At the age of 62, we are beginning our 25th year of financial independence. That is quite a feat!
From the beaches on Nevis, West Indies, to the shores of Phuket, Thailand we have travelled extensively through these decades, and what a ride it’s been!
Young and strong in those early years, we were willing and able to tackle just about anything. Now we tend to be a bit more cautious but we’re not letting up. We still climb into the backs of pickup trucks, ride the chicken buses and soak in volcanic hot pools. The time has passed quickly from when we were the youngest, grayless couple in a group of retirees, to now where we blend in with the retiree crowd.
Still, no one can take away the dance we danced and we are filled with gratitude for all the miles and smiles.
You can do it too!
How do you want to live the next five, ten, twenty years or more? Only you can decide what is best on your path and how to get to your goal.
We were often told retiring early couldn’t be done successfully and that we would fail. These self-supported 24 years have proven the naysayers wrong, and we believe that since we have done it, you can too. In our books and on our website we share the tools we have used to get us here so that you, too, can create your own successful retirement, early or not.
We maintain that one must keep one’s dreams alive. No one will do it for you. Besides, it’s much more fun to be led by one’s dreams instead of being pushed by one’s problems.
No matter where you are on your path to Retirement (Findependence?), here are some time-tested tools we have used. Take advantage of what we know.
This is basic and oh-so-essential. When you track what you are spending you know exactly where your money is going and you are able to make decisions clearly and in real time about your cash outlay. This one habit will change your financial life.
Manage cost per day and annual net spending
Once you track your spending, you are able to figure out the yearly amount of money you are devoting to live the lifestyle you are currently enjoying. Divide your yearly amount by 365 days a year and you have your Cost per Day. Manage these figures assertively and you will be in control of your money. We have been retired for a full 24 years (beginning our 25th year January 14, 2015) and our annual spending for these years has been well under $30K per year.
4 categories of spending
In any household, there are four major spending categories: housing, transportation, taxes and food. If you make adjustments here – and there are lots of ways to do so – you are on your way to financial independence. Open yourself up to options such as house sitting, moving to a less costly area to live, paring down the number of vehicles you own, and being aware of your entertainment outlays.
Positive attitude and mental flexibility
Some people think having a positive and flexible mental attitude is small stuff and inconsequential. But without a sense of wonder, an open mind to new things and even to Change itself, making the transition into a satisfying new life of retirement is more difficult. There are so many opportunities and different ways to live, travel and experience life! Why get in your own way? Embrace your retirement and get a mitt and get in the game!
So, as we begin our 25th year we encourage you to dust off that dream and create a clear vision. Strengthen your will to move into your new life and put your solid financial plan into action. If you do these simple things, you, too, can live the life of your dreams.
Editor’s note: On the date of our retirement, January 14, 1991, the S&P 500 was at 312.49. It has averaged better than 8% yearly plus dividends over these decades. Our average annual spending is well below $30K yearly.
Earlier this week there was extensive mass media coverage of the latest Sun Life “Unretirement” survey, which found more Canadians now expect to work full-time at age 66 than the number who are retired.
Given that the traditional retirement age has been 65, and remains the age many older investors think of collecting Old Age Security and the Canada Pension Plan, the general tone of this coverage was that the idea of working to such an “advanced” age is in itself scandalous.
Regular readers will know what I’m about to say, and did say Wednesday night on a CTV item on the survey. With rising trends to longevity, more and more people are choosing to work longer or feel financially compelled to do so. Indeed, governments around the world generally would love to see us all work longer and pay taxes longer, which is why the age of OAS onset is being bumped up to 67 for younger Canadians.
Plan for Longevity, not Retirement
I still love the positioning of Mark Venning at ChangeRangers.com, who says we should be planning not for Retirement, but for Longevity. Read more
Below is the jointly written article that ran last week at the Hub:
By TSI Network and Jonathan Chevreau
TFSAs let you earn investment income—including interest, dividends and capital gains—tax free.
The federal government first made the Tax-free Savings Account (TFSA) available to Canadian investors in January 2009. These accounts let you earn investment income — including interest, dividends and capital gains — tax free. You could contribute $5,000 in 2009 to start your Tax-free Savings Account.
