4 Steps to Achieve Financial Independence in Canada and Retire Early (FIRE)

Do you want to retire early without having to worry about money?

If you’re like 90% of the population, you’d probably jump at the chance not to have to work another day in your life. 

When I was 27, I made $170,000/year from my job and side hustle, and I was seriously considering trying to use the FIRE method to retire by the age of 35. But I ultimately chose not to pursue that route. There’s more on that below. 

First, let’s understand what FIRE is and how you can achieve financial independence in Canada.

What Exactly is FIRE?

Financial Independence, Retire Early (FIRE) was popularized in the classic 1992 personal finance book, Your Money Or Your Life. 

The FIRE movement has been taken to the mainstream in recent years with (former) Canadian blogger Mr. Money Mustache, who retired at age 30, leading the charge. 

The concept is simple but challenging to execute. It usually involves saving at least 60% of your income and increasing your income through your work and investments. After you hit your target FIRE amount, you can retire early.

How to Retire Early in Canada Using FIRE and the 4% Rule

The 4% Rule is a guideline used within the Financial Independence, Retire Early (FIRE) movement, which helps people figure out how much they can safely withdraw from their investment portfolio annually during retirement without significantly depleting their principal.

This rule is based on the Trinity Study, a research paper that examined the historical success rates of different withdrawal rates over 30-year periods.

Here’s a detailed example of how the 4% Rule works in the context of the FIRE movement:

Suppose Jane wants to retire early at the age of 45. To determine the amount she needs to have saved in her investment portfolio before she can retire, Jane first calculates her annual living expenses. Let’s assume her annual expenses are $40,000.

According to the 4% Rule, Jane can safely withdraw 4% of her portfolio each year during retirement without significantly reducing her principal. To find out how much she needs to have saved, she divides her annual expenses by the 4% withdrawal rate:

$40,000 / 0.04 = $1,000,000

This means Jane needs to have $1,000,000 in her investment portfolio before she can retire early and maintain her desired lifestyle without running out of money.

Once Jane has reached her target amount, she can retire and begin withdrawing 4% of her portfolio each year. In the first year, she would withdraw:

$1,000,000 * 0.04 = $40,000

This initial withdrawal amount would be adjusted annually for inflation, ensuring that Jane’s purchasing power remains constant over time.

It’s essential to note that the 4% Rule is a guideline, not a guarantee. Its long-term success depends on various factors such as investment performance, economic conditions, and individual circumstances.

Advantages of FIRE in Canada and Retiring Early

It’s easy to see the advantages of retiring early. Most people have fantasized about it at one point, usually during a particularly tough or boring workday! Here are some of the best things about retiring early:

1) More Time

I consider time to be the most precious resource. If you manage to pull off an early retirement in your 30s or 40s (or even 20s for those who are super ambitious!), you’ll have saved the 40 hours per week that you’ll have to go to work. Taking vacation time into consideration, the average Canadian works about 1700 hours per year. Think of what you can do with all that time!

2) Focus on Your Passion

Always wanted to learn the guitar, learn a new language, or pick up a new sport or hobby? Well, now you have all the time in the world to focus on your passions. You can spend your days doing the things that make you the happiest.

3) Strengthening Your Relationships

You can spend more time with loved ones, or build new friendships and meet new people. You’ll be less stressed because you don’t have to work, which should also help in your personal relationships.

4) Travel 

Canada would be the perfect place to live if not for the weather. But now that you’ve retired early, you can just pick up and leave for the winter! 

If you own a property, Airbnb your place out and you can often earn more income than where you’re travelling to. You can now take your time and travel for several weeks or months to a single place. 

Long-term travel is my favourite type of travel because you can really get to know the country you’re living in.

5) You Can Work, But Only If You Want To

If you are smart and disciplined enough to have pulled off FIRE successfully, you’ll have no shortage of work opportunities available to you when you’re retired. You can pick and choose projects that you feel most passionate about. 

