Top Financial Tips For Early Retirement
Early retirement might seem like a distant dream, but there are ways to set yourself up to retire early, even if it is just a gain of a few years.
Early retirement means different things to different people.
The freedom to work when you want, or not at all, is one popular goal of early retirement. Work isnt that bad when you have the option to do it on your own terms. Many people work well into their 60s or even 70s after they officially retire.
Things You Should Know For An Early Retirement In Canada
As Canadian citizens, we are quite lucky when it comes to planning for retirement. Many of us have a healthy amount of CPP, RRSPs, TSFAs, GICs and many acronyms that have come to represent our late-life freedom. But even if you havent been saving up for your whole life, there are ways to retire early. This article is mainly going to focus on planning a retirement overseas, where the dollar stretches further and the sun is always shining. While it is easy and cheap to retire to paradise abroad, there are a few things that you should think about before taking the plunge. Here we will attempt to shed some light on the topic and help give you a better understanding of where you stand in terms of retirement.
What You Need To Know About Early Retirement
Its a glorious spring day on Vancouver Island, and Patricia Robinson and her husband, Ron Sadownik, are relaxing amid the West Coast splendour. Robinson, a 55-year-old retired school principal, spent the morning finishing a watercolour painting while Sadownik, a 58-year-old former high-school drama teacher, worked on a piece of molten-glass art in his studio. In the afternoon, the couple went for their daily walk along the harbour near their home in Nanaimo, then returned to putter among the daffodils in the garden of their three-bedroom house.
There isnt a day were not smiling, says Sadownik. Early retirement is the best thing we ever did.
Thanks to a combination of good fortune and good planning, Robinson and Sadownik have managed to quit working a full decade earlier than many other Canadians. Will you be able to do the same?
The good news is that early retirement is possible not just for this lucky couple but for many of us. Sure, it takes a bit of financial discipline, and you may need to be creative in bridging the gap between full employment and complete retirement. But you dont need a million dollars to be able to quit working. So how much do you need? Join us as we show you how to plot your own escape from the working world.
Ignore the 70 per cent rule.
How much, then, should I save?
Can I count on CPP?
What other tricks are there?
What can I do now?
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Am I Eligible To Retire
Perhaps one of the most important things to be aware of when considering retirement is whether or not you meet the retirement eligibility requirements for your plan and retirement group.
You may be financially and mentally prepared to retire, but you need to meet the age and service eligibility requirements set by OPERS to take that next step.
You Might Not Go Back To The Grind But You Might Work
Like Mamula, both Jeske and Gilbert are also maintaining side gigs or work that they enjoy.
As Gilbert said, Its interesting that even if you didnt plan on earning any money, lets face it, a lot of us that are in this F.I.R.E. community are pretty driven people whore pretty successful. And theres going to be opportunities, the difference is, the opportunities are doing something that you love. So, I think youll find that there is income even if youre not planning for it. So dont sacrifice all your life to continue working to get that withdrawal rate down to 3%, 2.5%.
Learn about How to Make Money in Retirement: 14 Real and Really Easy Ways to Boost Income. Or, explore these passive income ideas.
Recommended Reading: How To Save For Retirement Without A 401k
Do I Qualify To Apply For An Early Retirement Pension
If you have less than 6 years until you reach the state retirement age, you can apply for the right to start an early retirement pension.If you were born in 1963, 1964, 1967 or 1968, you can apply for an early retirement pension 7 years before you reach the state retirement age. In order to be entitled to receive an early retirement pension, you must also fulfil a number of requirements and conditions, including requirements concerning your address and citizenship. Read more in the Requirements for being entitled to an early retirement pension section.
If you were born in 1959 or 1960
Other age groups
How Much You Should Save
Retirement experts suggest that households should aim to have 50-70% of their pre-retirement income for living expenses in retirement.
For example, assuming you want to replace 70% of your pre-retirement income:
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If your annual pre-retirement income is $20,000 per year: your standard of living in retirement will likely be maintained by OAS and CPP income, even without additional income from savings.
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If your annual pre-retirement income is $40,000 per year: in addition to OAS and CPP income, you would need an additional $11,795 per year, which must come from your personal savings and/or workplace pension plans to maintain your standard of living in retirement.
