Retire at 60

[xix]

I won't quote everybody. But great advice.

Here is what I would do.

Yes retire, but be aware that items or merchandise will go up in price - FOOD. Eat minimal, no constant restaurants visits, Annually yes. Can't buy latest fashions , so keep you clothes for 5-10 years except for underwear, that is yearly. Furniture you will be stuck in the 90's or 2010's depending when you changed you furniture.

Work part time at low end jobs, Walmart ( department stores) Tim Hortons, etc. But do it this way. Ask for part time only say 15 hours to start you off max 25 hours per week for 3-5 months. Quit take a month off then go off to a Coffee shop or bakery, or fast food joint for 3-5 months and repeat. Might pick up a new skill or meet women ( I assume you are a guy and single) who want to have some fun. Free.

Take up artsy classes, yoga, tai chi plenty to choose part time. This way the resources, options or MONEY doesn't dry up quickly.

I know a few "ladies" back in the 90's that couldn't do this because they spent money on crap so they came back to work full time. I think they also invested in a scam and lost their underwear, or got bored at home alone (widows) and females friends were far in between because their friends had husbands, grand children, and other interest.

Anymore? - yes ask stinky-nuts, or read his adventures.

 

[Darts]

The OP said he/she/they have $600,000. So, $600,000 at 5% would generate $30,000 a year so he/she/they do have a steady stream of income.

 

[volkanoff]

Quick answer: It depends.

 

[LTO_3]

I would suggest holding off retirement for 1 year so that you're 61 when you retire. That's what I did so I would get a bit more CPP vs being 60. That also gives you an extra year to build your nest egg. Consider all of your expenses vs what you want to live on. I found that I live on about 1/3 of what I made when I was working and not missing anything.
Also make certain your investments are "safely" making money, no risky investments. On average I consider 5% conservative but should look for at least 8% using a blend of stocks, mutual funds/ETFs and some bonds.

Also be certain your retirement fund has enough cash to cover any unexpected costly expenses so that it doesn't have any major impact on your yearly budget. Make a decision if you want to fully retire or if your semi retiring.

LTO_3

 

[Not getting younger]

Why not mate - advice is advice - good to get all perspectives. Plus have you seen some of these finance guys - they have no idea at least our group of individuals will look out for each other as we still want to make sure we have enough to continue to hobby .

Nothing wrong with getting points of view. But actual advice?
Read through the replies. How many seem to have any actual knowledge?

I let my credentials as a financial adviser expire years ago. Not really what I did ( capital markets).

The way I look at is.
We pay experts to do things for us. Whether that’s electrical work. Fix our cars, or repair our roof.

Guys will spend hours. Researching SPs, what large screen TVs to buy, where to go on vacation. But they won’t spend way more time on something way more important?

Finding a good financial advisor is not only smart, it’s your future….There are always those who think they know better. Sometimes their cars fall apart and houses burn down.

 

[John_Jacob]

Quick question. If your house is paid off is $600,000 enough to retire at 60.

You didn't state your current age, risk tolerance, if you have any other income or if the $600K is free to invest or already invested. It also depends ENTIRELY on your expenses and goals.

Say, on the income side, $600,000 you invest the $600K in Canadian Banks/other stocks that yield a mix of 4.5%. ETFs are great, marginally more safe but the yield is less. That will give you 0.045x$600K = $27,000 income a year that will likely grow ~5% per year. My personal experience is dividend income will grow at ~7.5% but that's me, YMMV. Assuming income/cash flow is the priority, you don't really 'care' about the capital gains and CG returns as long as the principle & dividends remain. Canadian Banks/Blue Chips (EMA, SLF, BCE, T say) are pretty good for retaining Principle.

[as an aside, 80% opinion, I think if you're >45, Dividend investing is better for you, <45, the Capital Gains Investing approach works better]

Also, since these are Canadian stocks, you're eligible for the Dividend Tax Credit (DTC) which, long story short, with a mix of Dividend, Capital Gains Income and Other Income (say CPP, Pension, RIF), you'll pay ~<5% in income taxes up to around $80K - $90K income. This is a pretty good income, particularly if your expenses are low.

