When Am I Really Ready to Retire?
Posted by Ocean Wealth
As you edge closer to the end of your working life, it’s time to think about retirement. Whether that’s a source of crippling anxiety or complete bliss, retirement planning can help secure a bright future outside of work.
Of course, all of this is easier said than done. Retirement planning has many moving parts that need to be considered. The biggest component is determining how much money you’ll need in retirement. Since you won’t have the consistent income you once had, you must assess your needs and plan accordingly.
For some people, that can be pretty simple. For others, breaking down their financial needs in retirement can be a challenge based on what they want to do. That said, proper planning can go a long way in quelling retirement restlessness and give you something to truly look forward.
Calculating Your Retirement Age
Before you start talking to a financial advisor about your retirement aspirations, figure out what age you want to retire at.
This isn’t as cut and dry as it may seem. There are advantages and disadvantages to retiring younger or older, and it can impact your Canada Pension Plan (CPP). Traditionally speaking, 65 has been seen as the magic age when it comes to retirement. That said, many people are bucking that trend and retiring earlier or later.
Your age also has an impact on your CPP monthly payment. If you retire before 60, you will receive 36% less than at 65. Retiring at 70, however, will give you 42% more than at 65. It really comes down to what your needs are and what savings you have in place on top of your pension.
While it’s impossible to predict how long you’ll be around for, Canadians are also living longer than ever. This is certainly something to consider as it may mean planning for a longer retirement that can last upwards of 30 years in good health.
Expect The Unexpected in Retirement
Having an emergency fund is valuable at any age, but it becomes especially important as a retiree.
Since you don’t have that steady working income anymore, planning for unexpected events is crucial. That can come in the form of new home expenses or health emergencies that need to be addressed. There are plenty of things that can happen and having money set aside can be a huge help when needed.
This emergency fund should be separate to your regular retirement savings. When speaking with a financial advisor about this kind of account, you should ask how much they recommend you have set aside based on your income.
Okay, So How Much Money Do I Need to Retire?
Many people look for a specific number when considering how much money they need in retirement — the real answer varies from person to person.
One of the most important things to note is that you’ll be spending less money in retirement. The average retired Canadian is living on 62% of what they earned before leaving the workforce. That statistic, while perhaps shocking at first, actually hasn’t affected their moods as 88% of retirees reported feeling positive about their life in retirement.
While every retiree spends money differently, the overall costs go down. Even if you decide to do some travelling, you’re not tied to commuter costs and other work-related expenses that accumulate. There are also discounts for senior citizens that can have a significant impact on the amount they spend on a regular basis.
Looking for the best way to find out if you’re ready to retire? Chat with us over a cup of coffee. Our trusted team of financial advisors will give you all the information you need to make the best decision for your future. Contact us today!