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If your annual pre-retirement income is $75,000 per year: in addition to OAS and CPP income, you would need an additional $33,329 per year, which must come from your personal savings and/or workplace pension plans to maintain your standard of living in retirement.
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When To Start Your Retirement Pension
The standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.
If you start receiving your pension earlier, the monthly amount youll receive will be smaller. If you decide to start later, youll receive a larger monthly amount.
Theres no benefit to wait after age 70 to start receiving the pension. The maximum monthly amount you can receive is reached when you turn 70.
Federal Insurance For Private Pensions
If your company runs into financial problems, you’re likely to still get your pension.
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Insures most private-sector defined-benefit pensions. These are plans that typically pay a certain amount each month after you retire. These are single-employer plans. Multi-employer plans have different coverage.
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Covers most cash-balance plans. Those are defined-benefit pensions that allow you to take a lump-sum distribution.
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Does not cover government and military pensions, 401k plans, IRAs, and certain others.
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**qualified Public Safety Employees
Effective for distributions after December 31, 2015, the exception for pubic safety employees who are age 50 or over is expanded to include specified federal law enforcement officers, customs and border protection officers, federal firefighters and air traffic controllers. Also, the restriction that only defined benefit plans qualify for the exemption is eliminated. Thus, an exemption is allowed for distributions from defined contribution plans or other types of governmental plans, such as the TSP. See IRC Section 72, as amended by the Defending Public Safety Employees Retirement Act, P.L. 114-26.
When Can I Start My Early Retirement Pension
When you can start your early retirement pension depends on how many years you have been attached to the labour market. However, the soonest it can happen is 3 years before you reach the state retirement age. You accrue seniority from the time you reach the age of 16 and up to the time where there is 6 years until you reach the state retirement age.Please note that this means that the accrual period is from the age of 16 to the age of 61 . Please note that if, for example, youaccrue 42.232 years of seniority, this will be rounded down to 42 years. Youcan accrue early retirement pension entitlements for 1, 2 or 3 years – not halfyears.
The table shows you how many years you need to have been in the labour marketbased on your date of birth and your state retirement age in order to beentitled to an early retirement pension 1, 2 or 3 years before you reach thestate retirement age.Please note that if, for example, youaccrue 42.232 years of seniority, this will be rounded down to 42 years. Youcan accrue early retirement pension entitlements for 1, 2 or 3 years – not halfyears.
Send documentation
You can receive up to DKK 13,740 before tax permonth. Your benefit may be reduced due to:
- residency and/or work abroad after reaching the age of 15
- your pension assets
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Should You Take Cpp Early Break
For me, the starting point to answering the question is looking at the mathematical break-even point. Heres an example of twins Beth and Janet.
Under Canada Pension Plan benefits, Beth can take income at age 60 based on a reduction factor of 0.6% for each month prior to her 65th birthday. Thus Beths benefit will be reduced by 36% for a monthly income of $640 starting on her 60th birthday.
Lets fast forward 5 years. Now, Beth and Janet are both 65. Over the last 5 years, Beth has collected $640 per month totalling $38,400. In other words, Beth has made $38,400 before Janet has collected a single CPP cheque. That being said, Janet is now going to get $1000 per month for CPP or $360 per month more than Beths $640.
The question is how many months does Janet need to collect more pension than Beth to make up the $38,400 Beth is ahead? It will take Janet 106 months to make up the $38,400 at $360 per month. In other words, before age 74, Beth is ahead of Janet and after age 74, Janet is ahead of Beth.
If Beth or Janet can provide their date of death, making the right decision would be easy. Another way to phrase this question is, How long do you expect to live?
Heres the breakeven chart to support the example
| 76.9 | 77.9 |
If you live past age 74, the one could argue the math says take CPP later. If you dont live to 74, then you should have taken the money early. Unfortunately, no one knows when they are going to die.
Permanent Address In Denmark
You normally need to have a permanent address in Denmark in order to be entitled to an early retirement pension. However, this does not apply if you meet one of the conditions below.