Risks and Disadvantages of FIRE

FIRE isn’t all roses and sunshine. It’s not an easy feat to accomplish by any means. Here are some of the pitfalls of financial independence in Canada to be aware of:

1) Huge Sacrifices Will Need to Be Made

It’s not easy to be disciplined enough to not only first make enough money but to save a large portion of it to retire early. You’ll have to cut expenses, usually by quite a lot, which could negatively affect your happiness and relationships if you aren’t careful.

2) Spending More Money Than You Planned

Suppose you miscalculated and need more money when you retire than you thought. In that case, your FIRE portfolio value could drop faster than you anticipated, and you would have to start working again.

3) Life Is Unpredictable

if you lose your job, have a cut in pay, or your career doesn’t go as planned, you won’t make as much money, and your target age will increase. On the expenses side, if you give birth to twins, or if you have some type of health emergency, your expenses could go up dramatically. FIRE is a good plan to have, but there are a lot of obstacles and randomness in life also.

4) Stock Market is Unpredictable

Most FIRE strategies involve investing in the stock market, either with Exchange-Traded Funds (ETFs) or directly in stocks. There can be a lot of volatility in stocks, and if you time your FIRE retirement age date at a period when the stock market is going through a recession, this could cause you to have to delay your retirement date by years.

5) You Might Miss Working

Even if you hated your job, it did provide a social network for several years of your life. If you don’t have another network to fall back on once you’re retired, you might miss your coworkers’ interactions. 

6) Why Don’t Billionaires Retire Early?

If FIRE is so great, why don’t all billionaires retire? Why would a man like Elon Musk work 100 hours a week running multiple companies when he doesn’t have to work another day in his life?

The reason is that he is driven by more than just money and not having to work, but by his ambition and passion for colonizing Mars one day. Every person must search for their passion, and if it’s not your career, you’ll have to find it elsewhere.

7) Retiring Early Might Not Give You All The Answers 

It’s human nature to get caught up in a goal, and then once we hit it, we aren’t satisfied and just wonder, “what’s next?” What happens if you hit your FIRE goal, but are dissatisfied in the end? You’ll have to find satisfaction and meaning in other things, whether in different work projects, family, travel, or hobbies. 

My Thoughts on the FIRE Movement

I thought about joining the FIRE movement when I was in my 20s. I made $140,000/year at my job by the time I was 27, and close to $170,000 with my other sources of income. I even made up a FIRE plan. 

I could have easily stuck it out there, saved 70% of my income, and retired at probably around 35 – 37. But I quit shortly after that to earn less than half of that amount.

So why didn’t I do it? There are a few reasons. I didn’t like or was interested in my career in the energy industry. While I liked it the first few years I was there, I didn’t like living in Calgary anymore and got the urge to travel more. 

I set off on the path to having the best of both worlds, to be able to find something I love doing and that would provide me with the flexibility to travel wherever I wanted. 

I made a conscious decision that I didn’t want to spend another ten years at a job that I didn’t enjoy to retire early. I wasn’t sure what I would do, but I knew I would eventually figure it out, which I have done in the past few years. 

I’ve tried many things since then, and to my surprise, I found my passion for writing. From there, everything seemed to fall into place, and today I’m travelling while working on something I’m enjoying.


Financial Independence in Canada

Financial independence in Canada is a dream for many. I hope this article has highlighted the reasons why it’s not only a fantastic thing to aim for, but at the same time, it also has many disadvantages and risks to achieving it. 

Think carefully about if you want to pursue FIRE, because it is a huge commitment, and it might not always be the answer that you are looking for.

Still unsure of your retirement? Learn more about how much you need to retire in Canada.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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2 thoughts on “4 Steps to Achieve Financial Independence in Canada and Retire Early (FIRE)”

  1. Great post Christopher,

    I was fortunate enough to achieve FIRE at 45. (Nov 25, 2020). From my own personal experience in Canada, I felt that the advantages of achieving FIRE easily outweighed the disadvantages. Time is precious and finite in nature, and you can never get it back. It will take discipline to get there, but controlling and spending more time on the things you love is well worth the effort to achieving FIRE. Best of luck to all those on their FIRE journey.


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