Every year until 2013, you could contribute an additional $5,000 to your TFSA. If you contribute less than the maximum to your TFSA in any given year, you can carry the difference forward. That means your TFSA contributions for 2009 and 2010 totalled $10,000, rising to $15,000 in 2011, $20,000 in 2012 and so on.
As of January 1, 2013 the annual contribution limit increased to $5,500, in line with the initial promise to adjust limits with rising inflation. It remains at $5,500 for 2015. That means that if you haven’t contributed yet (and were 18 years or older in 2009) you can now contribute up to $36,500. At some point, once the federal books are balanced, the Conservative government is on record that it will boost the annual TFSA limit to $10,000.
How to shelter your gains with a Tax-free Savings Account
Use your TFSA to complement your RRSP.
Generally speaking, your TFSA can hold the same investments as an RRSP. This includes cash, mutual funds, publicly traded stocks, GICs and bonds.
Contributions are not tax deductible, as they are with an RRSP. However, unlike withdrawals from RRSPs (or withdrawals for RRIFs to which most RRSPs are converted), withdrawals from a TFSA are not taxed. In this respect, RRSPs and TFSAs are mirror images of each other in the way they impact your taxes.
This makes the TFSA a good vehicle for more short-term savings goals, like saving up for a down payment on a first home. If funds are limited, you may need to choose between RRSP and TFSA contributions. RRSPs may be the better choice in years of high income when you’re in the top tax brackets, since RRSP contributions are deductible from your taxable income. In years of low or no income — such as when you’re in school, beginning your career or between jobs — TFSAs may be the better choice.
Investing in a TFSA in low-income years will provide a real benefit in retirement. When you’re retired, you can draw down your TFSA first, incurring zero tax liabilities. After that, you can begin making taxable RRSP withdrawals.
I have a lot of books about Retirement and Financial Independence in my personal library, but I seldom go through any one twice. Today’s review is an exception because of a lunch I had with a friend we’ll call Albert (not his actual name).
Albert is a former client with whom I’ve kept in touch. He’s now 70 and just begun to retire. Because of various circumstances, he was unable to engage in most of the basic practices described here or at our sister site, the Financial Independence Hub: so no taxable or tax-sheltered savings for Albert.
Fortunately for him, he bought a house in Toronto at something like a third of what’s it’s worth now, and it’s that home equity that has allowed him to finally stop working. He has no dependents and after going over the pros and cons took out a reverse mortgage.
The Joy of Not Working
But that’s not what this blog is about. Over our lunch, Albert told me he’d been at the public library to check out books about Retirement. Two were by a Canadian writer who has achieved massive international success through self publishing: Ernie Zelinski. He’s written 15 books but the two best-known were the ones Albert got from the library: The Joy of Not Working and How to Retire Happy, Wild and Free. I told him I’d read both a long time ago and likely reviewed them when they first came out.
Retrieving Wild & Free from my office shelves, I noticed I had read it in November 2003, when I was 50 and (as it turned out), still more than a decade from my Findependence Day. I started to flip the pages and noted I had underlined many passages, some of which I reproduce below.
It holds up well. Note the subtitle of Wild & Free: “Retirement Wisdom that you won’t get from your financial advisor.”
Connoisseur of Leisure is now 65
Zelinski is an interesting character. He lives in Edmonton, Alberta and opted for semi-retirement when he was 30, despite having a net worth of minus $30,000 at the time. Born in 1949, he turned 65 last summer. Zelinksi, who is unmarried, has long described himself as a “connoisseur of leisure” who used to work just two or three hours a day.
That work was mostly writing his books, generally in various Edmonton coffee shops. He religiously adhered to a daily writing regime that clearly worked for him: as of 2015, The Joy of Not Working has sold 280,000 copies, Zelinski told me this week.