The average CPP paid out in in 2023 was $760 per month so that will add $9,120 per year. You can check your amount in MyCRA, your CPP might be higher (or lower). The basic advice is delay CPP payout for as long as you can until you have to at 71 years of age.
For OAS, you're eligible for about $700 per month until 75. This will add $8,400 per year. We can assume claw back is not a concern for the first few years.

So, assuming 65, the question is, is $27,000 +9,120+$8,400= $44, 520* greater than your expenses by, say, 20% 'shit happens' factor? That is, are your expenses <= $35.6K? If yes, you're ~good. If not, then no.
*with the DTC, no income taxes at this level of income

Alternatively, because interest rates are high, you could invest the $600K in an annuity, which @$500K, pays out $32.6K before taxes. This is taxed at income tax rates (versus Dividend/CG) so your income tax rate is a little more complicated. If your overall income is $50K, you'll pay about $9K in taxes worst case. The Annuity approach is outsourcing risk so is a LOT safer than the self-investing Dividend/stock approach but slightly less income due to higher income taxes. There is always a cost for risk and self-investing requires good emotional control. Given that you hobby (as do I), your emotional control is baseline questionable so you can decide what works for you. If you like the Annuity approach, pray to the Interest Rate gods that they'll keep increasing the rates for awhile before you purchase.

Other factors are of course health. Married or single? If single, when are you selling the house to pay for an old age home which costs about $100K a year. Married - bonus, more income. How long can you both age in place? Costs for in-house caregivers are, say, $50K per year. Can you down size? Selling the house, buying a small apartment and live in LCOL places and coming back to maintain your OHIP eligibility? First step of course is get/update your Will, Power of Care, and Power of Financial Attorney to someone.

Again, it ALL depends on your expenses.

Annuity Calculator; https://www.sunlife.ca/en/tools-and-resources/tools-and-calculators/annuity-calculator/
Tax Calculator; https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm
EXCELLENT site; https://www.financialwisdomforum.org/forum/ You can ask the same question there, very smart people and a lot of good posts to read.

 

[Burldude]

If he sell his house, he will not only get a new income source but he will also get a new expense in term of renting which in Toronto is over 2k per month for 1 bedroom apt.

So 600k is not much.

 

[kona]

Don’t know what you do, but see if it is possible to take a sabbatical for a year to try out retirement and if things don’t work out, then you have a fallback plan. Do you have a wife? The maintenance on those can be unbelievable. Here are things that I think you should do:

• Determine your BAU monthly spend. This includes all the fixed costs required to live.
• Determine the one off items that you will need in the future. This will be cars, roof, etc. Also include any travel you are planning.
• Add the above up and this will be your spending plan. From this add in a buffer for situations like inflation that the Liberal government put us in.
• Take a look at your assets. Where is that $600K? What do you plan to do with it? What kind of return can you expect? What is your risk tolerance?
• Contact CRA to see what you are going to get for CPP. Add in OAS. Can you structure your finance to even get GIS even for a few years??

I went through the exercise a couple of years ago when my wife wanted to go on the freedom 46 plan and determined that we could do it. WAAAYYY different situation now. When I did the analysis, inflation was at 2% and interest rates were ultra low. Stock market was nuts. From that time to now, our net worth is down well over a milllion. I am doing the same analysis to see if I can take off. I am now 50. My plan was to renounce my residency and move to a low tax country, but after much research I found out ways to minimize taxes. So now the plan is to live in Canada for 6 months and then travel for 6 months. I will maintain a condo in Toronto to have as a home base. I will take the next decade to structure my finances to be as tax efficient as possible, which I cannot do now because I am at a higher tax bracket. I will try to get my reported income ultra low to be able to apply for GIS when the time comes.

 

[John_Jacob]

From that time to now, our net worth is down well over a milllion.

Invested a lot in financial companies?

 

[Butler1000]

Im looking at 60 too. Maybe 4-5 years. But I plan to downsize at the time. Right now I'm looking at whether to buy into a new build soon or buy used condo. The big issue is buying used you can run into extra upkeep fees for repairs.

