When is your financial independence day?

The day when you no longer need to work to cover your current and future cost of living, including realizing your retirement dreams—that’s your financial independence day.

To identify it, some people try using one of the many online retirement calculators that ask you to input information so you can find out if you can retire at a specific age. Others look to retirement guidelines, such as needing annual retirement income that’s 70% of your pre-retirement income. But these methods are hard-pressed to give accurate results.

Arriving at your financial independence day involves a process encompassing several factors, with input from both you and us.

Picture your retirement

Determining your retirement date and savings goal begins with picturing your retirement dreams. Do you see yourself travelling the world? Do you envision a life of leisure, enjoying quality time with family and friends? If you’re part of a couple, will one spouse retire before the other? As you imagine and plan your retirement, you may want to keep a paper or digital record of your desired pastimes and activities.

Next is the wealth plan

We put dollar values to your desired retirement lifestyle, a key part of establishing your savings goal. But we must also account for several other financial factors and needs, possibly including inheritances you wish to leave, insurance premiums, and a health-care and contingency fund, among others.

On the savings side, our calculations include your investments and other liquid assets, government benefits, any other income sources, projected longevity and the effect of inflation. Some people want to include an expected inheritance, but that’s a matter for us to discuss.

Together, with this input, we can estimate the age you can retire with enough funds to support your desired retirement lifestyle and without worrying about outliving your savings. If you wish, we can also project your estimated retirement income for a variety of retirement dates. Some people like to start by choosing their desired retirement date, and then we determine the financial goal and amount to save each year to reach that goal.

Working past independence day

Many people who are financially able to retire continue to work, for a variety of reasons. Someone may find their role fulfilling, want to stay mentally active or enjoy their social contact with colleagues—and be in no rush to leave. Another person may continue to earn income to help support a child or grandchild with a disability. Some people continue to work past their independence day because what they do is an integral part of their identity. For example, that’s one reason Canadian physicians retire at an average age of 69 years.¹

Contact us whenever you wish to discuss your retirement date or if you experience any life event or change of plans that may affect when you retire. You only retire once, but we’ve managed a multitude of retirement plans and our experience can help ensure you’re comfortable with your retirement decision.

When plans change

Some people establish a hoped-for retirement date only to be taken aback by an unexpected event or situation that puts their retirement date at risk. For example, someone about to pay a divorce settlement may not have enough savings to retire when planned.

When retirement plans change, here are four possible ways to get back on track.

Boost your savings. An individual or couple may be able to keep their planned retirement date by increasing the amount they save in the years before retirement. Perhaps they’ve paid off the mortgage and can now invest that freed-up cash.

Postpone your retirement. If you can accept retiring later, you not only gain more years to increase your savings, but you’ll also have fewer years of retirement to fund.

Retire gradually. Some people are in a position to leave their full-time job as long as they continue to earn some income by working part-time, becoming a consultant or starting a small business.

Modify your retirement lifestyle. You may be able to keep your original retirement date if you make trade-offs. Perhaps someone who planned to purchase a vacation property down south to spend the entire winter now rents a property and enjoys shorter stays.

 

¹ Canadian Medical Protective Association, “The Aging Physician: Maintaining Competence and Practising Safely,” 2022.