Are you all confused yet? My wife had mentioned she was a bit unsure where the hell this series was going so I thought a time line might help sort things out.
- Age 34 – Mortgage paid off, shift payoff money and mortgage payment over to savings.
- Age 39 – Complete semi-retirement savings. Now $18,000/year will come from investments to cover the basics like food, property tax, insurance the bills (power, natural gas, water, phone). I quit my day job and do something else. Between my wife and I we need to make only $9,000/year to cover the rest of our typical expenses.
- Age 39 to 60 – Continue to work part time and assume I spend any extra money that we earn in excess of $9000/year. The reality is we don’t have to do that. If we find we are regularly making much more than that and not spending it we could then put the money back in the retirement pool and shift over to full retirement earlier than 60.
- Age 60 – File for CPP and move into full retirement.
Today we are going to focus a bit on two parts of that time line: 39 to 60 and then 60+. Now the first section of 39 to 60 will be hard to predict since I’ve tried to build things to be as flexible as possible. I might end up working full time for a year on a project and then stop working for three afterward. Or I might just work part-time for that entire period. The point is the ability to do just about anything as long was we are making a bit of income.
Regardless of how we do it it should help rise up our CPP payments since I won’t have this string of $0 income years that have typically dragged down my benefit. To play it safe I’m going to assume that we only get about $6000/year by taking CPP at 60 for both of us (my typical full retirement calculation).
So then at age 60 I’ll still have that $18,000 a year from investments, plus $6000 from CPP for a total of $24,000/year. Which leaves me a little short from 60 to 65 (I’ve typically assume spending around $27,000/year). So I can eat into my principle for a bit, which won’t be bad only about $15,000 in total. At age 65 we both can get $6000 each from OAS for a total of $12,000/yaer, but I’m playing it safe and assuming we only get half of that or $6000/year for both of us. So at 65 we should have an income of right around $30,000 a year in full retirement.
All in all it’s a workable plan. Yet there is one little interesting fact in all of this. I could just keep working from 39 until 42 and have the money build up to produce about $27,000 a year in investment income. Then I’m not required to work at all from 42 onwards. To be honest it’s not a bad idea. I’m just not sure what I’m going to do.
I think it will heavily depend on how I feel about my job when I turn 39. I might want to keep working or just reduce my hours to three days a week. Or I might be sick of it and ready to move onwards. The point is that last year or two of work just prior to retirement are your big compounding years, if you can hang on at all or don’t tap into that money it makes a huge difference to your final portfolio value. So choose carefully, the results will carry forward for a long time.