Ottawa is my leading contender right now. Good hospitals, airport, decent amenities, and can easily pull half or more equity out of my house after paying off the condo outright. Plus no more yard work and various upkeep chores. Easier for travel.

I will have a decentish defined pension kick in at 65 to join CPP and OAS. Along with some RRSP and the house equity invested. Its a matter of that 5 years I need to carefully plan for.

 

[Not getting younger]

OP.
There is nothing wrong with seeking out perspectives on what people have done etc.

I just touched on the basics because everyone’s situation is unique to them. John Jacob got a little more detailed, as did Kona.

The short and curlies, is.however much you have and let’s call that Net worth. You want it to last 23-25 years from the day you retire. Your “lifestyle” will play a huge role. Aka how much travelling do you do today, how much might you want to travel ( just an example) in your retirement years. The rule of thumb is 60%-70% of todays income (what ever that is)…is what you want yearly post retirement.

Next steps are looking at the present value of money (PV) and then calculating the forward value of money (FV). The FV is affected by your rate of return and inflation ( most seniors lose ground to inflation)…Today that’s 5.x %

A lot of seniors that are homeowners also run into trouble with Land Taxes. Which only ever go up and your on a fixed income.

Finally. For those that own their homes and need a roof over their heads. Reverse Mortgages are becoming more and more and more popular here in Canada . In essence they provide a steady stream of income against the equity you have in your house.

The best advice I can give you. Spend the time to find a good financial adviser. As Sonic said, there are a lot of ones out there you might not want to trust your future to.

My advice on that.
If said advisor that you are interviewing isn’t over the age of 40 move on……

How can any kid fresh out of school, that hasn’t lived life. Been through divorce, put kids through school, seen a loved one run into serious medical issues, etc etc…

Advise you.

As you can see from our 3 post. It’s not that simple or straight forward…

 

[bazokajoe]

My point of view only.

When I was thinking of retiring I looked over my finances. What my company pension would be and my personal investments. I am pretty lucky to keeping my company benefits until I'm 6 feet under.
Then I looked at my monthly expenses and my lifestyle(which is pretty low on expenses). Never been and never will be married and no kids.
But don't forget to look at the money you can save by not working. Such as transportation costs to and from work. Less wear and tear and maintenance on your vehicle. Work cloths depending on your work(business suit or blue collar work cloths).
I plan on collecting my CPP at 60. Yeah, yeah I know, it will be reduced. But I will take that money and stash it away. If I go back to work(part time only) the new CPP contributions will increase the CPP payouts when they do a readjustment every year.

Everybody looks at their retirement differently.
Just do what you think is right for you.

 

[Not getting younger]

CPP. If you start taking it at 60 you give up 10% ( -2% for each year early). If you wait to 70 (+10%)

Which is right?
“Depends”

with respect to spending less. Whether that’s on commuting, lunches, going out for dinner occasionally, spending less on clothes etc.That’s why the general rule of thumb is 60-70 percent of todays income.

 

[tastingyou]

If he sell his house, he will not only get a new income source but he will also get a new expense in term of renting which in Toronto is over 2k per month for 1 bedroom apt.

So 600k is not much.

Is 600k enough - as is usually the case - IT DEPENDS!!- on many factors - the most important being the equity in the house. and do you have a wife/partner

ASSUMPTIONS- net proceeds from sale of the house 1 million, no investment returns used in calculations

cost of renting at 3k/ month 36k/ year
deduct additional costs relating to maintaining the house 11k/ year no longer apply
net additional cost to renting = 25k/year

25 years of renting at 25K additional costs = 625k
375 k in capital remaining from the million in house proceeds over 25 years leaves 15K in additional spending power per year


CONCLUSION

If there is 1k million equity in the house you have plenty to retire on. - especially if you are single.

If the house equity is realistic YES- you can keep hobbying too !!!

 

[kona]

Invested a lot in financial companies?

lost ~500k in banks, but a bigger loss was a cottage that I bought in 2021.

 

[Spunky1]

With 600,OOO you can retire in Thailand like a king .

 

[Darts]

A couple of comments, not advice but it's free:

1) Is deferring your CPP a good choice? It depends how long you will live.