Zelinski self-published Joy between 1991 and 1997, at which point he handed it to Ten Speed Press, later acquired by Random House. While it has slightly outsold Wild & Free, he makes more from the latter because it’s self published. He says it was rejected by 35 British and American publishers and sent me three rejection letters to confirm it. One New York giant publishing house told him in 2003 that “the retirement shelf” is quite crowded but “we hope you prove us wrong.”
I’d say he did: He has since negotiated 111 book deals with publishers in 29 countries. The two big titles continue to sell, so much so he says he can’t qualify for Old Age Security. “I’m making the best money ever in my life. Only 1% get it clawed back … I guess I’m a 1 percenter among 65-year olds.” He now works about half an hour a day. How he spends the other 23-and-half hours you can divine from his books.
Do we focus too much on the financial side of retirement?
As I perused the pages of Wild & Free once again, I was struck by how little the book dealt with the usual financial matters that the personal finance press tends to focus on. Here’s one passage I had underlined 12 years ago:
“… the biggest mistake you can make with your retirement planning is to concentrate only on the financial aspects.”
Some of the points in the chapter summaries include “You are never too young to retire,” “Retiring too late means you don’t get another chance to do it right”, “Life is short — and so is money,” and “It’s better to live rich than die rich.”
I have to admit that once I re-read the passages I had underlined in 2003, and much more that I hadn’t the first time around, I thought to myself: “Why am I working so hard when I really don’t have to?”
It’s not about loafing but about staying active
Zelinski’s list of things you can do in Retirement takes multiple pages to list and it got me thinking about my own oft-postponed semi-retirement. When I put the book down for the second time, I was even inspired to go back to a hobby that had obsessed me between 2004 and 2011 or so: Internet bridge. Over those years, I had encountered many cyber personalities from around the world and was pleased to reencounter several of them once I did.
While Zelinski doesn’t use the term Findependence, his vision of Semi-Retirement is certainly consistent with this website’s insistence that our last few decades need to have purpose:
“This I can assure you: You won’t find genuine joy and satisfaction by spending all your time sleeping, relaxing, loafing, and watching TV, hoping to live up to the ideal of a true idler … To retire happy, wild, and free, you must stay active.”
As I have noted in other blogs about Extreme Early Retirement, Zelinski is certainly no loafer: he was smart enough to get out of the corporate jungle early in life so he could become an entrepreneur: in addition to his publishing empire he still speaks a bit. Sounds corny but it’s another case of “do what you love and the money will follow.”
I could go on at length but if you want more, go ahead and buy the book, or for $2.99 you could buy this summary e-book by Bob Matthews. It certainly made me think and I’d love to hear from Zelinski fans who have implemented his ideas over the years.
Just drop me a line at firstname.lastname@example.org. In fact, Ernie himself supplied me with a few letters from readers who achieved an even more happy, wild and free retirement than the author himself.
As mentioned in the MoneySense version of the blog, one of the readers highlighted — Oakville-based David Davidson — also sent along a photograph of himself, which we’re running here (on the left).
For continuity and archiving purposes, here’s the original version of the blog:
By Jonathan Chevreau
My recent column on planning for longevity attracted some good counterpoints from readers. In it, I suggested that with life expectancy rates steadily on the rise, people shouldn’t get too hung up with early retirement.
However, I recognize that my own preference to “just keep working” (at least for the time-being) is not necessarily shared by everyone.
There’s more to life than working
Click to the comments section of the story, and you can see one reader was concerned “the author can’t think of anything they would rather do with their time then work.” He or she cites such non-paid activities as volunteering, cultural activities, and visiting friends and family:
“Those activities would be mentally and socially stimulating, and wouldn’t require that I have to be somewhere at any given moment. I would be in charge of when and how often I participated.”
Well sure, but I’d argue much of that can be accomplished on nights and weekends. I don’t see paid work and other rewarding activities as being mutually exclusive. I certainly can see plenty of things I’d love to do that don’t result in attaching an invoice. One reason for my focus on “Findependence” has been my wish to pursue longer-term creative projects.
