5 Important Factors to Consider in Your Decision to Retire

5 Important Factors to Consider in Your Decision to Retire

As I consider some form of semi-retirement in the coming years, I’m learning there a host of factors to consider in the decision to semi-retire or retire.

For today’s post, I’m going to take a recent quiz of sorts published on Financial Independence Hub with Fritz Gilbert, the founder and mastermind of a popular U.S. blog: The Retirement Manifesto.

After 30+ years in Corporate America, Fritz retired (as planned) in June 2018 at Age 55. 

In running a respected U.S. personal finance blog, Fritz has written about pretty much everything on his site, including on retirement, and still does. A few years ago, as he was working through his own decision to retire, he admits some obsession about the transition. After doing his homework and analysis, he successfully made the leap and hasn’t looked back since. 

As Fritz puts it when it comes to transitioning to retirement: some folks do well, and some don’t.

I hope to be in the former camp (!) and I hope this post (and answers to Fritz’s quiz factors) helps you too!

Here are 5 important factors to consider in your decision to retire including what Fritz wants to share about the transition process…

5 Important Factors to Consider In Your Decision to Retire

Fritz factor #1: Do you have enough money?

I hope so!?

Fritz comments in his article that having enough is “a necessary factor, but far from sufficient.”

I agree witih Fritz that retirement or even semi-retirement starts with a math problem to solve.

To understand how much you need, you need a process, a formula to outline as many unknowns as possible before you pull the trigger. One of the biggest unknowns is any retirement plan is your potential retirement spending.

You need to consider what you will spend to determine your “enough number”.

After that, you need to consider how to build your retirement paycheque per se to fund that lifestyle. 

I’m intending to use a modified bucket strategy to deliver my income in semi-retirement.

Your mileage may vary. 

My Own Advisor Bucket Strategy - December 2022

  • Bucket 1 is cash savings. It’s simply a large emergency fund we don’t have to use but it’s there if we need it. 
  • Bucket 2 is earning income from dividend paying stocks. Income will be earned inside some key accounts (such as our non-registered account(s), TFSA(s), and RRSPs) to pay for living expenses.
  • Bucket 3 is earning income from equity ETFs. This income will come from mainly our RRSPs as registered accounts, as we intend to “live off dividends and distributions” and withdraw capital from our RRSPs/RRIFs over time as we work part-time.

The purpose of having buckets is simple but effective: this retirement bucket strategy is an investment approach that segregates your sources of cash or income into three buckets. Each of these buckets has a defined purpose based on what or when the money is for: now, (short-term), intermediate (near-term) or long-term (multi-year or decade).

My bucket approach, while maybe not perfect, helps for a few reasons:

  • It can help ensure I stay within a reasonable withdrawal plan, starting off retirement or semi-retirement with a low withdrawal rate of 3% or 4%. 
  • It can help avoid sequence of returns risk (especially in the early years of retirement)* *Review these graphs below from BlackRock for an example. 
  • It can help “smooth out taxation” over time by liquidating accounts, slowly and methodically. 
  • It can help offset longevity risk, thanks to preserving capital early in retirement and letting assets compound away. 

This is our more detailed bucket approach to earning retirement income. 

*On sequence of returns risk

Exhibit A – pre-retirement:

BlackRock - Sequence-of-returns-one-pager-va-us - December 2022 Page 1.pdf

Exhibit B – during retirement:

BlackRock - Sequence-of-returns-one-pager-va-us - December 2022 Page 2.pdf

Source: https://www.blackrock.com/us/individual/literature/investor-education/sequence-of-returns-one-pager-va-us.pdf

Fritz factor #2: Are you mentally prepared for retirement?

Yes, getting there, but it’s more semi-retirement for me/us. 

As Fritz puts it in his post on Jon’s site:

“Almost everyone thinks about money when they’re making the decision to retire, but far too few consider the non-financial factors.  If I were to choose one point to make from all the things I’ve learned in the 7 years of writing this blog, it’s that the non-financial factors are the most important for putting yourself on track for a great retirement. Important enough that I wrote an entire book on the topic.”

Instead of just focusing on the financial-side of things, I’m really ramping up my mental-game. 