- As a Danish citizen, you can apply for an entitlement to an early retirement pension if you live in an EU/EEA country, Switzerland, The United Kingdom or Turkey
- If you are not a Danish citizen, you need to meet one of the following conditions:
– You must live in another EU/EEA country, Switzerland, The United Kingdom or Turkey.- You are a citizen of a EU/EEA country, Switzerland, The United Kingdom, Turkey, a stateless person or a refugee.- You have in total accrued at least three years of pension entitlement from an EU/EEA country, Switzerland, The United Kingdom or Turkey, including at least on your of accrual in Denmark .- You have worked in an EU/EEA country, Switzerland, The United Kingdom or Turkey.
Please note that you cannot accrue seniority or fulfil the requirement about a current attachment to the labour market in/from Turkey.
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Statement Of Benefit Payment
If you annuitize any portion of your account and select one of the OPERS payment plans, you’ll receive a Statement of Benefit Payment any time there is a change in your benefit. You’ll also receive a Statement of Benefit Payment if there is a change in any deductions to your benefit. For example, the statement will show changes such as your cost-of-living adjustment, deductions for health care coverage or Medicare adjustments.
Statement of Benefit Payment are sent at the beginning of the year, or any time a there is a change in your amount of your retirement benefit.
How To Apply For Sss Retirement Benefit
Posted By: sssinquiries_administrat0rMay 10, 2017
How to Apply for SSS Retirement Benefit? Are you qualified for a monthly pension or a lump sum?
The SSS Retirement Benefit is a cash benefit paid either in monthly pension or as a lump sum to an SSS member who can no longer work due to old age.
There are two types of retirement benefit:
Other benefits aside from the monthly pension?
Who are qualified for a retirement pension?
How is the monthly pension computed?
For the readers guidance:
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Temporary Early Retirement Authority
I got an email back in April from someone wanting to know if a veteran was yanking his chain about being retired with only 16 years of Active Duty service. As it turns out, there was no chain yanking.
It is possible to retire with less than 20 years of service, and not have it be a medical retirement.
Prepare For The Soft Side Of Retirement
Gilbert emphasized that it is really important for people to prepare for their life after early retirement, not just their financial life after early retirement.
He said, Its really important for people as theyre getting close to what I call the starting line, that they do really spend some introspective time talking about that or thinking about it, talking with their spouse. Because the research says, its the people that do the most amount of time planning for the soft side that have the best transitions into retirement.
Its been proven and the risk of depression goes up 40% in retirement, big numbers. But the way you avoid that is by increasing the amount of time that you prepare for it before retirement. And thats really all the soft stuff. So thats where our focus was and it worked out well for us.
Learn more about retirement and depression.
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Expat Vs Travel Insurance
Expat insurance is available for those who enjoy long absences from their home country. As we mentioned earlier, Canadians lose their provincial health care after absences from Canada of more than three months, at which point they are no longer eligible for regular travel insurance. Expat insurance is considerably more expensive than travel insurance, but is still worth it because it is often so much cheaper to live overseas.
In a sample quote we pulled from Ingle International for a non-smoking 60-year-old Albertan with no prior health history travelling worldwide for 6 months, the cost is around $815.
It is worth noting that health care, dentist and doctors visits in developing countries is often so cheap that, unless youre in need of a serious surgery or ongoing treatments, it may be worth it to price out medical care in the country you plan to live in and decide whether or not it is even worth paying for expat insurance. Medical tourism is, in itself, a great way to save money in retirement. If youre planning a trip to a country where health care is cheap, consider booking an appointment and getting your work done for a fraction of the cost that it would be at home. We recently had dental work done in Mexico and it was great. Read more about it here.
Nora Dunn has written in great detail about the usage and application of this type of insurance and you can read more about it here.
Provincial Health Care Expires After Long Absences From Canada
Canadians are lucky to have their provincial and federal health care plans and we definitely dont like to give them up. If you are absent from Canada an extended period of time, your provincial health care may be suspended, meaning that your regular travel insurance may no longer be valid and you wont be covered for accidents when abroad, or upon returning to Canada. Luckily, once youve returned to the homeland and stayed there for 3 months, your provincial health care should be reinstated. Each province is different, so be sure to research the exact limitations to your health care before leaving Canada for more than a 2-week holiday.
Dont let your expiring health care keep you from leaving Canada for extended periods of time. You can always pay for Expat Insurance and while it is a bit more expensive, it is still worth not returning to the cold! Expat insurance is available for those who enjoy long absences from their home country.
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