I’ve also argued that as the Boomers shift gradually into semi-retirement, they can find a more comfortable balance of paid work and those rewarding alternative activities. Several years ago, my wife went down to a four-day work week, precisely so she could visit her aging parents in the country, usually on Fridays. Both have since passed away and she has returned to a five-day week but the point remains. Those who are really well to do and who have an extensive network of friends and family can go to a three-day week if necessary, or do what one self-employed colleague of mine does: she works from home from 8 am to 2 pm, then takes the rest of the day off for all these other activities.
45 years of working is enough
While it wasn’t posted as an online comment, I also received an email from an Oakville reader happy to be identified by his real name (and supplied the above photo): David Davidson is 62 (as I will be in a few months) and has been working full-time since he was 17.
“After 45 years I think I’ll stop working and enjoy the fruits of my labour before it’s too late … I do get exasperated by all the ‘keep working and never spend your money’ retirement articles I see these days”
While Davidson agrees with my skepticism about “extreme early retirement” he draws the line at planning to work into advanced old age and having to save enough money to last beyond 100 years of age:
“That seems like ‘extreme working’ to me and a way to ensure the financial management business hangs on to my money as long as possible.”
Davidson says he has “scrimped and saved all my life to pay off the house, and put my children through university debt free, all while maxing out both my and my wife’s RRSPs and TFSAs. This was not easy and involved a lot of long hours and sacrifice from everyone.”
Now that they are totally debt-free and the children launched, the couple have more than $1 million in combined registered savings “and we intend to spend it.” (She has a small indexed pension; he does not.)
Delaying CPP until age 70
As a hedge against extended longevity, they won’t take CPP until age 70, but it has “long been my plan to have all the savings spent by our mid-80s. After that, if we need money, we’ll have the house to sell (it’ll probably be too much for us to look after by then anyway) and we can rent an apartment or whatever.”
Davidson says his parents and grandparents had minimal expenses once they passed age 80:
“My father and his wife are both 89, in good health until recently, and don’t spend all their CPP & OAS (neither has a pension); my mother and my wife’s mother were the same. My wife’s father died at 68 so there is a downside to planning to live a long time – you might not make it.”
Well, yes, we all realize that. As a friend of mine says, “Live every day as if it were your last, because one day it will be.”
Enjoy the good early years of Retirement
Davidson sensibly counsels enjoying the “really good early years of retirement, before infirmities and just plain exhaustion set in.” He describes my hail-and-hearty 98-year-old friend Meta who still works part-time as “an outlier: the reality is most of us aren’t like that. My father rode his motorcycle until he was 88 so he’s been as healthy and active as anyone could wish for. This year at 89 he has inoperable cancer and most would say he’s had a good long life.”
Click above link for the full article. I’ve reproduced the ten headings below, after which I make a few additional observations, based on my own transition in 2014 from employment (21 consecutive years of it.)
The bottom line is this is what Findependence (Financial Independence) is all about, and the raison d’être of this website. In fact, the cover of the US edition of the book to which this website is focused is very similar to the illustration to the left, except that the calendar date circled is Findependence Day.
As I note below, there may also be good reasons NOT to quit your job in 2015 but instead in 2016 or later. I wrote the original Findependence Day in 2008 but the day didn’t actually arrive until 2014, so you could say it was six years in the making. Sometimes, big life events need to be planned out that far ahead.
In any case, here are the ten reasons for quitting sooner than later.
1.) Work from Anywhere
2.) Do What You Love
3.) Make More Money
4.) Crush Boredom
5.) Express Yourself
6.) Gain Confidence
7.) Get Excited about Going to Work
8.) Explore Limitless Possibilities
9.) Be More Flexible
Lots of food for thought there. I’d also add to point 3 about making more money that the odds are you can keep more of the money you do earn, since self-employment has tax advantages that don’t generally accrue to salaried employees. Similarly, there should be lower out-of-pocket costs, such as commuting and parking, snacks and lunches etc.
As I noted when I blogged from Turkey in October, the Internet and mobile devices certainly facilitate “working from anywhere,” all of which relates to points 1 and 7 to 10 above.
“My boss is a slave driver”
The article doesn’t single out avoiding having a particular boss but that’s certainly a fringe benefit. When you’re your own boss, you can quip “My boss is a slave driver,” assuming you push yourself as hard or harder than any external boss would.