I’ve given quite a bit of thought about what semi-retirement might look like, including answering many of these Frtiz-factor questions and more:

How much do you want to travel? (A bit, not all the time.)

Where do you want to live? (In Ottawa, as a home base.)

Are you going to downsize? (Already done!)

Are you going to do more entertainment with that increased free time? (Yes, but also more volunteer work.)

So, to Fritz’s points and recommendations: we dream a bit, we talk a lot, and we keep our mind open to new opportunites. I think everyone should consider the same. 

Fritz factor #3: Have you made a realistic spending estimate?

You bet!

As we enter semi-retirement, we essentially intend to “live off dividends”.

Meaning, we will live off dividends from our non-registered accounts as we make some slow, methodical withdrawals from our RRSPs, while working part-time. We won’t touch TFSA assets at all and we’ll be far too young to tap any government benefits. 

In a few years, we will be at this Crossover Point:

Crossover Point

The income via dividends and distributions, from our entire portfolio, will cover all basic living expenses without touching/withdrawing any of the capital. This excludes future government benefits. 

Including some cash buffer, we figure that’s a good starting point for semi-retirement to begin. 

You can see and read how much we intend to spend on this Dividends page here

Fritz factor #4: Is your portfolio ready for withdrawals?

Fritz wrote:

“One of the biggest changes you’ll face in retirement is the move from years of accumulating assets to the process of withdrawing those assets to fund your retirement.  It’s a huge shift and one which you should plan for in your final year or two of work.”

I think we’re ready.

With our cash wedge in place to manage market volatility (at any age) we figure with part-time work that’s a great cushion against any sequence of returns risks.

We have been planning this cash cushion for a few years now and should have it in place at least a year before we leave full-time work.

Fritz factor #5: What is your risk tolerance?

Fritz wrote:

“By definition, you are making a decision without knowing all of the answers. The future is unknowable. All things being equal, a decision to retire earlier has more risk than a decision to retire later. Are you aware of, and comfortable with, those risks?”

I believe we are.

We also strive to retire “to” something vs. away from something, and part-time work will be our buffer.

We are concerned with health insurance, so part-time work should cover the premiums.

We are concerned that some investments won’t always keep up with inflation, but that’s also why we have a bias to stocks to help hedge those risks.

We have decided that stocks will form the bulk of our investment portfolio, because I also have a pension plan from work that I consider “a big bond”. I also see our government benefits in the form of CPP and OAS, eventually, as inflation-protected big bonds so I/we can take on more equity risk with my personal portfolio to gain market-like returns.

The age or date to retire is also an interesting factor since as Fritz puts it: “….there’s risk that you’ll lose some great years of retirement if you delay your decision.”

Having a greater time-work energy balance in life is something we want to pursue sooner vs. later.

5 Important Factors to Consider In Your Decision to Retire Summary

Interestingly enough and maybe not surprising, I haven’t put an age to my/our retirement number although I have always dreamed about some form of retirement around age 50 (years ago).

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

29 Responses to "5 Important Factors to Consider in Your Decision to Retire"

  1. Hi JF: Well to tell you the truth I had no option. Also being single with just dad and me in the house money can collect very easy. I have found most people no nothing about the stock market and think it is a crap shoot, but I found with blue chips while dull and boring they bring in a nice stream of income. A sort of a funny story; I went to golf the first time after I got laid off and the league secretary saw me and asked what I was doing there. I said why and he said you can’t golf you’ve been laid off. I shrugged my shoulders and said a guy’s got to do something. Later that night when I told dad he just grinned and said there probably weren’t to many people who just got laid off who could continue golfing. I’m basically a shy guy and had experience going from factory to factory putting in resumes that were probably thrown out so I didn’t like it. With expenses light by 31/ DEC. 1992 I had $535,000.00 and each year it just compounded. As mentioned you would be surprised at the number of people that live paycheck to paycheck. I was lucky that my father got into the stock market while I was a teen and so when I started making a steady but small wage I too got into the market.

