Stock Trading - Entry 52

After identifying my plan moving forward to fund my retirement in entry 51, I wondered how I could also retire early. I mean, for me, maxing out on my pension is expected to occur at the age of 68.5 (gotta love half-year birthdays, eh?). Since I am focusing on my situation, I am not providing financial advice in this article.

My response to the question of potentially retiring early is: I may have found a way....

Given the age I can max out on my pension, I will start this analysis with retiring on the late side, which I define that as anything close to the of age 70 because that is the current limit for making RRSP contributions (as of 2025). It's also the same age as gaining the max multiplier for CPP and OAS benefits (as of 2025). In other words, if I cash in CPP and OAS at 65, I get whatever amount I earned. If I wait until age 70, I get whatever I earned multiplied by well over 30%!!

As you may have guessed, those multipliers also brought down the number I need to have in my TFSA to retire at age 68.5 (down to $0.5m in 2018 dollars).

If I retire right when I max out on my pension, then I will need to cover 1.5 years of expenses. But 68.5 is still on the old-ish side, so how can I cover living expenses for those 1.5 years plus a few extra years while having some leftover money to live between now and then? Easy, an RRSP.

With an RRSP, what I would have paid in federal income taxes at 20.5% or more in 2025, I am expecting to pay substantially less in future. How? Well, let's say the income tax rates and rules are the same as 2025 and that I have $0 in income in my sixties (since I will have both retired and deferred my pension to age 70).

That means, the first $57k I pull out is taxed at only 14.5%. Otherwise, I would have paid 20.5%. Right away, money saved (similar for provincial income tax). A TFSA won't do that for me (but it works nicely for supplementing my pension when I start collecting it later).

Also, I pay taxes on every pay cheque. That means, over the course of a year, a nice percentage of whatever money I put into an RRSP comes back to me as a tax credit. In practical terms, that means I take my tax refund and put it into my RRSP every year without needing to impact my guilt-free spending money (short clip on that term here). That said, the sooner the better because my RRSP room is paltry compared to my TFSA room, so I will aim to put more towards my RRSP in the next few years until I max it out. Then, the lion's share of my investment contributions will go to my TFSA.

What should I invest in in an RRSP?

Uh, duh. With an ROI of nearly 18% per year, the same thing as I am doing in my self-directed TFSA account at Wealthsimple (click here for a free $25).

How much should I deposit regularly in my RRSP? That depends entirely on four things:

1. how early I want to retire

2. how fast my TFSA gets me to $500k in 2018 dollars

3. whether I receive any significant lump sums

4. my RRSP contribution limit (and how much space I have in it)

By entry 26, I learned that I cannot predict items two and three. So those will simply be whatever they turn out to be. The first one is simply a goal, so whatever I can throw into my RRSP, the sooner I can retire - with the caveat that I can cover at least 1.5 years of living expenses. So that means some contributions will be required on my part and the Canada Revenue Agency dictates the max for that.

Calculating my contributions to both my TFSA and my new RRSP were easy with a tool I used here. (I may do a step-by-step article on that in the future given this is a critical step when investing to supplement one's retirement.)

What about life?

See that's the thing. I have analysed my lifestyle and career prospects to paint a picture of a future I like. Will elements of that change? They might. Could big world events really change things? They might. But I have worked out all this based on the world not falling apart AND what I know about myself (health, likes and dislikes, relationships, etc.).

You see, when I mentioned that I worked through a workbook and attended some free info sessions back in 2018, I learned how to factor many personal things into an investing strategy to arrive at my number. But that isn't all there is to it. I will focus a good amount of energy into living life (not just working or investing). Why?

Note to readers: I would have put the ask-stupid-questions picture here, too, but the answer is both surprising and serious.

Apparently, Ramit Sethi said people who followed the F.I.R.E. approach succeeded in retiring early according to their number, but then could not bring themselves to spend their money! As if I want to eat canned food while I look at my millions in the bank both now and in retirement!! (I don't have millions now, but you get my point of going overdoing frugality to the point of it screwing with your head.) So, I will make it a point to learn how to use money to love people (including some self-compassion) between now and then so my spending muscle remains well-developed (a thought echoed by many).

Also, take any retirement prep course you want (highly recommended at the beginning of your career, not only at the mid-point or close to the end) and you will spend a up to half of the time talking about things other than numbers. Why? That's what makes retirement last longer in a good way. I have heard too many stories of people leaving us (for a whole slew of medical reasons) within two to five years of retirement (even if they retire early) squarely from a lack of attention in this area!

For me, today, living life means shovelling snow so I can go spend time out and about and then spend time with others, which I am perfectly happy doing.

To find out what I do or don't invest in next, subscribe for free below to become notified right when I publish those articles. Alternatively, you can bookmark this page that contains a list of all my entries in my stock and blockchain trading journey I publish on Vocal Media.

Finally, go and tell someone you appreciate them.

You don't need a special day for that, but it helps if your memory isn't the best - and yes, this comment is directed at everyone with communication skills, regardless of age.