Of course, as many entrepreneurs have noted, business owners actually have multiple bosses: every client is in effect a boss and it can seem at times that so are suppliers, bankers and anyone else you depend on. Still, the freedom to decline assignments is a luxury few full-time employees enjoy.
But does this all add up to quitting your job in 2015? I’d have to say “Not necessarily.” If you’re in debt and have extensive financial obligations, just up and quitting may have severe consequences. If you’re debt-free and “findependent,” leaving a full-time job is a lot easier, particularly if it’s accompanied by severance or Employment Insurance. (Note that you may not qualify for EI if you abruptly quit: much better if you can engineer being laid off!).
Don’t forget that there are many good things about traditional employment. This is the second time I’ve been self-employed (the first was between 1984 and 1989) and both times I soon observed that the first thing you miss are paid vacations and sick days. Consider too the many benefits like health and dental plans and group insurance, and employer contributions on CPP or Social Security.
Think long and hard before acting, and plan in advance
As for the softer concepts like passion, confidence, creativity and the like, I suppose it’s all true but you don’t have to quit a job to enjoy those. Focused time spent on nights and weekends to creative projects, night school, and weekly events like Toastmasters, can all provide those things without having to quit your job.
As with anything, you need to plan well in advance. If you enjoy your work, have a congenial boss and compensation, by all means investigate entrepreneurship but check with your spouse and family and your financial adviser to see whether quitting in 2015 is realistic or even advisable. It could be that 2016 or 2017 might be better in your circumstances.
If on the other hand, you hate every moment at work, your boss is the proverbial jerk, you’ve not had a raise in years, and you are generally unappreciated, clearly you have little to lose and much to gain by taking the plunge sooner than later.
If you need help to motivate yourself to quit there are various blogs and podcasts on the subject. One is this from Freakanomics on the upside of quitting. Or try this one or just Google “quit blogs” or “quit podcasts.”
A Novel Approach to Financial Independence is one of the bestselling e-books in Amazon.ca’s Love & Romance category, as you can see in the screen shot to the left. Here’s the link to Amazon’s listing. Depending on the day, it sometimes hits #1 in the category.
Love & Romance? What about personal finance? Well, I’ve always described the original Findependence Dayas a financial love story so it’s not as out of the box as it may seem at first blush. Click on the blue link in the title above to find out more about the Romance plot that’s at the heart of the original novel.
The full book features a couple, Jamie and Sheena, who are 28 at the start and follows their ups and downs as a couple over 22 subsequent years. It takes a “life cycle” approach to personal finance and centers around Jamie’s declaration that he will become financially independent (“findependent”) by the time he turns 50.
There are numerous setbacks along the way, including business failure and betrayal, separation, children and more. As CTV Senior Financial Commentator Patricia Lovett-Reid says in the foreword to both the original book and the e-book, money troubles are often the cause of marital disharmony. You can read that foreword, by the way, for free because it’s near the start and Amazon lets you “look inside.”
e-book is a “Coles Notes” synopsis of the original book
The e-book pictured above is sort of a “Cole’s Notes” synopsis of the original book, summarizing the plot but focusing more on the content on financial independence. It’s short (15,000 words) but costs only C$3.37.
Amazon lets you designate purchases as gifts and with Christmas just around the corner, you have to admit it’s pretty cost-effective! Especially if you can change a young person’s life for the better, as we say in the ad below (also shown on the front page of Findependence.TV).
Regular readers of this blog won’t be surprised to see an installment dedicated to the difference between Retirement and my preferred term Financial Independence. However, I’m by no means the only person endeavouring to make this distinction. The other day a prominent American financial planner and influential blogger, Michael Kitces, called for a shift in focus for his profession in this essay published on his blog.
He noted that for most of its history the term “retirement” has been synonymous with “not working.” For all the pleasant imagery of golf, vacations and walking on the beach, the historical context for the term retirement was, Kitces wrote, “a mechanism to ‘force’ people out of jobs they were no longer competent to perform. Programs like Social Security were originally a way to soften the blow for those forced out of the workplace into retirement … and they weren’t expected to live long in that retirement in any case.