  2. Hi Mark: I was going to mention that but Lloyd beat me to it. Yes I hope you end up in the former camp. As for retirement timing I had no choice as I was laid off at age 43. For a few weeks things seemed strange but then you get into a routine. As mentioned before the nineties were great financially as I went from $400,000 to $1,000,000.00 on 6 3/4 years. I basically have one big bucket, but it is spread around. I have much dry powder and stocks in Waterhouse along with my TFSA and RRIF. At home I have some stocks and $184,000.00 in banking with a mix of cash and GIC’s. I also have $129,000.00 in cash and GIC’s in the Credit Union, so I think I have a enough funds to tide me over. The few stocks at home will bring in enough to pay my bills and the only withdrawal is quarterly to pay Revenue Canada. Don’t sweat the taxes Mark just grit your teeth and pay them. Withdrawing funds to smooth out your taxes and make sure you get the OAS is taking financial planning way to far. Just keep on investing and let the dividends compound. Like Don I have ZWB and a large distribution drop right after I bought it it has been coming back. By the way, with a small RRIF and TFSA by the rest of my portfolio I get the OAS all clawed back. Most stocks are Canadian except for ones spun off by Brookfield which are based in Bermuda and pay in $US.

    1. Ha, yes, updated the post = former camp 🙂 Not sure how I missed that!

      It seems you are MORE than financially secure, Ronald – kudos. I think life could begin a bit so to speak once we are debt free.

      That’s a bundle in GICs and cash. We hope to enter semi-retirement with (just?) $50k or so in cash reserves, we won’t have your amounts for sure!

      “Withdrawing funds to smooth out your taxes and make sure you get the OAS is taking financial planning way to far. Just keep on investing and let the dividends compound.”

      That’s fair, I’ve heard quite a bit of that from some successful retirees like you and Don, and others 🙂 I guess I’m thinking I will eventually spend the capital and just not forever live off dividends per se.

      I will keep you posted on my journey of course, but I enjoy the critique because it makes me think!

    2. Congratulations on your success, Ronald. I am curious to know how you knew you had enough money to retire on $400,000 at age 43 if you were open to sharing.

      All the best to you.

  3. #2 is so important. From what I’m seeing, I bet a lot of us in the FI community are going to pass away faarrr richer than we’d like to.

    #3, “Have you made a realistic spending estimate?” sort of dovetails that issue; it’s simply so hard to estimate future living expenses when so much of if depends on your healthcare/assisted living needs. Is that something you’ve thought about when coming up with your retirement budget, Mark? Seems really hard to estimate something so unknown.

    1. #3, a bit, but the future is unknown for sure. It is our hope we can afford something up to $6k per month or so via various income streams as we age, or a bit higher, if we eat our capital. We’ll still have a home to sell as well. The future is always very cloudy, I think you just have to plan the best you can….and mitigate some risk where you know it. Thoughts?

      1. I think about this from time to time also. Both my parents passed in 2019. At the end we were fortunate to move them into my sister’s house (where they lived for about 6 months before they passed). My sister is a trained nurse so that made it possible (and affordable). Before that we were paying for overnight care at their independent living facility. They had enough savings to cover what we did, but without my sister we could have outspent their savings in short order, especially if they had lived longer (they were 89).

        For me, I expect to own a home, mortgage free in retirement. If push comes to shove and we need some kind of assisted living, we’ll either find a way to bring care to us, or we’ll sell the house and use the proceeds to finance whatever level of care we need. I expect that to be sufficient, and the reality is that if we’re requiring that level of care, the amounts I expect to spend on travel and other luxuries simply won’t be happening any more so I think it’s as reasonable a plan as can be expected.

        1. I’m sorry for your losses, James.

          You and me both: “I expect to own a home, mortgage free in retirement.”

          I think that will be a huge enabler for us…both of us.

          My math tells we (my wife and I) have about $4k-$5k per month in basic living expenses (i.e., not lots of travel but still fun things to do….) and we’re saving and investing so we can spend $6k per month rising by 3% or so inflation year-after-year.

          I figure that’s a decent margin of safety but we really, really don’t know until we get there…semi-retirement or retirement is a bit of leap of faith.


