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.