How To Retire At 55 In Canada 2023: Start an Early Retirement

Many people work so hard throughout their careers to amass substantial wealth for their retirement nest egg. I know plenty of people who look forward to their retirement because they will finally get to live the comfortable life they have always wanted.

According to this survey, 46% of Canadians expect to retire between 60 and 70, while the average retirement age was 64 years old. My parents also retired in this age range, but I’ve always felt that it is too old an age to retire.

Retiring at a very old age is not an ideal scenario, considering that you get to enjoy only a few years of retirement in exchange for decades of hard work.

I know that, like me, many people are also planning to retire earlier. Fortunately, it is possible to retire early, provided that you have a well-formulated retirement plan.

Many people consider 55 to be an ideal age to retire, so in this post, I will discuss how to retire at 55 in Canada.

How To Retire At 55 In Canada

How Much Money Do You Need to Retire at 55 in Canada?

A growing number of people aim to retire at 55 years old. If you’re planning on retiring early, you might already understand that you will need to set aside and accumulate a substantial amount of money to fund your retirement. The only question is: how much do you need to save to retire at 55 in Canada?

As much as it might disappoint you, there’s no precise figure for how much you need to save by the age of 55 to enjoy complete financial freedom during retirement. The ideal retirement nest egg can be different for every individual based on their current lifestyle, income, age, and retirement goals.

You can use one of the many retirement calculators online to get an estimate of how much you should save for your retirement. There are also many rules of thumb to determine how much they need to save.

I will discuss some of the most popular rules of thumb below so you can choose the one that you feel is more viable for you.

The Rule of 4%

The Rule of 4% effectively means that you should create a retirement portfolio that can provide you with enough annual income on your ideal retirement age so that you can withdraw 4% to meet your financial needs.

Let’s suppose you need $60,000 in living expenses per year in retirement. According to the Rule of 4%, you should save a minimum of $1.5 million in your nest egg before you retire:

$60,000 / 4% = $1,500,000

The Rule of 10%

The Rule of 10% is a relatively simpler rule that infers setting aside 10% for every paycheck during your working years and saving it for your retirement.

The Rule of 20

Because not many people may agree with the Rule of 10%, another rule of thumb is the Rule of 20. It infers that you should save $20 for retirement for every $100 that you earn—effectively double the Rule of 10%.

The Rule of 72

The Rule of 72 is a quick formula that people use to estimate the number of years required to double the invested money at a given annual rate of return. Divide 72 by the annual rate of return, and it will give you a rough idea of how long it will take to see your investment double.

Your Desired Annual Retirement Income x 25

This rule is essentially another take on the Rule of 4%. The principles are similar, but this version simplifies the calculation of how much you need to save. It infers that to meet your retirement income needs, you must have at least 25 times your desired annual retirement income in your retirement nest egg.

For instance, if your desired retirement income is $50,000, you should save $1,250,000:

$50,000 x 25 = $1,250,000

70% Or More Of Your Pre-Retirement Income

The 70% of Your Pre-Retirement Income rule estimates that you will need to generate between 70% and 100% of your pre-retirement income during your retirement. The figure will be lower if you don’t have a mortgage to contend with. In contrast, it would be higher if you’re still paying off a mortgage and other significant expenses during your retirement.

The basic premise behind the rule of 70% or more is that your expenses during retirement should be lower. This is based on the idea that you won’t have to make mortgage payments, you won’t have to set aside savings for your retirement, and your children will be financially independent.

You can then calculate the amount and determine how much you will need to save by using the Rule of 4%.

For instance, let’s assume that you earn $80,000 per year before retirement. Using the 70% rule, you will need to earn approximately $56,000 per year in retirement to maintain your lifestyle. Going back to the rule of 4% means that you will need to save $1.4 million.

$56,000 / 4% = $1,400,000

Provided there are no exceptional circumstances, the 70% rule is a pretty liberal estimate for calculating your retirement income requirements.