Total leisure may not lead to happiness
But research is showing that a total cessation of work in favor of a life of 100% leisure “does not actually create the happiness that we might have expected,” Kitces says, “Leisure as an occasional break from work is appealing, but a full-time life of leisure can become boring once the novelty wears off.”
This is exactly what Financial Post writer Andrew Allentuck once told me: Allentuck himself has passed the traditional retirement age of 65 but he continues to write a weekly Family Finance feature focused on the retirement readiness (or lack thereof) of various couples in their 50s and 60s (usually.) When I asked him about this, Allentuck said simply, “Retirement is boring” and added that self-evident truth that the more you work, the more money you have.
Kitces observes that being productively engaged in work brings about the meaning and purpose in life that fuels positive well-being. The work environment also provides a source of interaction with others to fuel our social well-being. This explains the rise of part-time work in retirement or even entire new “encore” careers on the part of those who, financially speaking, could afford never to work for money again.
The financial industry has held out the state of “not working” as the ultimate goal and reward for decades of career success, yet those that reach the retirement finish line often find themselves “unhappy and unfulfilled” after a few months or years. The words in quotes is Kitces’s phrasing, which he follows by suggesting it may be time to rename retirement.
Findependence more achievable than Retirement
His suggested alternative? You guessed it: financial independence. My own call to shift the discussion from Retirement to Financial Independence was articulated in a guest blog I wrote more than a year ago for Roger Wohlner, aka The Chicago Financial Planner, which you can find here.
Here’s how Kitces frames the discussion: “Being financially independent is about being independent from the need to work, which then opens the door to more productive conversations about whether we want to work, and what meaningful work might be.” (his emphasis).
I have noted before that for young people for whom retirement is a distant and seemingly impossible prospect, Financial Independence is a much more doable goal. Kitces says as much when he provides a nod to my book, writing that “For many, their ‘Findependence Day’ may be much more achievable than a full-on retirement, in addition to being more personally satisfying and conducive to well-being!”
But he adds that you can’t plan for financial independence until it’s identified in the first place. Addressing other financial planners and their interactions with clients, he closes: “So the next time you’re talking about ‘retirement,’ think about ‘financial independence and see where the conversation goes!”
Motley Fool podcast, new websites
Some of these themes were discussed last week on Motley Fool’s Market Foolery podcast hosted by Chris Hill, which you can find here. He closed with a mention of the US edition of my new ebook. (Note that I now also write for Motley Fool Canada, whose website is here. As per previous post, the Canadian e-book will be available on Thur., Nov. 13 but can be pre-ordered now)
Also, as detailed in November 3rd’s post, my associates and I have just launched two new websites focused on Financial Independence. By the time you read this, the initial versions should be available at www.financialindependencehub.com and www.findependence.tv. A third site, www.findependencehub.com, is a mirror site of the first one, for those who wish to save keystrokes and are comfortable with the neologism of Findependence.
These are not brand new projects but are short (15,000 words) summaries of Findependence Day (the financial novels shown on the right)and priced accordingly. First out is the U.S. e-book. A Canadian edition will be available next Thursday, Nov. 13 (date moved up from Nov. 24) but can be preordered now. Amazon’s “Look Inside” feature lets you read the forward, my new introduction and the first two chapters free.
Companion guide serves as teaching tools to full novel
The purpose of the new e-books is to act as a teaching tool or companion guide to accompany the full novels. Thus, they are aimed primarily at three groups: financial advisers working with individual investors; teachers of personal finance or financial literacy who work with students; and finally parents, who may want to use the full-length book to teach their children or relatives the basic principles of financial literacy or findependence.
The ebooks are priced at US$2.99 or C$3.37 (the minimum amount you can charge at Amazon and still qualify for maximum author royalties). (Note the Kindle version of the full U.S. edition costs $7.09 but sells for less on other e-book platforms, primarily through Trafford.com, Amazon.com and Barnes & Noble.com.)
