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The Best Age To Retire In Canada: 55, 65, Or Never?

    Retirement is an important milestone in an individual’s life. It signifies the end of a productive working life and the beginning of a new phase. There are various factors that influence the best age to retire in Canada, including financial stability, personal health, and government policies. In this article, we will discuss the pros and cons of retiring at ages 55, 65, or never, and also include some math calculations to help you make an informed decision.

    Retiring at Age 55

    Pros:

    • Early retirement at age 55 offers the chance to enjoy more years of leisure and pursue hobbies and interests before reaching an age when health problems may become more prevalent.
    • Retiring at 55 provides more years for individuals to potentially enjoy the fruits of their labor and travel or engage in other activities they may not have had time for while working.

    Cons:

    • Retiring at age 55 could impact an individual’s finances significantly. This is because they would need to rely on their savings and investments for a longer period of time compared to retiring at age 65.
    • Early retirement could also mean a reduction in the amount of retirement savings and benefits an individual receives from the government.

    Example: If a person retires at age 55, they will have 30 years to live off their retirement savings and investments, assuming a life expectancy of 85. If they have $1 million in retirement savings and investments and withdraw 4% per year, they will have an annual income of $40,000 ($1 million x 4%). However, this income may not be enough to cover the costs of living and inflation over the next 30 years.

    Retiring at Age 65

    Pros:

    • Retiring at age 65 is a traditional retirement age and is recognized as the age at which individuals become eligible for full retirement benefits from the government.
    • Retiring at 65 means that individuals have a steady stream of retirement benefits and savings, which can provide them with financial stability and security.

    Cons:

    • Retiring at age 65 could mean that individuals have to continue working for several more years if they have not saved enough for retirement.
    • By the time an individual reaches age 65, they may have health problems that could prevent them from enjoying their retirement as much as they would like.

    Example: If a person retires at age 65, they will have 20 years to live off their retirement savings and investments, assuming a life expectancy of 85. If they have $1 million in retirement savings and investments and withdraw 4% per year, they will have an annual income of $40,000 ($1 million x 4%). This income is more likely to be sufficient to cover the costs of living and inflation over the next 20 years compared to retiring at age 55.

    Never Retiring

    Pros:

    • Continuing to work allows individuals to keep contributing to their retirement savings and investments, potentially providing them with a larger nest egg for when they do eventually retire.
    • Working for a longer period of time can also help individuals to maintain a sense of purpose and prevent boredom in retirement.

    Cons:

    • Continuing to work into old age could mean that individuals are unable to enjoy their retirement years to the fullest, due to health problems or declining physical and mental abilities.
    • Individuals who never retire may also be subject to the challenges of an aging workforce, such as discrimination or difficulty finding employment.

    Example: If a person never retires and continues working until age 85, they will have had 40 years to save for retirement. If they save $10,000 per year and earn a 7% return on their investments, their retirement savings and investments will have grown to $2.1 million ($10,000 x 40 years x (1 + 0.07)^40). This provides a more substantial nest egg for retirement compared to retiring at age 55 or 65 with a smaller savings balance.

    The best age to retire in Canada is ultimately a personal decision that will depend on an individual’s specific circumstances and goals. It is important to carefully consider the pros and cons of each option and conduct a thorough financial analysis before making a decision.

    It is advisable to plan for retirement as early as possible and regularly evaluate and adjust your retirement plan as needed. This can help you to achieve your financial goals and have a comfortable retirement. It is also important to be aware of the retirement benefits offered by the Canadian government and to make informed decisions about when to claim them.

    There is no one-size-fits-all answer to the question of the best age to retire in Canada. It is important to consider your personal circumstances, goals, and financial situation to make the best decision for you. Whether you choose to retire at age 55, 65, or never, it is crucial to have a well-thought-out plan in place to ensure a comfortable and financially secure retirement.

    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

    Christopher - BSc, MBA

    Christopher - BSc, MBA

    With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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