Another newbie planning for ER!

[Meadbh]

Hallo everyone, great to be here!

I've joined this board because it seems to have good quality content on my current obsession and (generally) nice people. I'm a single female professional, late 40s, living in Western Canada, and plan to ER at 55.

My financial situation is very favourable and I live modestly. No matter how I do the math I can expect to live past 90 without having to eat cat food.

I have always been quite career driven. My biggest challenge will be to make a guilt free transition. I plan to do part time consulting as long as it interests me and also to explore interesting volunteer opportunities. The rule is: only activities I enjoy. I'm also considering a move to another (pricier) part of the country.

I'm interested in learning about other people's experiences with this strategy.

 

[AltaRed]

Welcome. There are a number of Canadians posting here as you may already know, me included. I just retired 3 months ago at age 57 and have not missed the office one day!

 

[mosaic]

i do love Canadians. We are like Americans without the cafeine. America light....

 

[PsyopRanger]

i do love Canadians.  We  are like Americans without the cafeine.   America light....   

With better health care too.

Welcome Meadbh

 

[Donzo]

Hey Mead,

If you are all set till at least 90 - why are you sticking it out 5+ more years? Is there a benny package? I just ask because I always planned to hang on til 55 and then looked at the big picture...and jumped off at 49.
Welcome and congrats on your situation

 

[Meadbh]

Here is the economic argument:

I'm an academic physician like Rich.

My employer (a University) has a defined contribution plan which is well invested, but I cannot touch it till age 55 at the earliest. It accounts for only a small portion of my net worth. At 55, I have the option of rolling the balance in the pension plan into an LRIF (locked in retirement fund).

I also have an RRSP (registered retirement savings plan; like an IRA) into which I can put a defined proportion of earnings tax free each year. When I cease employment I can no longer invest in it. I have to begin drawing on this at age 69, but can do so earlier if necessary.

I will get some OAS at 69, but not the full amount, because I will not have lived in Canada for 40 years.                                                                     

As a physician, I established a medical corporation in 2002 and am saving all my clinical income within that vehicle, using my salary for current expenses. Corporate tax is lower than tax on earnings so this is quite tax efficient. The Corporation's NW will increase till I retire, at which time dividends issued by the corporation will provide me with most of my income, at least till age 69, whcn I must start using my RRSP. If I retire at 55, the corporation must be my principal source of funds for 14 years. I want to ensure that it can do the job.

The bottom line is that the majority of my income will come from investments, so I am more dependent on market volatility than most people. I want to be quite sure that my projections are meeting targets over time using my present investment strategy. Things have changed over the past year as I had a significant inheritance.

The other issue is my own attachment to my career. I have crafted a unique niche for myself and, while I work very hard, I enjoy most of what I do. My identity and self worth is quite tied up in my work. I do have a fear of feeling without purpose if I give it up too soon or all at once. That's why I am now getting involved with external organizations that may provide opportunities for me to use my expertise on an ad hoc basis when I retire. I figure that would be a nice transition and would give me some structure for the first few years.

 

[Meadbh]

Oh Donzo, I forgot to answer your question about benefits.

My university benefits include a free internet account and a dental plan.
As I live in Canada, basic health insurance for hospital care is not an issue and is collectively paid for through my taxes. My employer provides a supplementary package which I can use for ambulatory services, eg. physiotherapy, massage, etc. I pay my own disability insurance (which I could drop following ER).

If I ask nicely I can get a 12 month sabbatical every seven years, which I have to fund myself, provided I return for at least the same amount of time afterwards. During a sabbatical the employer continues to contribute to my pension fund and the other benefits continue. I have taken one sabbatical. At that point in my career it was really worth it. There are many hurdles, not least the requirement to show how your sabbatical will benefit the university. I would consider taking another sabbatical but would have to find someone to replace me in the unique work that I do with the expectation that they would step out of the way on my return. That might be challenging and it might be simpler to cut the cord after grooming a suitable successor. 

So the employee benefits are nice to have, but not dealbreakers.

 

[Ed_The_Gypsy]

Meadbh,

I hope you have read Derek Foster's "Stop Working--Here's How You Can!"

Consulting (starting your own business) seems easier, simpler and may have better benefits, I think, in Canada than the US (for a Canadian in Canada--hard for us furriners to do the same). See Voth's "The 10 Secrets Revenue Canda Doesn't Want You to Know!" Simple stuff, but useful.

