I’m working on my “60 things to do before I turn 60” aka 60 x 60, and goal #3 was planning my retirement. You can see the original post here (“60 x 60”: Goals 01-05 – Death, life, retirement, reading and writing).
Now, there are a bunch of elements to that bigger goal. Some of it is the detailed financial planning that is required. I also have thoughts about what I need to do in terms of psychology. And more pointedly, one aspect of the psychology around retirement is the resulting isolation adjustment with the loss of the people at work that I deal with regularly. All of those will bear some thought. I may even add in some physical planning for retirement such as certain mobility exercises to better aid me if I’m going to be playing golf or walking a lot or whatever.
But today is not the day for that type of discussion. Today, I’m just picking the day.
Pick a card, any card
If you start considering some of the basic variables, you can start ticking off options on your fingers.
For the first finger, picking my retirement date seems simple. When did I start, add 30 years, bam, I’m done. Right? That would give me a date in basically September 2026, if I hadn’t taken any special leave, etc.
For the second finger, it gets a bit more complicated. While I would have 30 years of continuous service in September 2026, and thus I would be eligible to retire without penalty, I can also buy back some “non-continuous” service. In fact, I have 14 months sitting there. Yes, I should have bought it back years ago, but no I didn’t have the money then; if I buy it back now, it nominally pays for itself in about 7 years of retirement and then a bonus after that, although the “source” I use is more complicated (see below). But I could buy back 14 months, thus moving my date forward to about August 2025. Ish. It’s 8 months that I worked as a co-op student way back in ’93 and 6 months of probation / non-pensioned service when I started CIDA.
For the third finger, the middle finger perhaps, I could put in my papers tomorrow and say screw it, I’m done. I can’t afford to do that financially, or at least not without some major changes in lifestyle, but sure, it’s a possibility. Call it July 2023.
For the fourth finger, I could stick it out to 35 years. Basically, my pension kicks in at 30 years of service with 60% of my best five years of salary and no penalty, but every year after that counts as 2 extra percent. If I worked until 35 years of service, I would get 70% of my salary (5 years x 2 percent for 10 more percent to a maximum of 70%). So call it September 2031 if I went with no buyback or August 2030 if I did.
For the fifth finger, maybe a fist, that’s where the rubber hits the road for more complicated decision-making. You estimate the expenses you’ll have in retirement with whatever standard of living you plan for, how long you’ll live, how long your spouse will live, when they’ll retire, add in their incomes, add in some contingencies for things like health, if you want to leave money for others when you die, etc. Basically, you calculate your long-term expense stream and match it to your income stream, adjusting your retirement date to when it all evens out.
For me, there’s an added element related to that buy-back question I mentioned. As I said, the ideal scenario is to go back in time and buy it back 25 years ago. I don’t have a De Lorean available, so that’s out. But I can buy it back still, and it is still beneficial. Or as the advisor from the Retirement Planning Institute course told us, “We’ll do all the calculations, help you figure it out, and then tell you that yes, you should buy it back”. The only time it WOULDN’T make sense to do so is if doing so means you have to pass up a more lucrative investment option. But the bar is kind of high…golden pension? Guaranteed for life? Indexed for inflation? Kind of hard to beat that in the long run for security.
In my case, I can deduct it from my salary for the next five years. Or I can pay in cash (except I don’t have the liquid cash after the recent bathroom renos). Or more excitingly, I can transfer the money from my RRSP and buy it that way. Hmm…that DOES have its advantages, I must say. But when you start looking at all the options, all of them come with opportunity costs too. I know the buyback is worth it within 7 years, nominally at least, but if I was giving up a good investment to take a smaller return through pension, yet likely to run for about 21 years of retirement (if I live to say 79), etc. etc. etc. Ultimately, the fifth option doesn’t really determine “when” for me, it is more about how with how much cushion, although there are aspects in there of when Andrea retires too.
I know that I can retire without any other decision involved somewhere between September 2026 and September 2031. Even without a buyback. If I go for buyback, it could move the 2031 date closer, but not enough to likely affect things.
So it seems more like a magic trick…pick a card, any card, between 2026 and 2031. That will be my retirement date.
A day that resonates
Often when I think about my work life, the daily grind, my life spent working, I think of my father. He spent almost 40 years on a shop floor in a factory. And when he retired? He was done. I feel somewhat the same way. I confess I would love to retire tomorrow. There are days when I feel like Danny Glover in Lethal Weapon — “I’m too old for this sh**”. 🙂
And strangely enough, there is a day in that period from 2026 to 2031 that resonates with me. My father was born in 1927, and if he had still been alive, he would have turned 100 that month. So I have a date that heavily resonates with me.
August 27, 2027.
A 100 years from the birth of the man who taught me what work means.
If I don’t buy back my years of service, I’ll have about 30.9 years or something like that; if I do, I’ll have 32.3 or so. This means that the buyback doesn’t affect my date anymore, just how big my pension will be per month after that date.
Sooooo, how many days is that?
That’s a little over four years away. And I could simply stop there in calculating. 4 years and 2 months as of today. 1,522 days by the calendar.
Except I don’t work 7 days a week, now do I? 🙂
By raw work days, aka Monday to Friday, it would drop to about 1090 days.
Then I would have to deduct all the stat holidays between now and then. New Year’s, Easter, Victoria Day, St. Jean de Baptiste, Canada Day, Labour Day, Reconciliation Day, Thanksgiving, Remembrance Day and Christmas. Between now and the “big day”, it’s about 50 days or so, dropping me to 1040 days or so.
But I have vacation days and personal days in there, plus family days. And accumulated sick days which I am likely to use more of as I age. I actually could take off up to 272.3 days in there for current and future leave. Which would drop me all the way down to 768 more days of work.
That’s not a lot, in the grand scheme of things. I didn’t even factor in additional leave for increased years of service, nor a big wrinkle for the last one to two years that I might consider.
If your boss agrees, you can reduce your hours in the last two years of service to gradually transition out of work and into retirement. There are some basic rules, such as that you have to actually put in your papers and you can’t change your mind and stay longer. You can, however, say after 3 months, “You know what? I’m done, this is silly”.
Because many people do. They reduce to 4 days a week for a while, and that seems nice, an extra day off every week, a long weekend perhaps. Every Friday is common. Some do it mid-week and take Wednesdays off. 2 days on, 1 day off, 2 days on, 2 days off. And then they move to 3 days per week at work. But a lot of people start to realize that they simply don’t care enough anymore to keep doing it when their larger life is calling them. They were committed to their work, but once they start transitioning, they are often like, “Why the heck am I doing this to myself? I’m too old for this sh**”. Or at least that’s what they say when they put in their revised departure date and say, “Nope, just process me out.” Sure, you have to have your 30+ years to avoid any penalties, but I will have that.
So I might consider arranging a transition out over the last year. Meaning even fewer days than the 768 total I mentioned above. It probably won’t quite seem real to me until it is less than an estimated 500 days, though.
So that’s it. The first part of my retirement plan is “set”. Four years and two months from today is the plan. August 27, 2027.