What is the ideal age to retire?
Identifying when you want to retire can bring clarity to your retirement planning by helping you figure out how much to save and knowing the optimal time to access retirement benefits, such as the Canada Pension Plan (CPP).
According to Statistics Canada, the average retirement age has been trending higher over the last 20 years. As of 20231, the average Canadian clocked out of work for the last time at age 65, which is roughly three and a half years later than in 2003. Gender and occupation also influence retirement. Self-employed Canadians tend to work longest, retiring at age 68, while public sector workers retire on average at age 63. Regardless of the type of work, women tend to retire at least a year earlier than men.
There are several reasons why the retirement age has been creeping higher, including increased life expectancy, lifestyle choices, market volatility and, more recently, economic uncertainty and inflation. Fidelity’s most recent retirement report indicated that more than four out of five retirees say the rising cost of living has negatively affected their retirement, while 58% said poor economic growth has hurt their financial security2.
In practical terms, retirement can start whenever you’re financially able to make it happen, but there is more to the retirement equation than your savings. With many Canadians staying active well into their golden years, determining your ideal retirement age should start with a close evaluation of your specific circumstances regarding life expectancy, finances, and lifestyle goals in retirement.
Map out your goals.
Living longer and healthier lives is a good thing, but to get the most out of those years, it’s crucial to ensure your retirement savings are ready to go the distance with you.
Here’s a simple, fast way to see where you are on the road to retirement. Answer a few questions to find out if you’re headed in the right direction with the Fidelity retirement calculator.
Timing your benefits
When you’re thinking about retirement, it’s also important to have a good handle on your potential income sources. If you’re like many Canadians, the savings built up in your Registered Retirement Savings Plan (RRSP) will be a significant source of retirement income. To learn more about RRSPs, click here! The longer you can let those funds benefit from continued contributions and compound interest, the longer those funds will last. But there are limits. You do have to convert your RRSP into a Registered Retirement Income Fund by the end of the year you turn 71, at which point you must start making regular withdrawals. To learn more about how RRIFs work, click here!
In addition to your savings, government benefits can be another important piece of your retirement income, but timing matters. Consider the CPP: while you are eligible to receive your full benefit at age 65, you can increase your monthly payments by as much as 42% by delaying your CPP until age 70. Alternatively, you have the option to take your CPP as early as age 60, though that can reduce your benefit by 36%.
Old Age Security (OAS) can also be deferred by as much as five years, which raises the payout by 36%, but unlike CPP, you cannot collect OAS earlier than age 65.
Likewise, if you have a defined-benefit pension plan through your employer, the point at which you can receive your full benefit will depend on how many years you’ve contributed. Some plans may also allow you to collect your pension early, although it could result in a lower payout.
Finding the right balance
Ultimately, finding the right time to retire depends on your health, individual goals, and financial resources. Although retiring earlier might give you more years to enjoy your downtime, it could also make managing your finances to carry you into old age that much more challenging. At the same time, while delaying retirement can provide you with more financial security, it can also mean you have less time to live out your retirement dreams.
An increasingly popular option is a phased retirement, which is a gradual reduction in work that provides some additional freedom early. This approach allows you to continue to draw some income and delay fully using your retirement funding sources.
While deciding when to retire is always personal, it can be hard to figure out these answers on your own. Seeking financial advice may help you get a better sense of what you are working with, and starting the planning process early will give you the best chance to ensure you meet your retirement goals and retire at the right time for you.
Having a written plan can also give you greater confidence about when you can retire. More than 90% of retirees working with an advisor who had a written plan said they had a positive outlook on their retirement3.
For more insights on how you can better prepare for your retirement, check out the 2024 Fidelity retirement report.
