Retire Late vs. Retire Early — The Debate
What’s that one question about retirement planning that plaques you? — “Should I retire late or early?”
Answering this question can be quite tricky, but it is an answer that you must get! To help you decide,
we have come up with the following argument regarding early and late retirement:
What Are the Financial Differences of Retiring Late and Early?
Early Retirement is Costly, You may have decided to retire early so you could enjoy life or because of a medical condition. In
comparison to late retirement, you will find yourself spending more money.
- Saving Money Will Be Difficult
Even though everyone should budget, but if you do not like to budget, early retirement is not for you.
Since early retirement is costlier than late retirement, it is crucial that you start a budget. - Government Cheque is Not Here Yet
It is impossible for people retiring early from their job to start their CPP or QPP. You cannot start your
CPP or QPP until you have reached the age of 60. Moreover, the Old Age Security does not start until
you are 65. You will find yourself spending more of the money you have saved instead of the money you
will receive from the government. - Do Not Contribute to the CPP or QPP and Savings Plan at Work
If you no longer contribute to the CPP or QPP or the savings plan at work, you will earn less income.
When you retire early, you can take out the money saved thus far from these accounts. Therefore, it is
not a lot of money. If you retire later, you will have a good amount of money saved. - It Will Affect the Workplace Pension Program
If you are leaving your job for early retirement, the monthly income you will get from the workplace
pension program will be small. - Personal Savings Will Deplete Faster
If you are not eligible for government pensions and you choose to retire early, the money you have
saved in your retirement fund or emergency fund will decrease faster. You will also not be eligible for a
workplace pension if you retire early. This is why, it is so important for you to save money in RRSPs and
TFSAs as well in non-registered accounts. If you can freelance in your free time, that would be great. - Experience Increased Inflation Overtime
You will experience more inflation with time. If you want to go for early retirement, it is pertinent that
you prepare yourself for this beforehand.
In short, retiring early is a personal decision that one should take by themselves. If you are married, you
should consult with your partner on whether early retirement is for you. If you both work, you both
need to decide whether both of you want to retire early or just one of you does. Do consider all the pros
and cons of retiring late and early before you make a decision.