          1. I struggle with a retirement budget. Guessing groceries, gas, and local entertainment is hard – so I put it at $500 / week. Is it too much? I dunno. Everything else adds up to $4200/month. That includes a perpetual vehicle payment of $650/month. Too much? I estimate property taxes and all insurance (prop/car/life) at $1,000 / month. Will we need the life insurance then? I dunno. When I try to factor in a travel budget, including at least four weeks of snow birding and a decent overseas trip a year, and taxes….the budget gets a lot higher. That’s why I’m so focussed on building a much bigger dividend snowball. My wife’s DB pension will be small (for a teacher) as she has been part time and only building about 50% of a standard pension. I would love to find a part time consulting gig in my field – a 2-3 month project once a year – that would make a huge difference, but it would have to be doing what I love. I might have a line on that (my mileage may vary :p ) lol

            1. Yes, travel bumps things up quite a bit…especially Florida or other. Go to Portugal or other places and your money goes a LOT farther.

              I put our basic expenses expected in 2024 dollars on this page here:

              Our big three of food, shelter, utilities, etc. will be close to $3k per month. Add in other expenses closer to $4k-$4.5k per month.
              Add in inflation and I figure we start semi-retirement needing $5k per month after-tax without major travel, major expenses.

              We don’t plan to have any life insurance after 2030. We won’t have any debt and we’ll have our cash wedge. What am I insuring?


  4. For me, I’m in the same camp as Don G. We own our core BTSX stocks and have added a few others on the fringe (ARE, CPX to name two). I lucked out with selling AQN at the beginning of the year but I’ll be dipping back in once the divvy cut is announced.

    With about five years to go we are now generating just under $42k across all accounts, including RSPs. We still own some non dividend payers and will gradually switch them the closer we get.

    I want to double the divvy income and collect them for at least six months before retiring. Lots of work still to do.

    1. James, you’re doing great 🙂

      $42k across all accounts, is outstandng and a serious stream for semi or full retirement once you add in government benefits like CPP and OAS.

      I figure if we can get to $30k (next year) from non-regs x2 + TFSAs x2 + part-time work, we should be good. I hope to cross that milestone in mid-2023 a year ahead of schedule if the portfolio compounds like it could. Ha.

      Continued success to you.

  5. Very good pre-retirement list. I’ve been retired for almost 10 years and all of the 5 factors initially mattered at my time of retirement. At this point, none of them actually matter any more. We have ~3x the dividend income we need to live off so don’t need to worry if we have enough, don’t need to know what we are spending, don’t need to withdraw anything (just harvest part of our divys and re-invest the rest), don’t care about risk tolerance, and obviously I was mentally prepared for retirement as it has been fantastic so far,

    If an investor follows Henry Mah’s excellent income strategy, they don’t need to worry about most of the factors (other than being mentally prepared). I didn’t discover the strategy until after I retired so that’s why the list mattered back then.

    As an aside, we are 100% invested in TSX listed dividend growth/income stocks with a very small cash wedge and no fixed income or GICs. Our portfolio continues to gain value and more importantly, our dividend income continues to grow (a very nice $21.6k fro this year alone 🙂

    My wife & I are both very healthy at this point, so life is very good.

    Don G

    1. Yes, Henry’s approach overall is sound but it does limit the sphere of stocks to own. I like assets outside of Canada as well which have been great for returns. Examples include just indexing via VTI which have been surprior to the TSX over the last decade.

      Congrats on the dividend income stream, Don, very good = $21.6k from this year alone!!

      Impressive! 🙂

      Health is wealth for sure.

      1. Hey Mark

        Henry’s approach isn’t for everyone but if you want to live off dividend income without having to sell anything, then it’s the best strategy for that. Also, remember investors like me & Henry don’t really care about total returns. It’s all about the income.

        I was sort of thinking that the $21.6k might not be clear. That’s how much my wife & my dividend income increased this year alone going from $164.5.k at the end of 2021 to $186.1k as of now. (I know it sounds almost too hard to believe, but that’s where we are at and I’m expecting a nice increase next year as well with more divy increases and adding to existing holdings with some of the extra 2023 divy income).

