Can you retire early on a lower income?

Can you retire early on a lower income?

It’s not easy, it will likely take more work, but you can retire early on a lower income.
Following a few early retirement case studies posted and linked to on my site in recent months, I got a few great email replies from readers. I’ve captured a couple of their comments below verbatim:
“Mark, let’s be honest. Not every 30-something has a 6-figure job like your Kingston engineer here.”
“Mark, can you link to that post on your site where the 60-year-old wants to retire on a lower income? That seems far more representative for many Canadians.”
…and you know what, these readers are right.
A lot of people like the idea of early retirement but facing facts, few folks have the means to pull it off.
You can only comparison-shop so much. You might not have the time to take on side-hustles. You tried to save as early as possible, as often as possible, but life got in the way.
I’ve argued people really don’t need any more financial advice. There are 80,000 books saying the same things. 
But people do appreciate good coaching when they see it and feel it. People tend to appreciate the lessons learned shared by others – to tailor their own path. They genuinely want to be better over time.
At least my readership feels that way…which is very inspirational…
So, for today’s post, I thought I would act on one reader’s email to me in particular and highlight how she can still retire, maybe not earlier than most, but retire all the same without some of the financial stressors she is feeling today.

How to retire on a lower income – case study

Read on for information below from a reader I’ll call “Kat” for privacy reasons, and where I’ve changed some of the information to be tailored for our case study:

Hi Mark,

First off, love, love, love your blog and look forward to reading your weekend roundups every Saturday. 
You mentioned that you will be featuring a case study of a millennial couple soon and wondered if you are in the need of any more case studies?
I feel my situation is dire and I would love to hear your feedback (I know you can’t give direct advice) on what I could do better for me…
Quick background – I’m 43, separated, 2 kids (one is 19 and in university now, the other is 14). I work full-time making less than $45,000 per year. I’ve had financial issues in the past. I have around $30,000 invested, in mostly my RRSP. I am way behind at my age (for retirement planning). I don’t have a lot of disposable income, so I’m trying to put aside $300/month now.
I have lots of questions for you but thoughts on the best route for me (meaning, TFSA over RRSP I have now?). What can I do with my $300 per month? What might that give me in terms of the next 25 years of saving and investing? Could I retire at age 65 or 67?
I currently have ETFs in the Canadian versions of S&P (VFV), international (VEE) and high dividend XEI. I am torn with sticking with this route of buying ETFs or also diversifying to include Canadians stocks with good dividends. I have a few of these stocks already, but not much.
I was thinking that if I don’t have a larger enough amount to live off at retirement, at least if I could have a small dividend income stream (say $5,000 would be ideal), that will help me bump up my monthly income with my OAS and CPP payments… 
So, some questions:
  1. At my current income level, say $42,000 per year, saving $300 per month, is it better to focus on building up ETFs and get as much growth as possible? Or, do half and half (50% ETFs and 50% stocks)?
  2. What income might I be able to expect at ages 65-67, in addition to my OAS and CPP? I know I won’t retire with a million dollars, but trying to figure out what that might be – assuming growth or dividends or both helps.

Please let me know if you are interested in doing a case study! I’m not sure how many of your readers are in similar positions to me… 

Thanks so much for your amazing blog and all your articles. I read them constantly and have them bookmarked! 

How to retire on a lower income – results

Kat, happy to run some inputs and assumptions for you. Here’s what the projections say and assume since so much can change over the coming decades. On that note, we encourage you to annually monitor your progress to any personal plans!

1. Salary – we have assumed that you will maintain your employment role, for the coming years, with salary increases aligned with inflation at about 2%.

2. Investing – given your salary, and because we also believe in tax-free investing (i.e., using the TFSA for wealth building), we have assumed you will contribute at least $300 per month on average inside this account; contributions will increase over time aligned to inflation (2%) per year, and finally because you have a few decades to invest, you will be in mostly equities (instead of bonds) and earn annualized 6.5% over the coming decades.

3. Government benefits – assuming you will continue to work, and therefore contribute to Canada Pension Plan (CPP), we have assumed it might make sense to delay these CPP benefits until age 70. We leveraged your desired, latest retirement age date of 67 to start taking Old Age Security (OAS) – so that’s when that income stream will kick-in.

The math says, you can essentially continue your current after-tax spending in retirement Kat! 
Retirement on a lower income - Kat Case Study
The other good news is, we see your taxation in retirement being sustained quite low while you draw down tax efficient income from primarily your TFSA starting at age 67. The combination of your income sources will last you to age 100, adjusted for inflation throughout. 
Retirement on a lower income - Kat Sources of Income

Can you retire early on a lower income?