Multiples of 10 to 14 x Pre-Retirement Income

This retirement income requirement rule of thumb suggests using your income just before retirement and multiplying it by a number between 10 and 14.

For instance, we will suppose that your annual income right before retirement was $95,000. According to the rule, you should have at least the following savings:

  • Multiple of 10: $95,000 x 10 = $950,000
  • Multiple of 11: $95,000 x 11 = $1,045,000
  • Multiple of 12: $95,000 x 12 = $1,140,000
  • Multiple of 13: $95,000 x 13 = $1,235,000
  • Multiple of 14: $95,000 x 14 = $1,330,000

This rule might not be the most effective means to calculate how much you need to save if you’re a young career professional who plans to retire early. Since the rule assumes the highest amount you will be earning right before your retirement, you might still not earn a significant enough retirement income according to this rule.

Do I Need $1,000,000 To Retire At 55?

The rough estimates that you can get from these rules of thumb indicate that you will need around $1 million to retire so that you can enjoy a comfortable retired life.

However, I consider this to be an oversimplified estimate because everybody’s situation is different. Someone might have other expectations for how they plan to live during their retirement and have different expenses to contend with.

Sure, saving $1 million could be fine if you plan on living a relatively simple lifestyle during your retirement. But what if you have other plans?

The amount you will need to save for your retirement will depend entirely on when you want to retire and what you want to do when you retire. You will need more money to retire if you plan to travel the world than you would need if you plan on living in a cabin in the woods.

Tips To Achieve Your Financial Goals For Retirement By 55

The circumstances for every individual can create a significant difference in how much you should save in your nest egg by the time you turn 55. However, there are a few general goals that you can follow to achieve your financial goals. They are flexible enough to suit anyone, making them excellent rules to consider for how you might want to set your financial goals for retirement.

1. Avoid debt as much as you can.

Living in debt is the worst thing for people planning on early retirement. Having a significant debt to pay off will take out a significant chunk of money from your retirement nest egg.

The higher the interest rate, the lesser your retirement savings capacity will be. Avoid borrowing money to make purchases. If necessary, make sure you create a plan to pay it back within a reasonable timeframe before you borrow the money. Also, strictly adhere to the plan.

It’s impossible to avoid debt if you plan to own a home. You should make every possible effort to get the best rate if you plan to take on a mortgage. Once you accumulate enough equity in your home, capitalize on a home equity line of credit (HELOC) to get the lowest possible interest rate for future investment opportunities and emergencies.

2. Try homeownership if it makes financial sense.

Homeownership is arguably the best long-term investment you can make. Considering how much residential real estate values have soared in the past decade, it makes sense. Also, when you own a home, you won’t need to pay rent, freeing up more money to invest and grow your wealth.

3. Make your money work for you.

Holding your savings as cash is a waste of an opportunity to earn more. The returns you get from interest rates can’t keep up with rising inflation rates.

Establishing HELOCs can be an excellent way to access funds for emergencies. It also allows you to free up your cash and invest in assets that can provide you with more significant returns than what interest rates can offer.

4. Reinvest your RRSP refund in a TFSA.

A tax refund from your Registered Retirement Savings Plan (RRSP) might seem like additional spending money, but you should consider it as money to grow your wealth.

Consider reinvesting your RRSP funds into your investment portfolio to compound your wealth growth. Also, investing in a Tax-Free Savings Account (TFSA) lets you withdraw the money tax-free instead of moving to a higher tax bracket by investing too much in your RRSP.

5. Consider working with a financial advisor.

Financial advisors aren’t there to simply tell you which investments you should consider. It’s only a part of what they can do. Instead, they help you establish a diversified and long-term strategy to help you meet your financial goals.

They can identify more lucrative investment opportunities and help you avoid current investments that might sour in a bit of time and affect your savings. A professional financial advisor will ensure that you can get the chance to reach your financial goals.

6. Always Take Advantage of any free money.

If your workplace offers a pension plan in which the employer matches your contributions, take advantage of it and contribute as much as possible. It’s free money that might not seem like much right now but goes a long way in growing your retirement nest egg in the long run.

