I’m single – is it possible to retire at age 55?

I’m single – is it possible to retire at age 55?

So much retirement income planning can be geared towards couples or partners. So, a reader wrote to me and asked me: I’m 45 and single – is it possible to retire at age 55?

Today’s post shares some insights for this reader and others in this position, including references to many other case studies on my site. Read on and leave me a comment below!

I’m single – is it possible to retire at age 55?

Of course for this case study participant today, but as always, my answer usually begins with “it depends”.

I’ll tell you why…

I’ve had readers and commenters on this site sharing many of their own semi-retirement and retirement income stories over the years. Some of those are quite personal, which I do not share nor post.

Others allow me to post their emails and questions, which is great, edited one below for a bit of context:

Mark, your case studies are very interesting and insightful but the fact that some people feel they need $7,000 per month, increasing by 2-3% inflation, well into their 80s and 90s for retirement spending, seems a bit much. My wife and I spend about $5-6k per month in our 60s, on average, and live a great lifestyle including vacations a few times every year. Some people need to know how to budget!

(Reference: How much do you need to retire on $7,000 per month?)

How much do you need to retire on $7,000 per month?

And this one…

Mark, I have read your recent case studies with great interest. I’m single, so I would like you to consider more case studies and examples for singles if possible. Not everyone is going to have $1 million saved up as couple by age 50. I look forward to your future updates!

And…

Mark, do some folks just not understand dividend investing? You can own BTSX stocks among others, get 4.5% or more yield every single year plus capital gains over time such that starting with a $1M portfolio outside of government benefits like Canada Pension Plan (CPP) and Old Age Security (OAS) would deliver $45k-$50k per year in tax-efficient income and these retirees would never have to touch their portfolio – unless they wanted to.

Dividend income investing is a perfect plan for today, and age you get older.

If retirees saved this much, then got another $2k per month from CPP and OAS (or more per couple), life is on easy street. What’s to figure out?

(Reference: How to Beat the TSX (BTSX stocks to own)

Beat the TSX

Passionate stuff. 

Keep them coming. 

You know, some of these folks have hit on a few themes so I will try and answer some things below. 

On retiring on $7,000 per month (and more over time)…

• I would tend to agree, that’s one nice lifestyle assuming all debt is gone.
• But “it depends”; what capital outlays, dreams and expenses you have. Travel and cottages and more add up if you’re in the fortunate financial position to own those things. 

On being single and striving for retirement…at any age…

• Totally agree and while I will link to previous, single, case studies on my site below I will do more of these over time so I appreciate the feedback and suggestions! Good on you to push for those…

On BTSX stocks and generating income from your portfolio…

• Hey, I’ll be the first to acknowledge I love dividend paying stocks for income (and growth)!
• But, again, “it depends”. While some form of “living off dividends” / off the income your portfolio generates is absolutely IMO a more secure way to enter retirement with, just living off the dividends or distributions can also trigger estate issues. Meaning, never touching the capital will almost assure you have a fat estate. Is that what you want? Leave money on the table? I’m not convinced living off your dividends or distributions in perpetuity is wise. Spend the capital over time. Again, your mileage may vary.

I’m single – is it possible to retire at age 55?

For today’s post, I’m going to assume:

• My single reader does not have spending goals of $7,000 per month, not even close.  
• My reader will not have a spouse nor partner to share living expenses with. 
• My reader does not have a $1 M+ portfolio to retire on, soon, but will get there…thanks to a disciplined savings rate over a 30-year working career.
• My reader is fearful of owning any one stock including those that tend to Beat the TSX as a group over time. 

Where does that leave us?

Here are my assumptions for today’s case study. I hope these are resonable and also relevant to some.

Joannne is 45 right now and aspires to retire at age 55. She reads My Own Advisor every week and knows that regardless if she invests like I do (in a mix of stocks and ETFs), that owning low-cost, diversified ETFs can be a great way to help realize her wealth-building goals.

She believes dividends don’t really matter.

Joanne also hates debt. She is very close to owning her condo but still has about $86,000 in mortgage debt to pay off in the coming 10 years prior to retirement. I’ve assumed her borrowing costs are in the range of 4.5%. Joanne is determined to enter retirement without debt (smart).

Next, Joanne knows that contributions to her Tax Free Savings Account (TFSA) are super smart for any retirement income planning, but given she makes $75,000 per year, she also leverages the tax-deferred power of her self-directed Registered Retirement Savings Plan (RRSP) – to reduce her taxable income in any given year.

Without a workplace pension to speak of to support her retirement income planning, she’ll need to lean on her own plan.

I believe she can do just that.

Like many people these days, Joanne is also worried about inflation, especially when she is no longer working at age 55. I’ve pegged inflation at 3% sustained over time. Inflation could of course be higher near-term (and likely will be) but 3% spending over the coming decades, every year, should be a great starting point for this forecasting. 

Like I referenced above, Joanne is not quite ready for any individual stock investing but has embraced a couple of my favourite ETFs for lazy returns: XIU for Canadian exposure and more recently since mid-2015, XAW for the rest of the world. 

(Reference: My ETFs)

She doesn’t really believe in bonds, yet, since she is treating CPP and OAS in her 60s as that fixed-income component but acknowledges some bonds or at least GICs might be helpful as she gets closer to age 55, her desired retirement age. 

