My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with BDO. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, January 25, 2021

How much do you need to retire in Canada?

In 2014, I wrote a six-part series on retirement called “How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!” The series was not only six parts but also over 10,700 words and I am sure over 60 hours of research, writing and editing. I recall telling myself, “Never again,” after completing this series. If you wish to read the series in full, you can find the links to the six posts on the right-hand side of my blog under the retirement planning category.

I also recall it was somewhat depressing to realize that after all that work, I couldn’t come up with a definitive determination of the actual nest egg you require. No one can. There are simply too many inputs, variables, models, simulators and varied expert opinions.

That being said, there was still a ray of sunlight in the series. I found that after using multiple models for my sample calculations, I was able to map out a range of retirement savings that likely would provide a realistic retirement goal, especially if twinned with a financial plan that is updated every few years. So, while it is likely impossible to determine your retirement nest egg to the nth degree, you can provide yourself a realistic retirement savings objective with some work and planning.

At this point you’re likely saying, why is Mark rambling on about a series he wrote almost seven years ago? The reason is COVID.

The pandemic has brought retirement savings front and centre for far too many of us.

In some circumstances, people have lost jobs or their own small businesses that they expected to work at until retirement.

In other cases, people may be succeeding financially but have become more contemplative during COVID. They have begun to think about the long term and what they really want out of life. Maybe it is time for a change in career or time to retire early while healthy and still invigorated. (Full disclosure: I am one of the people in this group and made the decision to retire from public accounting at the end of 2021.) Some have even decided to retire early and follow the advice of Mike Drak and Jonathan Chevreau in their book Victory Lap. They say people should leave their day job behind once they’ve reached financial independence, and work at something they love or always wanted to do to make some supplemental income.

Canadians who pivoted to retire early caused many a financial advisor to pull their hair out. They typically advised clients to just push through the next couple years, as there is too much financial uncertainty to retire early. But based on what I have seen and heard, early retirements have not been uncommon, despite not necessarily being the financially prudent thing to do. (Although if you listen to the Michael Kitces podcasts, I will reference in this series, you will hear his research that many people should have been retiring early for years, assuming they continued to work part-time at a minimum.)

And that’s why COVID has prompted me to revisit this series. For those retiring soon, or just planning for the future, it’s a great time to rejig these topics with some new research and expert opinions. You will be pleased to know that I have learned restraint over the last six years: The 2021 series will be “only” a few parts and a mere 3,200 words give or take.

I will stop here today. The next 1,600 words or so require a clear mind, as retirement planning and determining a safe withdrawal rate in retirement are surprisingly academic topics. I will discus this methodology in Part Two of this series and am also looking forward to reviewing a couple of the top retirement experts’ studies and suggestions.

The content on this blog has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The blog cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information on this blog or for any decision based on it.

Please note the blog posts are time sensitive and subject to changes in legislation.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

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