Do you think I am ready to retire

[guelphinvestor]

Hi

Here are my assets;

RRSP : 140,000
Company pension: 250,000
TFSA: 47,000
Taxable accounts:   157,000

I currently spend 12,500 a year

I calculate my spending percentages as:

Ratio not including RRSP or pension:  6.24
Ratio including RRSP : 3.90
Ratio including pension and RRSP: 2.21

I am currently 46 and can start withdrawing my pension at 55.

Any thoughts would be appreciated.

[okits]

How secure is your company pension?  (And is Guelph really that low-cost?  Wow.)

[forummm]

Are you sure you're going to keep your spending at that same level in perpetuity? Or would you want to travel, have a hobby, etc?

[guelphinvestor]

The company pension is defined contribution, so it is my money and should be secure.

Guelph is quite inexpensive.   My house is paid for and I bike to work most of the year.

[guelphinvestor]

I think I would probably like to do more travel when I retired, so my expenses could go up for that.

[kiwichick]

I'd say go for it. Though if you get the travel bug you might need to pick up some part time or seasonal work. Travel is expensive!

[lostamonkey]

The company pension is defined contribution, so it is my money and should be secure.

Guelph is quite inexpensive.   My house is paid for and I bike to work most of the year.

How much is your house worth?

[Jon_Snow]

I certainly wouldn't. But I'm not you. :)

[mxt0133]

With expenses of 13k a year rounded up.  You could work part-time at a Starbucks and get your withdrawal rate down to under 4% not including RRSP or pension.  You might even qualify for some government assistance programs.

The question is what is it that you want to do when you retire?

[aj_yooper]

mxt0133, you are pretty amazing!  By the numbers, you could retire, as your spending is so very low.  You are definitely financially independent by that standard now.  So congratulations!  As you know, MMM's 2014 budget for 3 is about $25,330* for three so you are in an elite group.

While you are working, you have low expenses, but what do you want to do with your freedom and will your stache be able to meet your wants and needs, if you stop your current job?  Think it through, but keep smiling.

*Edit:  http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-familys-2014-spending/

Also, MMM says this "We did most of the saving before we knew all that much about early retirement. But once the picture became a bit clearer, we had a clearer goal. For the last few years, the mantra was “$600,000 in investments, plus a paid-off house.” This is enough to generate $24,000 of spending money, which goes quite far if you have no rent or mortgage to pay." at:  http://www.marketwatch.com/story/how-to-retire-early-35-years-early-2014-01-17 

As I recall, he also had a paid off rental house that covered his expenses.  So check out the earlier posts by MMM and see if it makes sense for you.

[okits]

My concern is if $12.5k is sustainable and accounts for things like house maintenance and replacement of periodic big things (roof, furnace, etc.) Your numbers work and you can draw CPP and OAS in your 60s, so that's a help down the line.

[guelphinvestor]

Yes, I think I will continue to work probably until around 50.
My job is not particularly stressful, and that would give me a little more to live on.

It is nice to know I have the option though.

[daverobev]

Does the company pension replace CPP?

Either way, add OAS in and you're more than fine, IMHO.

[guelphinvestor]

No, the defined contribution plan does not replace CPP, so I would still get CPP at 65 and OAS at 67.

It is the time from now to 65 that I need to think about.

My house is worth around $300,000.

When I did a retirement plan at my bank, it forecast that I would have the same income as now if I retire at 60, which is way more than I currently spend.

[daverobev]

No, the defined contribution plan does not replace CPP, so I would still get CPP at 65 and OAS at 67.

It is the time from now to 65 that I need to think about.

My house is worth around $300,000.

When I did a retirement plan at my bank, it forecast that I would have the same income as now if I retire at 60, which is way more than I currently spend.

So you just need ~20 years? You're good, really.

[Scandium]

My concern is if $12.5k is sustainable and accounts for things like house maintenance and replacement of periodic big things (roof, furnace, etc.) Your numbers work and you can draw CPP and OAS in your 60s, so that's a help down the line.

My concern too. Great low expenses, but unforeseen events are thus much worse. Even if you buy a cheap car one year that could increase your annual spending by 30-50%! Or the AC unit in your house fails and, if it was like ours, suddenly your expenses go up by 60%!