2) For those thinking of leaving Canada, consider the departure tax.
Canadian Departure Tax: Canadian Tax Lawyer Guidance (taxlawcanada.com)

 

[jeff2]

You didn't state your current age, risk tolerance, if you have any other income or if the $600K is free to invest or already invested. It also depends ENTIRELY on your expenses and goals.

Say, on the income side, $600,000 you invest the $600K in Canadian Banks/other stocks that yield a mix of 4.5%. ETFs are great, marginally more safe but the yield is less. That will give you 0.045x$600K = $27,000 income a year that will likely grow ~5% per year. My personal experience is dividend income will grow at ~7.5% but that's me, YMMV. Assuming income/cash flow is the priority, you don't really 'care' about the capital gains and CG returns as long as the principle & dividends remain. Canadian Banks/Blue Chips (EMA, SLF, BCE, T say) are pretty good for retaining Principle.

[as an aside, 80% opinion, I think if you're >45, Dividend investing is better for you, <45, the Capital Gains Investing approach works better]

Also, since these are Canadian stocks, you're eligible for the Dividend Tax Credit (DTC) which, long story short, with a mix of Dividend, Capital Gains Income and Other Income (say CPP, Pension, RIF), you'll pay ~<5% in income taxes up to around $80K - $90K income. This is a pretty good income, particularly if your expenses are low.

The average CPP paid out in in 2023 was $760 per month so that will add $9,120 per year. You can check your amount in MyCRA, your CPP might be higher (or lower). The basic advice is delay CPP payout for as long as you can until you have to at 71 years of age.
For OAS, you're eligible for about $700 per month until 75. This will add $8,400 per year. We can assume claw back is not a concern for the first few years.

So, assuming 65, the question is, is $27,000 +9,120+$8,400= $44, 520* greater than your expenses by, say, 20% 'shit happens' factor? That is, are your expenses <= $35.6K? If yes, you're ~good. If not, then no.
*with the DTC, no income taxes at this level of income

Alternatively, because interest rates are high, you could invest the $600K in an annuity, which @$500K, pays out $32.6K before taxes. This is taxed at income tax rates (versus Dividend/CG) so your income tax rate is a little more complicated. If your overall income is $50K, you'll pay about $9K in taxes worst case. The Annuity approach is outsourcing risk so is a LOT safer than the self-investing Dividend/stock approach but slightly less income due to higher income taxes. There is always a cost for risk and self-investing requires good emotional control. Given that you hobby (as do I), your emotional control is baseline questionable so you can decide what works for you. If you like the Annuity approach, pray to the Interest Rate gods that they'll keep increasing the rates for awhile before you purchase.

Other factors are of course health. Married or single? If single, when are you selling the house to pay for an old age home which costs about $100K a year. Married - bonus, more income. How long can you both age in place? Costs for in-house caregivers are, say, $50K per year. Can you down size? Selling the house, buying a small apartment and live in LCOL places and coming back to maintain your OHIP eligibility? First step of course is get/update your Will, Power of Care, and Power of Financial Attorney to someone.

Again, it ALL depends on your expenses.

Annuity Calculator; https://www.sunlife.ca/en/tools-and-resources/tools-and-calculators/annuity-calculator/
Tax Calculator; https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm
EXCELLENT site; https://www.financialwisdomforum.org/forum/ You can ask the same question there, very smart people and a lot of good posts to read.

Good points. I believe indexed annuities are quite rare and of course cost more. So, you would have the problem of your annuity payments being eroded by inflation.

 

[doinker]

depends on where you live I retired at 64 sold my house in toronto for almost a million had some cash and investments rented an apartment for a year let the intrest I got for my house money pay for the rent then I bought a house for half a million and living off my cpp and oas comfortablely

 

[Darts]

depends on where you live I retired at 64 sold my house in toronto for almost a million had some cash and investments rented an apartment for a year let the intrest I got for my house money pay for the rent then I bought a house for half a million and living off my cpp and oas comfortablely

I know (but not well) a couple of people who sold their Toronto house and moved up to Barrie but I hear Barrie is also expensive now too.