        Take her easy

        1. Amazing!

          Yes, not for everyone for sure but definitely a proven strategy. As you know, I own a multitude of dividend payers (close to 40 in total) but I also own some low-cost ETFs for extra diversification.

          I hope to add to my CDN payers in my TFSA for 2023: BCE and CNQ in particular and maybe some WCP too for some oil and gas speculation? 🙂 Not sure on the latter yet.

          Do you still own the same stocks? I recall Henry is down to about 12 or so total in his entire portfolio!

          1. Hey Mark

            Yup, still hold the same 16 stocks & 1 ETF (ZWB) as earlier in the year after we sold all our GRT.UN (yield got below 3%) and FIE (didn’t fit our strategy any longer). We just keep adding $5k at a time to some of the existing holdings. We used to try and keep all our stocks at a similar book value but this year I got more selective on what we buy with the extra dividend income. My current favs are BCE, BNS, EMA, and PPL so we’ll be adding $5k to 3 of those 4 in our TFSAs on Jan 3rd and the other on Jan 15th with the first round of extra divy cash.

            Here’s what we now hold:

            Utils – CPX, EMA, FTS, AQN
            Banks – RY, TD, BNS, BMO, ZWB
            Midstream – PPL, TRP, KEY, ENB
            Telcos – BCE, T
            REITs – DIR.UN, NWH.UN

            I think I hold most of the ones that Henry does with a few others. He doesn’t like REITs nor ETFs. I’ve been with him generally on the ETFs. I only like ZWB because of the covered call strategy.

            I’ve also now moved into his camp on not really liking REITs. We used to hold between 6 and 10 up until 2019 and now are just down to the two. I think potential REIT divy cuts are just too big a possibility. We’ve done really well with REITs in the past but most of it was because of divys, take-overs, and a timely sell on GRT. I won’t ever be buying any more REIT units from now on.


            1. Impressive.

              I still have some legacy units of REI.UN, but will keep for now. Only < 1% of the portfolio. Don, I'm getting more selective as I age too 🙂 Own the same: Utils – CPX, EMA, FTS, AQN (own all of them including some BEPC and some SO from the U.S.) Banks – RY, TD, BNS, BMO, (and I also own some EQB for growth, along with CM (lowest-position) and NA (a few hundred shares) Midstream – PPL, TRP, KEY, ENB (own all but KEY at this point). Maybe I will put some more PPL in my TFSA?? Telcos – BCE, T (yup :)) Thinking I will put some BCE into my TFSA in 2023 for sure. REITs – DIR.UN, NWH.UN (don't own either). I could see ZWB for calls. I own a bit of CAR.UN too. Nice 10-year run for a double for me, for sure, but we'll see... You're doing amazing Don! Mark

    2. Very well done Don G. I only retired 4 years ago but also don’t need to worry about these factors. Life is good as you say. I like your approach and also see that there really is no reason to be diversified far and wide if it is income you want. We have very good solid companies in Canada and that works very well for dividend investors. In our portfolio We still have about 20% in US stocks, I like to use US Dollars for travel so we don’t need to worry about the exchange rate. But everyone is a little different in there approach, but I really like yours. We are very similar with our income but only grew dividends by $19,000 this year.

      1. Hey Div

        Excellent stuff. I’m very confident in our approach but it still is great to hear from others that are basically doing the same thing and being very successful at it. Love your fantastic $19k 2022 divy growth. If I remove the $2800 divy bump that we got from selling all our GRT.UN and putting it into more of our other holdings, then you edged us out by $200. 🙂

        I also think your 20% US strategy is a very smart plan with your US travel. We travel to the US for 2-3 weeks in the spring and 3 weeks in the fall but we just random camp (free camping and free firewood) so the only expenses are gas and food so it’s not worth it for us to worry about exchange rates.

        All the best in your investing and retirement

      1. I’m fairly confident we won’t see a dividend increase this June. 😉

        Seriously though, every time I try to figure out how much this holding is down in the two places I hold it, I end up almost tearing my hair out. Poor record keeping on my part.

  6. “some folks do well, and some don’t.

    I hope to be in the latter camp”

    Perhaps former camp? 🙂

    I’d also be inclined to add one more important consideration to the list. Health.


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