Posted by Tim Stobbs on March 16, 2009
Well at the end of my last set of retirement calculations I mentioned I had several other scenarios that I wanted to run. So far I only finished the analysis of one of them: semi-retirement at 40.
Semi-retirement is a somewhat attractive option since it allows me to:
- Leave my current work five years earlier.
- Boost my CPP payout in retirement, since I would work part time till 60.
The plan would look something like this. I would work until 40 and during that time I would build up about $136,000 (assuming 4% average return) in my pension. Then if I don’t touch that money till I’m sixty I would have about $300,000. That money with CPP and OAS would be more than enough to provide me with about $30,000/year during my retirement.
I would also continue saving in my TFSA and RRSP prior to 40. That pool of cash would provide about $11,000/year in semi-retirement. So with the mortgage gone that would mean I would be able to cover my property tax, food, the water, power, natural gas and phone bills. Everything else would have to be covered by a job. So depending on how much travel I want to do during semi-retirement I would need an income of $16,000 to $19,000 a year.
Now of course an option during this time would be to pick a job that provides a bit more income and then I could shift into full retirement a bit earlier if I like.
There are downsides to this plan, such as:
- I have to work. Some income is required right up until 60. If health issue come up and prevent me from working it might cause a reduction in standard of living.
- Full retirement then is pushed off until 60, unless I earn more money during the semi-retirement.
In the end as attractive as getting out of work earlier is I think I would wait a few more years to finish covering off at least all my basic expenses. I might be willing to quit a bit early if my travel money wasn’t saved yet, but I have issues with being forced to work all the way until 60. Espcially when I would be saving so much money at 40 that waiting a few more years would let me significantly reduce my income required during the semi-retired phase.