[daverobev]

My concern is if $12.5k is sustainable and accounts for things like house maintenance and replacement of periodic big things (roof, furnace, etc.) Your numbers work and you can draw CPP and OAS in your 60s, so that's a help down the line.

My concern too. Great low expenses, but unforeseen events are thus much worse. Even if you buy a cheap car one year that could increase your annual spending by 30-50%! Or the AC unit in your house fails and, if it was like ours, suddenly your expenses go up by 60%!

Big expenses, like a roof, should be budgeted for. It should be a monthly expense. Whether you choose to sell stock to transfer to cash for those expenses, or just know that you'd have to whenever the expense actually comes, is up to you.

Also with home ownership - you can choose not to fix the AC. If you're FIREd you can just go and sit in the library. Not have a car and rent when you need. Etc.

[Rosy]

I would prefer a bigger buffer before retirement. Since you like your job, consider hanging in there until you are 50 and then work the numbers again, before pulling the trigger.
So I guess my vote is - you are almost there:)but then again, if you are the adventurous type and aren't too worried about the what if's in life, you could retire now, travel some, work some.

[Bolshevik Artizan]

Hi - I am roughly the same age as you, Canadian, and in roughly the same position, except that I have a lot more in pensions and a lot less in real liquidity (yes, I know pensions are liquid, but bear with me).

Because you have "only" $214,000 in real liquidity generating (say) 5-7% or $10-14,000 CDN per year, you are going to risk having a shortfall year on year until you retire. The other way of playing it would be to slowly run down your cash savings to retirement, which at the burn rate you indicate would take you to 63 years of age.

So for me the best way for you to roll would be part time or seasonal/contract work until you are 50, letting your savings accrue revenue at (say) 5% a year. By that time you will have approx. $190,000 and can live off $13,500 from then until age 65, at which point as you say the pensions kick in. the good news, based on your current spending estimates, is that retirement after 67 is going to feel like the land of milk and honey to you, assuming average CPP payout of $14,000 pa, OAS of $8,600 pa and your pension of approx $15,000 pa assuming you don't tap in to it before then.

Hope this is helpful. Like I said, my situation is eerily similar to yours - I just wish, in many ways, I had 20% less in pensions and had put it in cash so I could do with it as I wish now.

FWIW my plan is to do a PhD for three years from 2016 then return to part time/contract work from 49-56 or 57 then retire and open a coffee shop for mums and babies in BC. So we (wife also) wouldn't touch our pensions until I was 67 and wife was 60 either.

The key to all this, as we mustachians know, is being ABLE TO MAKE CHOICES and not HAVING TO WORK.

You are there, my friend. Now you need to be able to make it last - and I think you should semi-retire but go on working part-time for another 5-6 years

[Kaspian]

Are you 100% sure you start withdrawing your pension at 55? 

Mine states I can retire and begin taking pension at 55 but if I leave early (i.e., quit) then I have to wait until age 65 to get it.  This technicality is a giant thorn in my ass. 

[sleepyguy]

That's it, I'm moving to Guelph. :)  At your spending rate, for sure I would go for it... now unless your work doesn't 'feel' like work and you really enjoy it and the coworkers are good company.

[igm]

Looks like you are ready to retire. I agree with working until you are 50, or working part time for 4-6 years. Your savings will be even larger to enjoy traveling and any unforeseen, but inevitable, expenses.

Your annual spending is admirable. Could you provide a breakdown of your spending: food, utilities, property taxes, property insurance, home maintenance, health insurance, dentist, clothing, and any other spending? Thank you.

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/

[guelphinvestor]

Food   $3,650
Gas   $200
Car insurance   $700
House insurance   $500
Internet   $480
Hydro   $1,050
Natural gas   720
Property tax   $3,048
Charity   $2,400
Clothes $500

Total $13,248

( I noticed I was missing some, so this total is higher than the original $12,500 )

[DavidAnnArbor]

This expense budget doesn't take into account the big ticket items mentioned by previous posters. You need a savings bucket for replacing the roof/furnace/AC/plumbing.
Also personal care expenses, cell phone, and other things might be missing here. What about state income taxes? a federal income tax?  If you only draw around $14,000 from your savings will you also have to pay some state income taxes as well?

