stop planning for a long retirement. You should consider the portion of the population who adheres to your philosophy of “living for today”, doesn’t bother to save, and then unfortunately lives in poverty until they’re 88 years old, placing a tremendous financial burden squarely on their loved ones. Your father may not have lived to see a life of leisure, but at least he didn’t land back on your doorstep, completely dependent on you financially. Live for today? Sure, take time to smell the roses. But don’t ignore the fact that you might actually live beyond 66. Even your beloved family members will have a difficult time forgiving your for being fiscally irresponsible, when it inevitably becomes their problem.

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      • After reading Fred Vetesse’s Essential Retirement Guide, a Contrarian Perspective, I am a convinced we need to replace 50% of our working income in retirement. That is actually easier for lower income and wealthy people. If your income has been quite modest you don’t need $700K. Buy the book used or get it at the library. You may well feel much better after reading it.

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  6. If you do not own a house and have few 000000$ in saving, pay the house cash and take a mortage to do some investments. Interests are deductible

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  7. 2.75 at NA for HELOC

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  8. I would love a 2nd opinion on whether I can retire early or not. I am mortgage free, no personal debt, nice sized portfolio (7 figures), but still have a young daughter in grade 12, hopefully she will attend university. Can I retire early and still help with my daughters education? Or should I continue to work for a few more years until she graduates? Thanks love Moneysense!

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  9. I am a big believer in this topic.
    I semi retired few years ago at 45, doing community work to give back. No debt…never had mortgage or loan was biggest lesson; live within means; the more stuff you buy the more stress and time to maintain it all; live close to work to save time and money ( have a life saving 2 hrs/day commute = like getting extra couple months free time/yr); drive fuel efficient cars/don’t idle/combine errands to save time/money; buy things on sale; grow a veggie garden in backyard; give to charity; ; etc. We lived based on one income so second income was a bonus and not risked if one lost their job. . Saved up and bought smaller home and fixed it up over time. Got $750k in investments + no debt. , 1 work pension coming to wife who works part-time by choice, will retire at 55 (loves her job). Learn how to invest on own…financial advisors (sales people mainly) were a waste of time and money – was another lesson.. If you seek financial advisor hire one who has no debt and mortgage free early to learn from them. They get paid no matter what return you get. Other tips: Cancel cable TV – Free HDTV with HDTV antenna we get 25 channels free in high def! VOIP phone $3/mth! + Internet reseller uses Bell lines anyhow but save $30/mth. Next purchase: Electric car to rid oil/gas costs saving $2k/yr. We like to travel. Travel in low season..its cheaper & less crowds a bonus! Teach your kids this and they will have a life free of worries and troubles. Teach them that commercials/marketing/media want you to buy something. If they are media smart, they will not fall into wanting what others have and joining the rat race. Enjoy life my friends. You are in control remember! If you give that up, ( to banks, car sales, expensive toys etc) then you may struggle. Financial independence is the goal that everyone needs to learn!

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  10. Very good article – and totally agree you don’t need a million to retire on, some so called experts like to bloat the figures needed, 700K in my case is a figure I find very close to my reality !

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  11. We both are 70,71 year old, have our own professional work. No pension plan But mortgage free house in good area in Toronto (min price 1 Million up )Total RRSP/RIIF 750K ,other investments with dividends $700K or so ,Investment property(110K mortgage)Property Value $550K rent pays mortgages/property taxes. CPP/OAS total $2100 for both
    Still not convinced that we can be comfortable since we don’t know how long will live? Have a Private Insurance coverage with critical insurance .2 cars ,mine is leased on business .
    Am I really ready to retire in next 2 years ,my husband is retired .

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    • It very much depends on your expenses – what will your investments bring you in income minus your expenses. It shouldn’t be too hard to do that math, and then go from there. There are lots of savings and investment calculators that should be useful. If you can’t retire at your age and with your investments, we’re all in trouble!

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  12. Point 4 -having $ 650, 000 saved. Does it mean is it enough to have just $650 thousand saved or do I neef to have it all #1 through# 10, pensions, CPP …?

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