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Insights & advice

How do you know when it's time to retire?

May 2022 - 15 min read

Key Takeaways

  • The landscape of retirement is changing – your planning should, too.

  • There is no one-size-fits-all approach to deciding when to retire.

  • Your mental health is just as important as your physical health in retirement.

  • You may have more options than you think when considering your retirement budget.

  • How you see your retirement helps you decide when to take the leap.

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How do you know when it's time to retire?

Wouldn’t it be great if there was a simple way to know when it’s time to retire? The truth is your circumstances are unique so there’s no right or wrong way to make that decision. But deciding when the right time is for you is important. You’ll have to consider things like income, pensions, debt, mental health and a number of other factors when making your decision. Let’s explore everything you need to know before taking this important step of knowing when to take the retirement plunge.

The changing landscape of retirement

Ultimately, when you decide to retire is a personal choice but perhaps redefining “retirement age” is a good place to start.  

Retirement looks different than it did even just a generation ago. As people are living longer, generally healthier lives, some tend to work longer and retire later during their twilight years. Or some may choose to officially retire but not completely stop working.   

That’s happening for a couple of reasons: 

  • Some may need more money to feel more secure – Because we’re living longer, people find that they simply need more money to retire because it costs more now than it ever has. After retirement, some may have decades of life to live. 
    Think about what will make you feel financially secure in retirement - this will help you decide if continuing to earn an income for longer is not only feasible, but also the right choice for you. After all, continuing to make money will allow you the chance to save more of it.  

  • Some people love to work and want to keep doing it – People enjoy working and some are continuing past what we traditionally think of as “retirement age.” Some people are happy to retire from their career but want to continue to work in retirement, full-time or part-time, to fulfill a passion or simply to keep active.

  • Changing family structure – It’s more common for some adult children may move back in with their parents or seek help from them because of their own financial situations. Whether it’s moving back in with you for a time, or perhaps gifting a mortgage down payment, the circumstances of your kids’ lives may have a direct impact on yours. It’s important to think about the possibility (or reality) of those empty nest years not being so empty. If that is something you can expect, perhaps your retirement might need to be delayed.


    If elder or childcare is part of your life, you’ve likely already included this factor in your decision of when to retire. Maybe you live in a multi-generational household and currently provide eldercare to a family member, or when your adult child moves back home, they might be bringing grandchildren along.

  • What about retiring early? – For some, it’s the other side of the retirement age coin that means the most to them. If you plan to retire before age 65, you’ll need to assess where your finances stand in terms of savings, investments, retirement funds, etc. By retiring before 65, you will have to prepare to live without an income for longer.

  • The cost of living (longer) – Remember when you could go to the movies for $5.00? When you bought your first home for $100K? Those were the good ‘ol days, weren’t they? Times have changed.   

    Cost of living impacts a lot of your decisions surrounding retirement, particularly the “when.” It’s something we naturally work into our budgets our whole working lives, so it’s important to extend that into retirement, too.   

    It’s especially important to account for if you’re thinking about retiring before age 65. The earlier you retire and the longer you live, the more time you’ll have to consider in your budget. 

    A good place to start is to understand the average cost of living for where you live and based on your lifestyle. The more you understand about your current (and past) cost of living, the easier it will help to predict for your retirement years.  

  • Are you psychologically ready? – It can be quite a shock to the system transitioning to the retirement life.   

    For some, retirement is the biggest change they experience in their lives. While it can be exciting to think about the feeling of freedom you’ll have after working so hard and long to get there, you might be surprised to learn how many people feel fear and anxiety about retiring.   

    Coping with change is difficult, even when it’s an exciting, welcome change. So, it’s important to try to mentally and emotionally prepare for it.  

    Even if you have all your financial ducks in a row and you’ve decided when the right time to retire is, perhaps you’d benefit from some serious reflection about whether you’re psychologically ready to make that transition.  

Taking stock of your finances

Savings and pensions and debt, oh my! Probably the first thing that springs to mind when you start to think about retirement is the money, right? Well, that’s because it is perhaps the most important factor in planning your retirement. It’s basic – if you’re no longer working you need to replace that income stream to simply keep living life, let alone fulfill any kind of retirement dream.   

So, to get your retirement planning off the ground, you’ll need to take stock of your retirement income options.   

There are 3 main retirement income streams: 

  • Personal savings accounts

    There are important strategies that can help you maximize your finances. Perhaps you have an RRSP or TSFA that you’ve been contributing to specifically for retirement. You might have investments that will be helpful in retirement planning. Figuring out what your savings will contribute to your retirement will help you make the decision about when to take the plunge. You also may find that you have more money than you thought.  

  • Pensions or workplace benefits

    When you retire you might have a pension available to you. When planning for retirement, it’s a great idea to make sure you know what type of pension(s) plan you have. Is it a Defined Contribution Pension Plan, a Defined Benefit Pension Plan or a Locked-in retirement account? Once you know what you’re working with, it’s easier to plan your retirement income and ultimately, when it’s the best time for you to retire. 

  • Government benefits

    There are a few different government income options you may be eligible for depending on your financial circumstances, like Canada Pension Plan (in Quebec, the Quebec Pension Plan), Old Age Security and Guaranteed Income Supplement. Depending on when you want to retire and start accessing the funds there are different rules and implications to be aware of. If you’re working toward retiring at a specific age or time, by taking stock and discussing your situation with an advisor, you can get a solid grasp of the distance between where you are financially now, and where you’d like to be when it’s time to retire, and most importantly, what you need to do to get there.  

What do you want out of your retirement?

If you have a family, 1 of the most important things to think about is how a move will impact your spouse and children. There are many things to discuss with your partner, such as:

  • Budgeting for the kind of retirement you want

    When you dream of your retirement years, do scenes of sandy beaches, turquoise water and sailboats flash before you? Perhaps you imagine your retirement years being spent closer to your children or other family. No matter what you imagine your retirement will look like, you have to plan for it. And that means you need a budget.  

    When you think about when to retire, in addition to the timing, the nature of your time spent in retirement is a big factor. Creating a retirement budget is important no matter when you decide to do it, but especially so when you consider your retirement life. This applies to the “big picture” of your retirement goals like travel or more time with your family but also the day-to-day cost of living. Think about your weekly, monthly and annual expenses – will those change when you retire? And if so, how? 

    In the simplest terms, if after crunching the numbers you can see you simply can’t afford to retire yet, then it’s not the time to retire yet.   

  • Planning to retire with your partner

    If you want to retire at the same time as your partner, you have to plan for it. The assumption that you and your partner will be ready (and able) to retire at the same time might not be a given.    

    Retiring as a couple demands certain considerations like; do you want to retire at the same time? Is there an age gap or any other reason one may retire sooner than the other? Working together to prepare for this major life event is key to figuring out the general plan you have for your shared retirement, and specifically when you plan to do it.  

Final thoughts

Choosing when to retire is a big decision and there really is no one-size-fits-all approach. It’s different for every person and it can be daunting – but it doesn’t have to be.   

It might be useful to use these topics as a kind of checklist to navigate conversations with your partner, your loved ones and/or your advisor about your retirement planning.  

What's next?

You look forward to living the kind of retirement you always imagined as long as you plan for it and choose the right time for you to retire. 

You might want to contact your advisor to:

  • Confirm how much retirement income you can expect to receive from government plans. 

  • Make sure your investments are on track to achieving your retirement savings goals in the timeframe you’re working towards.  

  • Get an estimate of the annual income your company pension may provide.

  • Look at ways to get rid of debt. 

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The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.