Retire in 20 Years or Less in Canada, Even With an Average Income


Table of Contents

IT’S UP TO YOU………………………………………………………………………………………. 2


SAVINGS CALCULATIONS……………………………………………………………………. 4

REDUCING LIVING EXPENSES………………………………………………………………… 5

INVESTING………………………………………………………………………………………………. 8

DEBT……………………………………………………………………………………………………… 10


SUMMARY……………………………………………………………………………………………… 12


Many Canadians would be happy to retire at 65. The low savings and investing rates leave many people wondering if they’ll ever be able to retire at all. But there are people beating that trend.

A few have adopted an attitude of rejecting the common luxuries and conveniences of the typical American existence and choosing to be extremely frugal. Some folks are actually saving in upwards of 75% of their income and retiring in 10 years or less!

You might be thinking to yourself, “I need hot water and electricity. Count me out.” However, retiring early isn’t about doing away with common necessities. It’s about embracing the things that matter the most and doing without the things that don’t really make a difference to you.

But frugality isn’t enough. It’s imperative to invest those savings and to continue doing so until you’ve accumulated enough to live off your investments.

If you already have a hobby that earns money, you’re ahead of the game. If you don’t, find one! A money-making hobby that you’re willing to do into retirement can making everything easier and retirement can come quicker.

Retiring early is within reach for nearly anyone.

“I have learned to seek my happiness by limiting my desires, rather than in attempting to satisfy them.”

– John Stuart Mill

It’s Up to You

Retiring early is the result of having a positive mental attitude that supports your goal. While a few specific ideas will be presented, nothing is more important than attitude when it comes to retiring early.

You don’t need anyone to tell you that you need to save and invest money to retire quickly. You also don’t need anyone to tell you that you may have to significantly cut your spending to make that a reality.

But it’s your attitude that will ultimately determine whether or not you’re successful.

Try these strategies to help you align your attitude with your early retirement objective:


  1. Set a When do you want to retire? Have a date and a dollar amount. Don’t know how much you need? You will after the next section of this guide.
  2. Make a decision that you’re going to retire by a specific date and that you’re prepared to do whatever is necessary.
  3. Review your goal daily. Create a life that supports that goal. For most people, the time it takes to retire is dependent on the issue of convenience and luxury. Cable TV is a luxury. Starbucks coffee is a luxury and a convenience. Fast food is a convenience.
  • If you’re unwilling to give up conveniences and luxuries, retirement will take longer, maybe much


  1. Recognize that luxury and convenience have little to do with Going to the park with your family can create a happy moment, and it’s free. Going to the movies and buying popcorn and drinks is enjoyable, but it’s also expensive. Does going to the movies provide more happiness than seeing the same movie at home with your friends or loved ones?

Would you rather drive your Mercedes 60 kms to work each day or be able to walk your child to and from school each day? Would you rather continue working and have cable service or be able to stay home, read a book, and take a nap?

Just how far are you willing to go? If you’re willing to spend the next 20 years being responsible and somewhat frugal, you can retire in 20 years. If you are willing to really do what must be done, retiring in 10 years or less is entirely possible.

It’s all in your hands.

 “Frugality is one of the most beautiful and joyful words in the English language, and yet one that we are culturally cut off from understanding and enjoying. The consumption society has made us feel that happiness lies in having things, and has failed to teach us the happiness of not having things.”


– Elise Boulding


The Simple Math of Early Retirement

Maybe you didn’t like math in school, but this math is quite simple. And this math can change your life! It will be painless.

There are many complicated calculations you can do to determine when you can actually retire, but there are really only a few important items necessary to make a pretty accurate guess:

  1. What are your annual living expenses? This includes every dollar you need to spend over the course of a year to maintain your standard of That’s one reason cutting back on your spending is so important. The less expensive your lifestyle, the less time it will take to investenough to support it.


  1. How much money can you pull out of your investment each year without fear of eventually running out? Fortunately, a well-respected paper published by several professors at Trinity University in Texas answers that The study can be found here.

The ‘Trinity Study’ paper is entitled “Retirement Spending: Choosing a Sustainable Withdrawal Rate.” In a nutshell, the study examines the stock and bond markets over a long period of time and examines the maximum sustainable withdrawal rate.

The study takes into account market crashes, economic downturns, inflation, and all those other financial market challenges that keep many of us awake at night.