7. Every income stream matters.

You should diversify your investments and allocate a portion to fixed-income assets. Allocating a significant chunk of your capital to income-generating assets like dividend stocks also lets you enjoy higher returns.

Additionally, you can also leverage dividend reinvestment programs to buy more shares from your returns and compound your passive income streams.

8. Never take advice from people who claim to know the future.

You will find the internet full of “experts” and “financial gurus” who will make tall claims about knowing which investments will make people millionaires. However, their real goal is to make money off you when you follow their paid advice.

Someone who actually knows how to make it big will not spend their time making false promises. An actual expert will give you advice but will let you know that they don’t know the future and will provide you with a disclaimer for their limitations.

Retiring Between 60 and 70 (The Normal Retirement Age)

The most common age range for retirees in Canada is between 60 and 70 years old. Many Canadians choose to retire in this age range because it makes sense. You can begin collecting your Canada Pension Plan (CPP) payments at 60. However, the longer you delay your CPP, the higher the payments you will receive.

Starting your CPP at 60 means you will receive 36% less than you would if you started at 65. On the other hand, delaying it until you turn 70 can let you earn 42% higher CPP payments than if you started at 65.

The 60-70 age range is when government pensions like the CPP and Old Age Security (OAS) kick in. The retirement income sources are ideal, so many Canadians choose to retire in this age range.

Retiring After 70 (Late Retirement)

Still, it is possible to retire later than 55. In fact, 2009 saw the government decide to get rid of the mandatory retirement age of 65, giving Canadians the chance to continue working as long as they’d like.

After all, the longer you work, the more you can get from your retirement income payouts like the CPP and OAS. Because many Canadians fear running out of money when they’re older, they choose to continue working even past 70 to earn more through their CPP and OAS.

This has been made possible with the various medical advancements and improved healthcare systems. People are now living much longer, and in fact, as of 2018, Canadians’ average life expectancy is almost 82 years old.

On the other hand, many people are also quite passionate about their jobs and choose to keep working because they don’t want to get bored during retirement.

Retiring Before 64 (Early Retirement)

Early retirement is a commendable dream, especially for people who have been working hard for decades. I’m confident that most people would choose to retire early, provided they had the means to do so.

However, retiring early isn’t an easy feat. You need a lot of discipline to save, invest wisely, and make a lot of money.

Still, retiring early comes with so many benefits. You get to spend more free time, experience a lot less stress, travel, and partake in more physically involved activities that you can’t pursue if you retire at a later age.


Learning how to retire at 55 in Canada is not the easiest thing in the world, but you should know that it’s not impossible. It is worthwhile to take the time to formulate a comprehensive retirement plan and adjust your financial practices to achieve those goals.

The real key is to have the discipline to stick to your retirement plan as strictly as possible. There might be unforeseen circumstances that will require you to tweak your plan, but you should reposition your strategy and try your best not to let go of your goal of retiring at 55.

Check out my guide on how much you need to retire if you want to get a more detailed but simplified plan to calculate the amount you will need. Meanwhile, this guide is perfect if you want to learn about retirement income sources you can rely on to earn more money in your golden years.

How To Retire At 55 In Canada
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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Read about how he quit his 6-figure salary career to travel the world here.

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4 thoughts on “How To Retire At 55 In Canada 2023: Start an Early Retirement”

  1. I retired at 52 without $1 million but I am happy, healthy and totally disinterested in how others view retirement. I have yet to receive OAS but I do receive my CPP, which I took at 60. I live on less than $20,000 per year but I don’t feel like I am going without anything. I have avoided a lot of life’s pitfalls like drugs, alcohol, gambling and risky investment. I don’t believe a person should risk what they have to acquire what they do not need. You can always make money but you cannot make one second of time. Time is the most precious commodity in the universe.

  2. I am thinking of retiring early, I have worked a total of 29 years fulltime (not for the same company) and I am 56 years old. How much would I be entitled to monthly?


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