The short answer is – yes.

The long answer is, for all readers, it depends.

While I’ve written that pursuing financial Independence is a choice, depending on your income level, there will be more sacrifices to be made on a lower income. Those retirement plans can however be realized, even if your path is not as financially fortunate as others. Don’t despair. Don’t give up. Embrace your journey. This site hopefully provides that motivation.

I want to thank Kat for sharing her story and I hope this information was valuable to her. 

Further Reading:

You can check out dozens of case studies, financial independence stories, retirement essays from readers and much more on my dedicated Retirement page here.

Here is one proven path to retirement ignoring any 4% rule.

Mike and Julie want to spend $50,000 per year in retirement starting in their 50s…how much do they need?

This 50-something couple wants to FIRE at 52. How much can they spend?

Want to hire us?

Check out Cashflows & Portfolios and contact us.

Cashflows & Portfolios

My partner and I have been using various retirement projection tools for our personal FIRE journeys and now we’re using these tools to help readers, like you, with your personal retirement projections. We often answer key questions like, do I have enough to retire?  When can I retire with my current lifestyle?  Which account should I withdraw from (and when) to minimize taxes and maximize my retirement income?

Again, contact us anytime to learn more! 

What are your thoughts and reflections about Kat’s journey? What are your thoughts on the FIRE movement? Is that reserved for high-income earners only?

Disclosure: This is not direct investing advice nor should it be taken as such.  Assumptions above are for case study purposes only. Thanks for reading.

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.

30 Responses to "Can you retire early on a lower income?"

  1. Mark

    Thanks for all the good advice. I got off to a slow start and life had a few hiccups for me but I have just over 200000 in my RRIF and I’m happy for that. I wish you were around earlier in my life. I think schools should be teaching what you offer.



    1. That’s still good Terry and certainly with more time and low-cost ETFs I have little doubt you can get a decent income stream and/or growth from that RRIF for the coming years. I appreciate your kind words. I wish I knew then in my early 20s what I know now in my 40s 🙂

      Alas, live and learn!
      Best wishes back and see you again on the site in 2022.

  2. I think there alot of people who retire on a low income….but here in Canada many still don’t read enough English.

    we have to look to some of the lst generation immigrants. It is incredible. My father was the primary breadwinner as a restaurant cook in Ontario all his life. My mother full-time housewife…there were 6 children. In the end, they did own their house, was their 3rd house in the line-up homes. My father retired at 65. When he died at 85 yrs. there was probably $60,000 RRSP. That’s all.

    For 5 daughters to be fashionable….my mother taught us how to sew as teens… you get the picture.

    His children are all university graduates..some of us had OSAP grants combined with summer jobs. We paid our own homes..we couldn’t have asked for any financial help from Papa. People say the strength of CAnada…is the immigrants. It really is..the 2nd generation ends up working their ass off to avoid low-income, hard labour, etc. So the retirement stories on low income…they exist…the audience is just not here.

    1. Excellent story Jean and thanks for sharing. I think more Canadians could definitely to learn how to retire on a lower-income since it will likely be commonplace.

      I would agree: “people say the strength of Canada…is the immigrants. It really is..” There are so many hard-working folks trying to make a better life for their families – it’s the driver to move to this great country. Just because they may retire on a lower income doesn’t mean they won’t be happy and feel very fulfilled.

      All the best,

  3. Deane Hennigar (RBull) · Edit

    Lots of great points here, and I’d probably be redundant by making any of my own. I like reading the more typical retirement planning scenarios.

    I’d just like to say excellent job so far Kat. By the questions and comments you’re making its obvious you’re putting a lot of effort into making the right financial choices and doing the best you can. Even on a modest income you’re doing well and have an encouraging retirement future.

    1. Thanks for sharing. Yes, by asking some of those questions it is clear Kat is taking more control over her finances. That will serve her well in the decades to come.

      1. Deane Hennigar (RBull) · Edit

        Thank you Mark.

        For sure!

        Nice to have a resource like your blog to help people interested in their financial well being!

  4. Two thoughts on her situation. Firstly and most importantly is to work on increasing her earnings. Whether it’s gaining new skills or job hopping – switching jobs can often add a big pop to your income. Of depending on your situation is side hustles, earn a bit extra and put it straight into investments.

    The second is to focus on cost cutting. Amazing how few people shop around for better deals. Saving a 100 bucks a year on insurance is the same as a $200 pay rise!

    1. Good points Rob. Certainly any combination of higher income and lower expenses (i.e., growing the gap over time) will serve Kat well!