Cheers,

Ed in AB

 

[Donzo]

It sounds like you have several options with sabbatical, consulting etc. If you could pull off the sabbatical and continue to have your pension padded and other benefits maintained...that would be a great time to work on other ways to stay in the game without such a large commitment of your time to see if it is a good fit. You are fortunate to be in a profession that you enjoy and allows for various levels of time commitment.
Just make sure you don't forget that you have layed the groundwork....and could ER now - that provides huge benefits!

 

[AltaRed]

Here is the economic argument:

My employer (a University) has a defined contribution plan which is well invested, but I cannot touch it till age 55 at the earliest. It accounts for only a small portion of my net worth. At 55, I have the option of rolling the balance in the pension plan into an LRIF (locked in retirement fund).

I also have an RRSP (registered retirement savings plan; like an IRA) into which I can put a defined proportion of earnings tax free each year. When I cease employment I can no longer invest in it. I have to begin drawing on this at age 69, but can do so earlier if necessary.

I will get some OAS at 69, but not the full amount, because I will not have lived in Canada for 40 years.                                                             

The bottom line is that the majority of my income will come from investments, so I am more dependent on market volatility than most people. I want to be quite sure that my projections are meeting targets over time using my present investment strategy. Things have changed over the past year as I had a significant inheritance.

The other issue is my own attachment to my career. I have crafted a unique niche for myself and, while I work very hard, I enjoy most of what I do. My identity and self worth is quite tied up in my work. I do have a fear of feeling without purpose if I give it up too soon or all at once. That's why I am now getting involved with external organizations that may provide opportunities for me to use my expertise on an ad hoc basis when I retire. I figure that would be a nice transition and would give me some structure for the first few years.

Meadbh, I think you are on the right track, especially with respect to developing external interests to reduce your acknowledged identity and self worth being tied up in your work. Otherwise those transitions can be very tough. As for a few comments:

Initially you can transfer your DC plan contributions into a LIRA (locked in retirement account) and when you are ready to being withdrawals (no later than 69 or 70), it converts to an LRIF. Once you start your withdrawals, you are locked into the withdrawal phase.

You will also of course be entitled to CPP payments at age 65 or as early as 60 with discounting. You will want to trigger that plan at 60 for 2 reasons: 1) a bird in hand is worth 2 in the bush, and 2) there is a formula that starts to discount your CPP entitlement if there is a gap of more than 5 years (I believe) between the cessation of contributions and the beginning of payments. In any event, be sure to look at the CPP site here:

http://www.sdc.gc.ca/en/isp/cpp/cpptoc.shtml

Also OAS starts at 65 and is subject to clawback depending on income levels.

Lastly, if you have not yet discovered it, the following is a good Canadian based financial forum you may wish to lurk in, if not actively participate.

http://financialwebring.com/index.html

 

[Ed_The_Gypsy]

All,

A member PM'd me saying that he couldn't find these books at Amazon. So, here is where you CAN find them:

"10 Secrets" can be found on www.abebooks.com . Otherwise, order from Liberty House Publishing, libertyhouse@shaw.ca or (306)-955-3838.

http://www.abebooks.com/servlet/SearchResults?sts=t&an=david+m+voth&y=15&x=38

For "Stop Working", go to www.stopworking.com

abe books has a world-wide database. I have bought many out-of-print and rare technical books through them. My favorite on-line bookstore.

Indigo or Chapters can order either for you, if they don't have them on the shelf.

I have no use for Amazon. I shop at Barnes and Noble--far superior to Amazon, IMHO.

http://www.barnesandnoble.com/

You may also not know about meta-search engines. I use www.dogpile.com (it searches using many databases, including Google).

Ed The Gypsy

 

[Ed_The_Gypsy]

Furthermore,

Canadians may also enjoy reading Alex Doulis's books, "Take Your Money and Run", "My Blue Haven", "The Bond's Revenge", and "Tackling the Taxman".

http://alexdoulis.com/books.htm

Read about him at

http://www.goldhaven.com/AlexDoulis.htm

They are an amusing read. As financial advice, I dunno.

Ed

 

[Meadbh]

!

Thanks for the helpful links and book suggestions, everyone......this will keep me busy for a while!

Here are a few of my favourite financial sites:

http://www.alliancebernstein.com/investments/us/Home.aspx?nid=5415
http://www.fiscalagents.com/index.shtml
http://www.magnum.com/
http://www.investopedia.com/university/
http://www.walterharder.ca/MarginalTaxRateCalculator.html
http://www.canadianbusiness.com/my_money/index.jsp
http://www.naviplan.com/default.htm
http://www.xe.com/ucc/

Meadbh

Having a TERRIBLE week at work............ER looks even more attractive........