Do You Have to Work Until You are 65 Years Old?

I’ve met several people over the years who can’t imagine working until they are 65 years old.  Their job is stressful, the hours are long but the pay is good.  It’s a pretty much unavoidable fact that the more money you make, the more demanding the job is.  Most people put up with these work demands because of their lifestyle requirements and the self esteem boost that comes with a respected job in our society.

If you are one of those people who can’t keep up your work pace for another 10 or 20 years without losing your sanity,  there is a solution.

First, you needed to have followed the investing advice on this blog (pay off all your debt expect mortgage, build up a 3 month emergency fund and save 10% of your pay in a low cost etf).  This needs to be done for many years while you are young and can better handle the hours and stress of work.

Then, when you are approaching your mid 50’s, you could decide to move to a less stressful position, either by negotiating reduced hours with your current company, finding a more relaxed and lower paying position with another company or switching entirely to a brand new, less demanding career.

I’ve seen this done by people a little older than me.

The most important thing is to:

  • find a way to continue to work until age 65 even if the pay is less
  • stay out of debt on your reduced income.

You want to keep building your CPP and allow your personal savings to continue to grow untouched.
At the absolute low end, with minimum wage now approaching $15/hour in Ontario and Alberta, you can earn $30,000/year in a job that you might actually enjoy.  So, if you enjoy golf, try to find work at a golf course or golf store.  Book lovers might consider a book store or book publisher.

If the children are no longer such a drain on your finances in your 50s, you should be able to lower your expenses to deal with the reduced income.  It is important that you do not touch your retirement savings as they will need to continue to grow inside your RRSP and/or TFSA.

I’ve also met couples who have sold their big suburban homes and moved to condos or cheaper cities as a way to boost their savings or spending potential to compensate for their lower salaries.

As as example, let’s assume you and your spouse are currently earning a combined salary of $120,000/year.  This family income level would put you in the top 20% in Canada, by the way.  You earn $80000/year and your spouse earns $40,000.  If you are able to find a lower stress job that pays $40,000/year, you would continue to contribute close to the maximum allowed to CPP.  That would entitle you to a monthly CPP benefit of between $1000-1135 at age 65.  I assumed your spouse would keep their job and also retire at age 65.

Combined, your CPP benefit would be $2000/month or $24,000 a year.  Add to this, your family OAS (Old Age Security) payments of $14000/year and you are earning $38,000/year from government programs alone.

Don’t forget your personal investing (remember that 10% per year savings from age 25 to 65), and you have a pretty decent retirement.   If you have to stop contributing to retirement savings when you switch to this lower paying job, that’s okay. Just make sure not to touch your savings until age 65.

The key is to reduce your spending when you move to the lower paying job so that you don’t go into debt.  If you can’t do that, then your comfortable retirement may have to be delayed until all debt is paid off or a lucky inheritance comes your way.

The question you need to ask yourself is: Can we reduce our spending enough to offset the drop in salary so that we do not have to borrow money or raid our retirement savings?  Only you and your spouse can answer that question.   Good luck!

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