Do You Really Want an Early Retirement?

A recent poll found that Canadians of all generations hope to retire before the traditional retirement age of 65. In fact, the younger the cohort, the earlier they say they’d like to retire – in their late 50s, in the case of Generation Y (aged 25 to 30).

And yet the global trend is to work longer, not retire earlier. With the problems in Europe, many governments are trying to extend the retirement age to 67 or beyond. At the same time, people are living longer – a trend that’s reinforced by steady advances in medical technology as well as more positive lifestyles embraced by those still in the workforce. Generally, we are exercising more and eating better.

Most financial planners pencil in 90 as the age most clients can expect to live. That is, they plan for their investments for that long. So if you think you want to retire at 60, ask yourself what exactly you’ll be doing with those last 30 years of your life – the last 20 of which may well be the picture of physical health.

Early this year, before I changed jobs, I interviewed financial author Gordon Pape, who at age 75 had published his 40th book or so: Retirement’s Harsh New Realities: Protecting Your Money in a Changing World. As I blogged at the time, I witnessed him chat with a colleague who was himself approaching 70 and still working in the newsroom full time. I don’t mind confessing that it had me rethinking about my own proclaimed “Findependence Day,” which I had tentatively scheduled for April 6, 2014 (my 61st birthday).

Of course, that was before the opportunity to become the editor of MoneySense Magazine materialized. Now that I’ve made the switch, it’s quite conceivable that I’ll stay there five or ten more years, assuming all parties are amenable to that.

Mind you, I never regarded financial independence as the same thing as retirement. I never imagined ending work altogether at age 61: rather, I saw my Findependence Day as the moment I no longer saw it financially necessary to commute 350 kilometres a week to a newsroom and conform to the pressing demands of editors in a daily newspaper. I foresaw something like what I experienced as a freelance writer in the 1980s: working from home, engaging in longer projects like books or freelance articles, and generally supplementing whatever sources of income will be in place by then.

From a purely financial perspective, the deeper you remain employed into your 60s, the better. Defined benefit plans get sweeter the longer you stay in them; the Canada Pension Plan pays 42% more if you wait until 70 rather than 65 years to start collecting. Of course, your investments, whether in registered retirement savings plans, tax-free savings accounts or taxable accounts, can grow larger the later you wait – with each year of additional work meaning there’s one less year of withdrawals that will deplete your capital.

The real key is to find work you enjoy. If you do, retirement is a moot point, although financial independence will still be a valid goal.

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