It's Your Money  

Financial strategies to help you retire early

Retire early money tips

The idea of retiring early is a dream for many Canadians, but it often feels like an unattainable goal. And with expenses and the cost of living skyrocketing, the dream seems to be slipping further away.

However, with the right strategies and financial planning, early retirement can be a reality even in the current market and interest rate environment. Let’s explore some tips and strategies people can consider if they are looking to retire early without sacrificing financial security or dramatically altering their retirement plans:

1. Start early and save aggressively—One of the fundamental keys to early retirement is to start saving as early as possible. The power of compounding interest works in your favor when you invest for the long term. Begin by maximizing contributions to your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Take advantage of employer-sponsored retirement plans, like a company pension or group RRSP, if available.

2. Create a comprehensive financial plan—Building a comprehensive financial plan is crucial for early retirement. Consider working with a certified financial planner who can help you set realistic retirement goals, assess your risk tolerance, and create a well-structured plan that will keep you on track and adapt to changing market conditions.

3. Manage debt wisely—High-interest debt can be a major impediment to early retirement. Prioritize paying off high-interest loans, such as credit card debt and personal loans. Make a plan to reduce and eventually eliminate mortgage debt before retirement. Lowering your debt burden will free up more of your income for savings and investments.

4. Live below your means—Living below your means is essential for building substantial savings. Avoid lifestyle inflation as your income grows, and commit to a frugal lifestyle. This means cutting unnecessary expenses, making thoughtful purchase decisions, and setting a budget that allows for consistent savings.

5. Maximize tax-efficient investments—Take advantage of tax-efficient investment strategies. Invest in tax-efficient accounts like TFSAs and RRSPs, and consider using other tax-efficient investment strategies once those accounts are topped off. Tax planning can help reduce your tax liability both before and during retirement.

6. Explore income-generating opportunities—To retire early without sacrificing financial security, you may need to generate additional sources of income. This can include part-time work, freelance gigs, or passive income streams like real estate or dividend-yielding investments. Supplementing your retirement income can help bridge the gap between early retirement and traditional retirement age.

7. Healthcare planning—Retiring early means you might not be eligible for certain employer-sponsored benefits. Plan for your healthcare needs, and consider private health insurance options if necessary. Ensure you have adequate coverage for potential health expenses during your early retirement years.

8. Emergency fund and cash reserves—Maintaining an emergency fund is essential, even in early retirement. Having a cash cushion to cover unexpected expenses or market downturns can prevent you from having to tap into your retirement savings prematurely. Aim to have at least six to twelve months' worth of living expenses in readily accessible cash or liquid assets.

9. Regularly review and adjust your plan—Market conditions and personal circumstances can change, so it's important to regularly review your retirement plan. Adjust your investment portfolio, savings goals, and spending as needed to stay on track for early retirement without compromising your financial security.

10. Consider the sequence of withdrawals–Once in early retirement, be mindful of the sequence in which you withdraw funds from your various accounts. A well-planned withdrawal strategy can optimize your tax situation and extend the longevity of your savings.

Achieving early retirement in the current market and interest rate environment is still possible with careful planning and disciplined financial management – and should not mean you need to sacrifice your financial security or alter your retirement plans dramatically.

By following these tips, sticking to your well-constructed financial plan and staying committed to your goals, you can enjoy the benefits of early retirement while maintaining a comfortable and financially secure lifestyle throughout your retirement years.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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