[guelphinvestor]

My cell phone plan is only $25 a year ( prepaid only rarely used )
I do not think I would have to pay any federal or provincial taxes if I am making < $20,000.
After I turn 65 my income might go above that.
I agree about the big ticket items.

[igm]

Your budget is still impressive. The charity is a nice touch.

Any healthcare costs: doctor, dentist, health insurance?

I gather you have minimal fees for your province's vehicle registration and inspections?

A $20,000 per year withdrawal from investments would probably cover additional costs, travel and house maintenance.

Increasing your investments a bit will meet all your spending requirements.

[guelphinvestor]

Health Care is mostly covered by the government insurance.
My dental and drugs are covered by my work benefits. 
I believe I can continue to use the work benefits for a monthly fee, but I would have to check if that works if I retire early.
I think vehicle/license registration is around $100 a year.

Yes, I think $20,000 a year would cover it.
So $20,000 x 25 = $500,000

[guelphinvestor]

2016 Update:

RRSP : 151,000
Company pension: 293,000
TFSA: 54,000
Taxable accounts:   257,000

I currently spend 12,500 a year

I calculate my spending percentages as:

Ratio not including RRSP or pension:  4.29
Ratio including RRSP : 3.94
Ratio including pension and RRSP: 1.82

Looks like I may be ready now.

[daverobev]

2016 Update:

RRSP : 151,000
Company pension: 293,000
TFSA: 54,000
Taxable accounts:   257,000

I currently spend 12,500 a year

I calculate my spending percentages as:

Ratio not including RRSP or pension:  4.29
Ratio including RRSP : 3.94
Ratio including pension and RRSP: 1.82

Looks like I may be ready now.

You're def. ready. Now's perfect - you have some years to reduce your RRSP before you have CPP/OAS coming in driving up your taxable income, combined with having to convert to an RRIF.

[Retire-Canada]

You're def. ready. Now's perfect - you have some years to reduce your RRSP before you have CPP/OAS coming in driving up your taxable income, combined with having to convert to an RRIF.

Yes great work. Enjoy your retirement. :)

[guelphinvestor]

Thanks.

I forgot to update the percentages:

Ratio: 4.28
Ration with RRSP : 3.04
Ration with RRSP + Pension: 1.82

[Vertical Mode]

You and I are in very different positions (and countries, for that matter) so I will defer to the analysis you and others here have done on your numbers. It sounds like you may have a pretty conservative withdrawal rate, all things considered. As others have said, even some part-time gig here or there seems like it would be enough to reduce your burn rate into very conservative territory, if needed. The math suggests that the answer is yes.

This brings me back to the title of your post - if you have to ask...

Do you feel mentally ready to retire? Do you know what you're retiring TO? (don't have to know yet, but others have said it is helpful to have a general idea of what you want to do/how you will spend your time). The numbers say you have a strong financial tailwind, but ultimately the math is only part of the whole solution. If in your mind you have a satisfactory answer to the implied non-financial parts of your question, and this answer doesn't skew the numbers significantly, I would say go for it.

Best of luck!

-VM

[guelphinvestor]

Hi

Thanks for your response.

I think that am financially able to retire, but I will keep working for now, because I need more specific plans about what I would do.

I do not mind my work, and it provides a structure to my life.

[Retire-Canada]

Just playing devil's advocate here, but if you are that wrapped around work that you don't know what you would do with yourself if you didn't go there each day you may need to be away from it in order to free your mind of that paradigm and even see what's possible.  It's a bit like a prisoner not walking through the open door to their cell until they figure out what not being in jail is supposed to be. It can be a bit of a catch 22.

[guelphinvestor]

That is a good point.   

[guelphinvestor]

2017 update
Personal and Group RRSP: 514,000
TFSA: 69,000
Investments: 345,000
Total: 928, 000
Ratio to expenses: 1.44 %

Still not minding work though ...

For some reason I am thinking 1,000,000 plus an electric car would be a good goal

[ILikeDividends]

2017 update
Personal and Group RRSP: 514,000
TFSA: 69,000
Investments: 345,000
Total: 928, 000
Ratio to expenses: 1.44 %

Still not minding work though ...