By owning just two simple ETFs, along with some cash for any emergencies, Joanne has successfully fired her financial advisor and saved portfolio management fees in the process. She isn’t looking back…

I’m single – is it possible to retire at age 55?

Joanne’s inputs and assumptions for my analysis:

• Will assume income (today) is $75,000 per year.  
• Joanne hasn’t maxed out her TFSA yet, but remains very close and is doing very well. She has $100,000 now invested in low-cost XAW. I will assume 6% long-term returns from that fund.
• Joanne has done well to contribute to her RRSP for the last few decades, given a good salary here in Ontario as a graphic designer. Her RRSP value is now approaching $450,000 now thanks to 7% average annualized returns over the last 20+ years, most of those years in XIU. She has $10,000 remaining to max out her contributions this year. In more recent years, inside her RRSP, Joanne has added more low-cost XAW ETF for ex-Canada growth. I will assume 6% returns for this RRSP account as well moving forward.
• Joanne keeps $5,000 in savings at all times and she hopes to increase that cash position as she approaches retirement. Her focus is on killing the mortgage. 
• Joanne has no workplace pension.
• Joanne will be thinking she will be eligible for at least 60% max. CPP income at age 65, given her good salary and years of full-time work making maximum CPP contributions YMPE. It could be more but she hasn’t contacted Service Canada to find out. You can do that too, below!

CPP Retirement pension – how much you could receive?

https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html

• I will assume Joanne has lived and worked in Canada, her entire life. As such, full OAS for her at age 65.
• At minimum, going forward, Joanne is confident she can contribute at least $10k per year to her RRSP every single year for the coming decade – so I will include that into the calculations and my analysis. Joanne is also confident she can contribute to her TFSA as well, but not max it out. I’ll go with $5k each year for contributions which is under in the annual maximum contribution limit. 
• Once Joanne owns her home in Ontario, she know it should be worth more than $800,000 years from now but is very conservatively worth about $550,000 today. She is not counting on that home for any retirement income plan but we included it anyhow just in case she needs the income in her late-80s and beyond. (She could easily assume real estate inflation of 2% over the coming 30-40 years, so that home value today will easily double in value before she needs the money.) 
• I will solve her retirement income to age 85. The house could be sold for well over $1 M in future dollars to fund any additional needs in her late-80s. 
• Finally, Joanne is confident she will continue to work, if only periodically from age 55 to 60, earning some odd income from her current graphic design role/skills. I’ve included just $500 per month for that during those years but she could earn much more than that. Anything more is gravy.
• Inflation will be 3% sustained. 

Can Joanne do it, is it possible to retire at age 55?

You bet. 

After the mortgage is dead, Joanne figures she can easily fund her retirement needs and wants on about $4,000 per month without debt. Sure, some months with destination travel might be more expensive than others but when you’re no longer saving for retirement nor paying the bank with high interest costs, well, your lifestyle spending can be less. 

Here are Joanne’s results…

When it comes to her financial assets, she is in outstanding shape for future trending.

Joanne’s assets for retirement, beyond her home, will peak around age 54 and then trend downward from there, tapping her RRSP first for retirement income and allowing TFSA assets to compound further, tax-free. 

Her investment assets run out if all assumption come to pass around age 88 which creates a cash flow deficiency at age 89. This may seem dire but recall at age 88 her house has appreciated in value to about $1.3 M in value. 

Interestingly, with 3% sustained inflation: 

• That’s closer to spending $65,000 after-tax at age 55. 
• At age 70, that’s spending $100,000.
• By age 85, Joanne will be spending just over $150,000 per year.

Again, if all assumptions come true!

That means around her late-80s, Joanne will need to consider selling her house to free-up equity for future years if she continues to spend $150,000 per year (highly unlikely, since lower spending is likely to occur as she ages).

Based on a study I read, this is not uncommon and should be expected for most… 

With age 65 as the benchmark, a German study found that household spending fell by 19% by age 75, 34% by age 85 and 52% by age 95. Rather stunning but not really surprising given healthcare-related expenditures are likely the biggest concern in your late-80s and beyond.

Of course, SO much can and will change over the coming decades which is why such projections, while very helpful today, are most helpful every few years and at least once a year during retirement. 

I’m single – is it possible to retire at age 55 summary

Thanks to Joanne’s aversion to debt, disciplined RRSP contribution plan and thanks to more saving and investing discipline inside her TFSA over time, Joanne can be assured she is well on-track to meet some of her retirement income needs in the coming decade. 

I can also reasonably conclude that anyone in their mid-40s or even late-40s, who strives to max out their RRSP contributions and who has started to build up their TFSA as a retirement income nest egg, is well on their way to a comfortable retirement on a single income.

In my case study today, Joanne has fired her money manager to save on money management fees and DIY invests instead. She has successfully invested in a couple of simple, low-cost ETFs to avoid individual stock risks. She maintains a bit of cash for an emergency fund – if and when those funds are needed without going into more debt. Her projections include 3% spending inflation over time.

Joanne has done well, very well. 

I hope this post has helped and inspired others in similar positions to Joanne, striving to save and invest for an early retirement in their mid-50s on a single income.

Thanks for reading.

Mark

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.

This single saver was also wondering if they could retire, on a lower income?

Can you retire early on a lower income?

What about age 60?

Age 60, retirement on a lower income – can I do it?

Final Notes:

All charts related to the case study above were provided from our low-cost work over at Cashflows & Portfolios.

Mark

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.