Many experts deduce from the data that the sustainable withdrawal rate is 4-5%. If the average long-term stock market return is about 8% and inflation is 3-4% that leaves 4-5%.


In a nutshell, you should be able to withdraw 4-5% of your investments to use for your living expenses and never run out of money. In theory, the relative value of your investments would essentially be unchanged forever.


  • If you prefer using 5%, you’d need to save and invest an amount equal to your annual expenses x


  • If you’re a little more conservative and want to use a 4% withdrawal rate, multiply your annual expenses by


That target number lets you know when you can retire. While that number might seem more than a little challenging, there are ways it can be reduced. That will be covered later!



“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”





Savings Calculations

– Charles Dickens, David Copperfield



One useful way to appreciate the real cost of your spending is the use of a savings calculator. There are many available online.


Compounded monthly, an investment of $1,000 is worth almost $5,000 in 20 years! When you spend, you’re not just losing that money. You’re losing everything that money could have earned for you in the future. Many wealthy people are quite frugal and speak to this idea around spending.


A famous tycoon once said that he envisioned dollar bills as soldiers marching off to war for him. They were fighting the war of increasing his already vast wealth.



How long will it take to retire based on your current rate of savings?


Years until Retirement =    (Your Target Number – Current Value of Investment Account)

The Amount you are adding to your investments each year The math is simple, but like many things, the challenge is in the application!


“There is no dignity quite so impressive, and no independence quite so important, as living within your means.”


– Calvin Coolidge



Reducing Living Expenses

Since the investment amount needed for retirement is a function of living expenses, everything that can be done to reduce expenses is going to make a big difference. Using a 4% withdrawal rate, every $5,000 removed from your annual living expenses results in lowering your target number by $125,000! A reduction in expenses is powerful!


Before you spend even a dollar, consider how much enjoyment you’re going to receive. Is it really worth it? Is a little enjoyment, distraction, or convenience really worth working for several more years?


There are many common expenses that eat away at the average person’s ability to save. While some of these expenses are necessary, many can be eliminated or at least reduced.


Are you spending too much?


  1. The largest portion of anyone’s spending is typically for housing. With many households spending over $2,000 a month, this is the single biggest place to look for expense-cutting opportunities.


  • Canadian homes are considerably larger on the average than just about anywhere else in the It’s nice if each child has his own bedroom, but there are many instances across the world of large families sharing a one-bedroom apartment. Could you downsize to a less expensive home and still be just as happy as you are now?


  • How far is your home from your place of employment? Living close to work will minimize the amount of gasoline needed to drive each It’s possible you might even be able to do without a car altogether!


  • Do you have the opportunity to find work in a less expensive area of the country? Could you live in less expensive area in your current city?



  1. Do you own two or more vehicles? Many families have a car for each parent and another car or two for the teenagers. Again, many families are sacrificing the ability to retire early for the convenience multiple vehicles provide.


  • An automobile, even an inexpensive one, is very It’s not just the cost of the car, gas, insurance, registration and maintenance. It’s the interest on the loan. It’s also the opportunity cost. All of that money could be invested and earning money. Think about how much those cars are costing you. How much time do you actually spend using them?


  • Is it possible to eliminate one or more vehicles from your life? Could you move closer to work? Can you share a ride with other family members or friends? Could you use public transportation?


  • Consider owning an inexpensive car that gets excellent gas mileage. You’ll save on insurance, gas, and the opportunity cost will be Ideally, you’ll be able to purchase the car for cash. Calculate how much money you’ll save over the next 20 years.


  1. Food is a daily expense, and that means there’s a great opportunity for reducing spending.


  • Be a coupon user. When many of us think of coupon users, we conjure up less than flattering images. But coupons can be a great way to save a lot of money. The most important rule is to not purchase things you’ll never It’s not a good deal if you don’t need it in the first place.


  • There are many cookbooks and websites dedicated to saving money on Take a look and see which strategies will fit into your life.


  • It goes without saying that eating out is Is eating out enjoyable and meaningful enough to be worth the cost?


  1. This is the perfect example of convenience and luxury versus happiness. There are numerous ways to save on utility bills if you’re willing to focus on early retirement and happiness.