For some reason I am thinking 1,000,000 plus an electric car would be a good goal

Stay there until you do mind it.  I absolutely hated what my job had become, despite the big increases in pay, starting about 15 years before I got laid off.

Only after about 6 months of being laid off, I realized, hey, I'm not unemployed.  I'm just retired.  I finally realized this when my neighbor asked, "When are you going to stop saying you're unemployed, and just admit that you're retired?"  That was my get-out-of-jail aha moment.

I've been loving life ever since.  I'll never get that 15 years of misery back, but at least I was well paid for it.

And the advice, upthread, that you need the proper perspective to prepare for getting out of jail, is spot on.  I was living in a house way larger than I ever needed, filled up with stuff I purchased because I might need it (and never actually did need it), just because I had no life or time left, after an endless series of 70+ hour work weeks, to make rational purchasing decisions after work.

Spending money, which would have served me far better deployed in investments, became just about my only stress-relieving outlet from the daily (weekends included) grind of being employed, that I could fit within my schedule.

[guelphinvestor]

Mid 2018 Update:

Personal and Group RRSP: 543,571
TFSA: 77,932
Investments: 378,810
Total: 1,000,315
Ratio to expenses: 1.36 %

Still not minding work though ...

Still need the electric car

[letsdoit]

how is spending 12.5 k?

house and transport are appx 0?

[RichMoose]

Mid 2018 Update:

Personal and Group RRSP: 543,571
TFSA: 77,932
Investments: 378,810
Total: 1,000,315
Ratio to expenses: 1.36 %

Still not minding work though ...

Still need the electric car

Financials are looking great Rick!

What are you waiting for re the car?  I think you can afford one. ;)

[Retire-Canada]

I'm pretty sure a 0.5% WR is safe enough to pull the plug. Shouldn't be long until you hit that. :)

[letsdoit]

what does WR stand for ?

[Retire-Canada]

what does WR stand for ?

Withdrawal Rate. People often talk about the 4% Rule or 4% SWR [safe withdrawal rate]. The X% is that percentage of the initial portfolio value withdrawal each year usually adjust for inflation.

[letsdoit]

so why are the ratios in this example so extreme?:  12.5 k spend vs 1mill assets

[Retire-Canada]

so why are the ratios in this example so extreme?:  12.5 k spend vs 1mill assets

That's an excellent question. By any reasonable assessment the OP has enough to retire even if he can't maintain the $12.5K/yr budget long-term. At a sub-2% WR the 1M will keep growing quite quickly.

[Bicycle_B]

@rickbosguelph, I agree you are financially ready to retire.

Perhaps you can explore new activities before quitting your job. In general, ask questions like "What am I curious about? What would I love to do? How could I help someone? How could I make someone smile?" Do at least action per week to learn the answers to these questions. When/if the answers become more engaging than your job, increase the focus on them - more repetitions, more time spent per week, bolder or harder core examples. If the new path becomes even more engaging with increased focus, you have confirmed that the path itself, not just the novelty, is adding to your life. At that point, you're ready to retire.

Since you like having a structure, perhaps you can post weekly in this journal which questions you explored and what you did to explore them. Fwiw, I don't recommend evaluating immediately, or stressing yourself with undue disclosure if you're more of an internal evaluator instead of a conversationalist. But a structure of doing and reporting activities would get you moving in new directions. Their effect over time, not just the feeling of the moment, is what I suspect would be the most significant result. No need to quit until the new activities are fully able to replace the job structure IMHO.

Another take on the exploration route is Ernie Zelinski's book, "How to Retire Happy, Wild and Free."

[guelphinvestor]

Thanks for the suggestions

[guelphinvestor]

2020 Update

Expenses 14,000
Investments   $578,678   
Investment + RRSP   $803,714   
Investment + RRSP + Pension   $1,211,853   


Ratio with Pension 1.16%

[JAYSLOL]

2020 Update

Expenses 14,000
Investments   $578,678   
Investment + RRSP   $803,714   
Investment + RRSP + Pension   $1,211,853   


Ratio with Pension 1.16%

I started reading this not realizing it was originally from 2015, very cool.  Are you still working full time, or part time or are you completely FIREd now?  That’s a huge stache for how low your expenses are, congrats! 

[guelphinvestor]

Thanks.

Yes, still working full time.