  5. Kat is doing incredibly well for her situation. Kudos to her for her financial discipline in a very tight situation.
    Today’s working family of two bread winners should have no trouble retiring in the future with two of all the government pensions and, if they were wise like Kat, RRSP’s and TFSA’s
    I net approx $20K per year from RRQ, OAS, CPP (very small) and a small company pension, If I really had to I could survive on that but some serious decisions would have to be made especially pertaining to my abode which is debt free but, as any house, needs some TLC to keep it up to snuff. Now if you add in a second person to help out with expenses then you can easily live a bit higher on the hog.
    I was lucky enough to be able to put money in to RRSP and TFSA accounts over the years and am fortunate to be able to afford a side of beef and not just live off of hog (sorry to all you veggies out there).
    I would say to Kat go for the TFSA every year. It won’t give you the RRSP deduction but it will pay later in life. Put it in MOPAY in my opinion. Then you get to eventually re-invest every month and get the compounding ball rolling that much faster..


    1. Love the feedback….thanks for that.

      Seems to me, if you’re debt-free at the time of retirement and stay that way, it is absolutely possible to retire on a lower income assuming you have conservative needs. This post tried to show, even on a more modest means, CPP and OAS + small savings can go a long ways.

      “I would say to Kat go for the TFSA every year. It won’t give you the RRSP deduction but it will pay later in life.”

      Very smart and I do second that for Kat.

      Thanks again.

  6. Awsome article Mike and a great topic! my parents both retired more then 20 years ago at age 65 and started collecting cpp and oas and they had 0$ income from any other source just the governent’s payments and they’re doing great but the big bonus for them is that they had their condo paid off and they have 0$ in debt. so yeah i believe if you go no debts and no rent to pay you can make it , again I’m being bias towards real estate but it’s a good piece of mind when the roof on top of your head is yours 🙂

    1. I completely agree that owning the roof on top of your head gives one lots of financial security during retirement. It’s more predictable how much much you spend on your dwelling this way. Looking at how much rent has gone up during past two decades.

      If one is brave enough, can also borrow on the assets in the house and invest it, so that the house can support itself. I am not brave enough though. But might do this if time is right and if I could ever accumulate enough courage.

    2. Thanks Gus! I think Kat can definitely realize her goal but it will take some discipline for the coming years. Not that discipline is anything new for a lower income earner vs. higher income earner – just that with some scarcity there is less margin for error. The fact that she’s thinking about all of this now is a great sign she’s a planner. That mindset will serve her well 🙂

      Check out my Weekend Reading edition – all about real estate!

  7. Great respect and admiration for Kat. Be able to save with a low income won’t be easy. We have been there but only for a short period and we had no kids. I also feel you might want to stick with ETF which is a much safer choice. With the amount you want to invest, it’s very difficult to establish a diversified portfolio with individual stocks. Also just contribute to TFSA, if the tax rate won’t be lower in your retirement time. Best luck to you and hope you great success with your financial journey.

    Great respect and admiration to Mark too. You are very helpful here for many Canadians to get better financially no matter what their circumstances are. Myself is one of them. Great work as always.

    1. So kind May – thanks :))

      Yes, I think Kat can realize her goals with some steady, disciplined savings, and likely some low-cost ETFs that are very diversified are likely best to assure market-like returns.

  8. Great article, Mark! Reaching retirement on a lower income is something I’m out to prove. It’s one of the reasons I switched to part-time work at a young age. I figured I could still reach retirement through living a modest lifestyle, investing regularly, and by side hustling and creating multiple income streams. I think I will still be able to retire by 50 or sooner, but you never know how things could change. Fortunately, the path I have chosen has a backup plan. My job is seniority based, so if my blogging income stream does not grow enough in the next 3 to 5 years, I will likely have the opportunity to do my job full-time. In that case, my income isn’t necessarily that low. Overall, I agree with your assessment that it can be done. It does require a little more sacrifice, such as maybe not owning a car or avoiding some luxuries. But if you really want more time and you are consistent with savings, it can certainly be done. I think the main thing lower income earners have going for them is they can live on less. Therefore, they require less retirement savings. In a way, both high income earners and low income earners are in the same boat. Thanks for the read.

    1. Love it Graham! re: out to prove.

      The challenge for many lower-income earners is they cannot save enough, often enough. I do believe however Kat can realize her goals over some smaller savings, with discipline, with time. The benefit as you say, of a lower-income stream, is you always have to live on less – not ideal of course for many – but it makes the need to save less important assuming you have worked and lived in Canada for decades. CPP and OAS can be very helpful assuming you take it at age 65 or even 70.

