How Much Do I Need to Retire in Canada

The idea of retirement at a young age is the primary goal of many people. It's an achievement to work through middle age, manage your money, and wind up on the other end with enough savings to live comfortably without having to work. 

It's tricky to do if you don't have cushy company benefits or a well-paying job, though. That doesn't mean it's not possible. 

Hopefully, the information below can give you some guideposts on how to start thinking about early retirement in Canada in a practical way. Let's get started:

Understanding Early Retirement

55 is the optimal age to retire for those who can do so. The typical age of retirement is somewhere around 65 years old but it's entirely possible to build your savings up to a point where you can get out ten years earlier, especially if you start saving up while you're young.

When it comes to specific dollar amounts you'll need to retire, you aren't going to find any objective ones. Some people desire to live on far less than others, and it's possible to get by minimally if you need to. 

That said, most of us want to continue living at our current level of comfort as we enter retirement. Let's say, for the sake of this article, that you're looking to live on $40,000 per year as you go through retirement. 

You can adjust the numbers to fit your desires, but the formula will remain largely the same for any amount of money. Additionally, it's important to note that there are numerous ways that you can save and generate money through retirement. 

Most of those options involve investing and generating interest. The particular dollar amount you need to save will depend on your current savings portfolio, where your money is held, and how much interest it accumulates. 

It's important to be careful when you're planning for retirement, though, as holding massive amounts of savings in risky portfolios isn't wise. 

So, let's take a look at your safest bets for retirement savings. 

CPP and Retiring Early

You should never forget that you might be eligible to receive the Canada Pension Plan (CPP) when you retire. That income should factor into your estimates of how much you plan to save as well. 

The tricky thing about receiving CPP is that you need to be at least 60 years old to start receiving those benefits. So the earliest age you can receive CPP benefits is 60, and you'll receive slightly less money when you take on those benefits. 

The longer you postpone CPP payments after turning 60, the higher they will be; although there's no benefit in postponing any longer after you turn 70, as payments will no longer increase. You also must have made at least one valid contribution to the CPP.

What Is FIRE Retirement?

How Much Do I Need to Retire at 55: FIRE Method

A safe way to ensure that you're taken care of is to plan to withdraw 4 percent of your savings each year. Ideally, that figure will be sitting in a savings account that generates more than 4 percent interest each year as well. 

So, you'll still be accumulating more wealth as you go through retirement, and you can hypothetically take more and more out each year, relative to the amount of money you gain in interest. 

This is a way to live off of a small portion of your savings, offering up a massive safety net in the event of an emergency, and continuously renewing the money you spend throughout the year. 

In order to live at your current standard of living and only pull 4 percent of your savings each year, you'll need to save 25 times your annual income by the time you turn 55. 

In the case of a person who wants to live off of $40,000 per year, that means amassing $1,000,000 dollars by that time.

How Am I Supposed to Save One Million Dollars or More?

Thinking of That Sacrifice

Want to Learn More About Financial Well Being?

Retiring early truly depends on how much you want to live off per year. It's a complicated process to save that much money, but it's absolutely possible if you have early retirement in mind. 

Along with your retirement plan, no matter what age, life, travel and health insurance should be a priority as well.  We are one of the country's top financial comparison platforms and take pride in sourcing the best possible quotes from all of the major insurance companies across Canada.  Get a quote today!