Financial focus, but includes short plot summaries
The focus of the e-books is less on the story or novel, and more on the underlying financial principles. However, it does include short plot summaries of each chapter. It also summarizes in bullet point form the financial lessons associated with each chapter. (These end-of-chapter recaps already appear in the full U.S. edition and e-book but not in the original Canadian edition.)
The new e-books also include the glossary and bibliography from the full U.S. edition, and a new introduction by myself. The U.S. edition includes a forward written by certified financial planner Sheryl Garrett, and the Canadian edition again features a forward by CTV News senior financial commentator Patricia Lovett-Reid.
While the ebooks are for the Kindle, you don’t need a Kindle to read them: Amazon provides a free Kindle reader app that lets users of iPhones, iPads and other devices read Kindle ebooks. Amazon customers can also access the Kindle Cloud Reader, which you can find here.
Astute observers may note that the title of the ebook inverts the wording of the full U.S. book. My reasoning was that while the term “Findependence” may slowly be catching on in Canada, where the book was first published in 2008, the term is less familiar in the U.S., so the main title focuses on the more well-known phrase Financial Independence.
The ebook also includes live links to two new web sites on financial independence that are in the process of being launched in a matter of days.
Sun Life Financial assistant vice-president Kevin Press has penned a retirement planning article carrying a provocative headline: “Your retirement date will probably be a surprise.”
Published at www.brighterlife.ca, Press cited the most recent survey of Sun Life’s Canadian Unretirement Index and its startling finding that only 31% (fewer than a third) of Canadian retirees said they stopped work on the date they had actually planned. This attracted a fair bit of social media commentary, including my own predictable quip attributed to deceased Beatle John Lennon in his final album: “Life is what happens to you while you’re busy making other plans.”
Employers set the date a quarter of the time
At one level, the inimicable Press is of course correct. The precise date of retirement isn’t always a variable under one’s complete personal control. In these days of corporate cost-cutting, there’s little guarantee that one’s employment in a particular firm will last to the exact and convenient day of your projected retirement. One in four said they left their jobs because an employer decided that was the way it was going to be. The decision was forced by the employer for 10% of those surveyed, while another 15% took their employers up on their offers of early retirement.
Health is another major factor
But even if they love you and are willing to throw frequent raises and bonuses your way, your health may not cooperate. Sun Life found a whopping 29% reported their work lives ended prematurely because of “personal health or medical reasons.” Another 2% left not because of their own health but because of the deteriorating health of a loved one for which they had to care. Adding 14% more who experienced unexpectedly early retirement for other “unspecified” reasons, that’s 69% who did not finish their career as they had originally planned or expected.
This is all interesting data but should not be viewed as a particularly disturbing trend. Retirement planning is as much an art as an exact science and any financial planner will tell you that, even if employers and health are in your favor, there are many variables that will change the exact finish line. Stock markets will vary, as will interest rates, currencies and other factors. Even the related concept I call “Findependence Day” I have described as a moving target: if markets go on a tear the last few years before your planned departure from the workplace, your liberation from work may happen a few years earlier than it might otherwise have been. If markets languish in an extended bear market, you’ll probably decide to hang in there a few extra years, again assuming robust health and a willing employer.
In fact, a Sun Life ebook authored by Kevin Press quantified this in the wake of the 2008 financial crisis. Based on the traditional retirement age of 65, Sun Life surveyed Canadians as to what they thought they’d be doing at age 66. In 2008, 51% thought they’d be retired by that age, and in 2009, 55% thought so. This plummeted to just 28% in 2010 and has hovered between 27% and 30% in the subsequent years to 2013.
At the same time, the percentage who thought they’d still be working full time at 66 rose from just 16% in 2008 to 27% in 2013. Two thirds of those expecting to be working past 65 said they‘ll do so because they “need to” financially. By 2010, the average age at which Canadians expected to retire had jumped from 64 (in 2009) to 68 by 2010 and 69 in 2011. As confidence has returned, this average expected retirement age has since fallen back to 66.
Press’s e-book can be found here, and includes links to several calculators that should make your rough retirement date less of a surprise.