      Have a great long weekend!

  9. Good advice, Mark. I would support the idea of investing only inside your TFSA Kat and not using your RRSP. This is for a couple of reasons. Most importantly, your tax bracket will be essentially the same in retirement (when you start to pull the money out) as it is now, therefore there is no benefit to you. Second, you may be able to qualify for the Guaranteed Income Supplement (GIS). TFSA withdrawals will not impact your qualification as it is non-taxable, but RRSP/RRIF income will.

    IMO, stick with your broad index funds over dividend stocks as it is less risky. Picking the wrong company would have a serious impact on your financial security (tangent: It is really important to know that what is good for one person is not necessarily good for another. For example, Mark has a defined benefit pension plan that will pay him a guaranteed amount the rest of his life. This means if one of his stocks crashes, goes bankrupt, etc., it won’t have much of an impact on his overall financial plan, goals and financial security. Not so for you, Kat.)

    For your investments, you could look at all-in-one ETFs from Vanguard, BMO, etc. as you get instant global diversification, easy management (only one thing to buy), and automatic rebalancing.

    Advice-Only CFP®

    1. Great stuff Steve. Yes, potentially GIS for her in the coming decades although not desired 🙂

      Until Kat can max out her TFSA, I would only focus on that. Not advice, just makes sense for tax reasons as you say.

      All-in-one ETFs for Kat for her TFSA such as XAW, VEQT, XEQT, HGRO, others would be great for her!

  10. Mark,

    For what it’s worth I retired at 52 years of age courtesy of an early retirement bridge which I offered myself up for (thought I would save a job for one of my younger coworkers.

    The 3 year bridge paid me about $40,000 per year or about 2/3 of my salary at the time(20 years ago). On the plus side me and my wife were completed debt free with a paid up house, a decent amount of money in RRSP and probably a cushion of 2 years operating expenses for the house including cost of food. When the bridge expired I went on pension at approximately $30,000 year at 55 which was about 1/2 of my salary. Cooking from scratch and hitting the specials and we are doing very well thank you!

    1. That’s great William….

      Earning $40,000 per year, assuming anyone is debt-free, is decent money for sure.

      “When the bridge expired I went on pension at approximately $30,000 year at 55 which was about 1/2 of my salary.”

      Excellent stuff and sounds like you’re well funded for retirement 🙂 Kudos and thanks for sharing.

      1. Mark,
        A few other tips for your subscribers. We have a decent sized backyard garden, I do some foraging in local parks of which we have many. We also brew our own beer and wine from kits and ferment some of our garden produce as well as bought items off season and make jams, jellies and preserves. Hopefully these ideas will help a few people of their road to independence and self sufficientsy.

  11. At 43 with $30,000 invested and only saving $3,600 per year for the next 22 years, might, and this depends on how you invest and possibly the market, might provide between $15,000 and $20,000 of tax-free income if you retire at 65. Add cpp at 65 and oas and gis at 65.
    If you stick with your rrsp and etfs, you might hope for $6,000 to $8,000 of taxable income and possibly being able to sell 2% of your holdings each year, also taxable.

  12. Hi Mark

    First of all, your blog provides plenty of great information to help people manager their retirement investments. These things didn’t exist in the 1970’s when I first started saving for retirement. People have these tools now to help build their financial future. Secondly, no one looks after your money and investments better than yourself…no one. I am not throwing shade at financial advisors etc, but you are the only one that really cares about your money. Make sure you take ownership. The main thing to understand, saving your money as soon as your start working is the most important thing. Saving every year, year over year, and not touching it no matter what, that is the main thing I see after 40 + years. Don’t expect investment returns to make up any gaps, don’t expect pension plans to come to your rescue. Build your own house to live it. Save Save Save. Your biggest enemy for saving is consumerism. Your don’t need that fancy new car or that exotic vacation, if it impacts what you are able to save. 10% of your gross annual salary is the minimum bite, and it really needs to be your goal, and more if possible. In the end, after 40 years, you will see just how powerful your saving goal has been, and yes it will probably lead to an early exit to the land of do what ever you want ! :o)

    1. Thanks JRR. I appreciate those kind words.

      You’ve provided a lot of great tips, advice, guidance and lessons learned for Kat. I think she is doing just that by reaching out and seeing what is possible:

      re: “I am not throwing shade at financial advisors etc, but you are the only one that really cares about your money. Make sure you take ownership.” Ownership is key for sure.

      Continued success to you.


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