Here’s how to accelerate your retirement timeline, without taking too much risk


Jason Heath: Those nearing retirement can consider these strategies to save time on their financial independence date

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According to Statistics Canada, the average retirement age for Canadians in 2021 was 64.4. Retirement has been delayed by nearly three years since 2001, when the average was just 61.5 years. For some, those few extra years of work can seem like an eternity.

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There are, however, strategies that those approaching retirement can consider to reduce their financial independence date so that they can afford to retire earlier.

For this exercise, we will consider a fictitious 55-year-old Canadian couple living in Ottawa, owning their home without a mortgage, with assumptions inspired by data from the Canadian Real Estate Association and Statistics Canada.

The median selling price of a single-detached home in Ottawa during the first quarter of 2022 was $818,000. The median after-tax income of a Canadian two-parent family with children in 2020 was $110,700. Average household spending in 2019 in Ontario, excluding rent, mortgage, taxes, pension and personal insurance, was $56,407. Finally, the average private retirement assets of Ontario families whose major income earner is between the ages of 55 and 65 were $400,919 in 2019.

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So we’ll assume an $800,000 mortgage-free house owned by a 55-year-old couple planning to retire at 60, earning $75,000 each, spending $60,000 a year on basic living expenses, and with 300,000 $ of RRSP savings invested in conservative mutual funds.

Part-time work

Some employers are open to transitioning a full-time employee to a part-time position. Some employees are able to provide consulting services and work part-time as independent contractors in their field. Other workers might be open to a second career doing something completely different with a lower income.

For our couple, if they work from age 55 to 60, they will earn about $120,000 in annual after-tax income for five years, or about $600,000 in total. If they work at half that income and earn $37,500 each instead of $75,000, working for 10 years from age 55 to 65, they would earn about $65,000 after tax each year. This would cover their $60,000 annual expenses and they would earn about $650,000 after tax over those 10 years. This is about the same as their projected after-tax earnings over the last 5 years of their career ($600,000), but over 10 years.

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Point? There are different ways to reach the finish line. Financially, the two income scenarios have similar present value and can result in comparable retirement funding and future estate value. Using conservative assumptions about CPP and OAS pensions, inflation, and investment returns, they can afford to pursue either option.

The advantage is that they may have grandchildren who need childcare, a desire for more free time to work on their tennis game, or another reason to consider a phased retirement instead. than going all the way to 60 and suddenly withdrawing.

Higher returns on investment

Taking more risk with your investments should lead to higher returns over a long enough time horizon. In other words, by having more equity exposure, your long-term returns should increase at the expense of short-term stock market volatility.

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Lower investment fees can also increase returns net of fees. Morningstar’s Global Investor Experience Study pegged the average mutual fund allocation fee in Canada at 1.94%.

If our theoretical couple sold their conservative mutual funds and switched to equity mutual funds instead, they might be able to increase their returns by 2% per year. Likewise, if they decide to ditch their mutual funds and build an investment portfolio themselves with a discount brokerage, they may be able to increase their returns by reducing their fees by 2% per year.

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A 2% increase in their net investment returns, assuming a life expectancy of 95, could mean they can retire just over a year earlier than their retirement goal at age 60, keeping the other factors constant and cautious.

Point? Higher investment returns might help, and retiring a year earlier is meaningful, but it may not be a game-changer for most retirees. On the other hand, an overly aggressive asset allocation or a do-it-yourself approach for a less experienced investor could lead to an investment mistake. For example, panicking and selling stocks at market lows. Investors should invest according to their risk tolerance and DIY investing is not for everyone despite the potential savings.

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Less expenses

The less you spend, the less you need to have for your retirement. If our fictional couple could find a way to cut their expenses by 10%, from $60,000 to $54,000 per year, a reduction of $500 per month, they could afford to retire earlier. In fact, they can afford to retire more than a year and a half earlier using conservative assumptions.

That said, retirees should be careful not to assume they can spend less in retirement if they haven’t already been able to cut costs, as this could give them artificial optimism. Aging also brings other expense risks, such as the potential cost of funding long-term care needs.

Reduce the size of the house

The average condo sale in Ottawa in the first quarter of 2022 was $420,000. If our couple could sell their single-family home for $800,000 and net $760,000 after selling costs, buying for $420,000 plus $10,000 closing costs, they could make about $330,000. This equates to about three years of after-tax pay for them, and downsizing can also reduce their monthly expenses on housing costs.

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This could accelerate their financial independence by about three years, all other things being equal. A move to a lower-cost city or province could be even more meaningful, and even more so for someone approaching retirement and living in a city or property more expensive than an $800,000 single-family home in Ottawa. .


Those who are willing to be a little flexible in their retirement planning may consider changes in their job, investments, expenses, or real estate that may impact their ability to retire. Everyone has different goals for retirement, and some people work well beyond the point where they need to work, choosing to work rather than work because they can’t afford to retire.

Some changes could help someone retire earlier, spend more in retirement, or give more money to their children or charity. Financial independence can be extremely powerful, and some who think the power is beyond their control may be surprised when they consider choices that are in fact available.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) with Objective Financial Partners Inc. in Toronto, Ontario. It does not sell any financial products.



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