  • Do you have a cell phone and a home phone? If so, is that necessary? As a child, did your family survive with just a home phone? Perhaps you can make do with one or the


  • Cell phone plans can vary dramatically in If your cell phone is paid in full, it can be much less expensive to use a month-to-month pre-paid plan with your current carrier. There are also many little-known service providers with much less expensive service. Search around and see what you can find in your area.


  • Cable TV and the internet are expensive and the two items that most people are initially unwilling to give But these also suck away more time and happiness than probably


anything else in your life.


  • They are great distractions and an easy way to amuse ourselves. They are also very Find other ways to spend your time and enjoy yourself. Your life can be much more fulfilling without these great time wasters. Free internet access is available in many locations. If you do keep internet access, there are many cable TV alternatives.


  • Do all the little things you know you should be Turn off the lights. Turn down the heat and air conditioning. Fix the drafty doors and windows.


  1. Movies, expensive vacations, going out for drinks, and attending concerts are just a few examples of the many ways we can spend money to amuse ourselves. Consider some less expensive alternatives.


  • Pick up a movie from the library and watch it in the comfort of your own You can even invite over a few friends.


  • Plan a camping trip or a road trip to interesting It can be a fun and interesting vacation.


  • Invite friends over for a drink and tell them to bring their own Take turns hosting. It’s a great way to get out of the house.


  • Attend free concerts or go watch local bands with a minimal cover


  • Invite friends over for Take turns hosting. In the end, there’s really no cost and you might get to try something new for dinner.


  1. It’s surprising how much insurance we have. There are homeowners or renters insurance, auto, health, life, disability, and more. It’s important to shop around for new policies each year. Maybe you’re already getting the best prices, but you’ll never know for sure if you don’t check.


  1. Health club membership. Did you know that the average health club member attends three times and never goes back? Many memberships require a yearlong contract. Even then, this type of service is notoriously difficult to With a pair of athletic shoes and some simple equipment, you can great a great workout without having to drive across town.


Hopefully, you can see how many ways there are to save money. This is just the tip of the iceberg.

Now that you have the general idea, ask yourself how else you can save money each month. Remember to base your decisions on retiring early and being happy.


Many people are able to save 75% of their pay with enough effort! Anecdotal evidence suggests that most people are capable of saving at least 50% of their wages.


Consider using this thought process before you spend:



  1. How is this going to affect my plans for early retirement? Think back to the savings figures in the previous How much is that $25 dinner really costing you?


  1. Is this item or service really worth postponing my retirement and freedom? Maybe it’s worth it. Maybe it’s not. But at least stop and ask yourself the question before giving your money to someone


  1. Is this spending adding to my health or happiness? Most impulse spending relieves a short-term need, but has long-term consequences. In many cases, you can find a better way to spend the money or would be better off investing


  1. Do the At an 8% return, a $100 investment is worth just shy of $500 in 20 years. Is the item you’re about to buy really worth 5x that amount to you?


  1. Evaluate all ongoing spending with a long-term Cable TV isn’t just $75 a month. It’s

$9,000 over the next ten years. Invested, that money would have been nearly $14,000. A car isn’t just a car. It’s the payment, interest, gas, maintenance, insurance, time, and the long-term cost of all of those things.


Controlling your spending and minimizing your monthly expenses is a huge part of retiring in 20 years or less. Investing is the next important step.



“Waste neither time nor money, but make the best use of both. Without industry and frugality, nothing will do, and with them everything.”


– Benjamin Franklin





After saving all of that money, the next step is investing wisely. Put that money to work for you!


There are numerous ways to invest. There are stocks, bonds, mutual funds, real estate, and the list goes on. Those with a great track record of investing in stocks can certainly focus on that option. But if you want to retire quickly, individual stocks are somewhat risky. It’s not uncommon for a stock to lose value and take several years to recover.


High-grade bonds are very reliable investments, but that reliability comes at a cost. The yields are very low. Real estate requires a lot of time and expertise.


Mutual funds may be the perfect investment for the average investor, specifically index funds.


There are many advantages to an index fund:


  1. A regular mutual fund has a lot of expenses, and the long-term track record isn’t Index funds routinely outperform actively managed funds over time, and the costs are extremely low.


  1. Index funds track a market They essentially own every stock in that particular index. It’s like buying the whole market. It’s the ultimate in portfolio diversification. When the market goes up, you make money. Index funds are less volatile that individual stocks. The US stock market has grown consistently over many years.


  1. There’s little work on the investor’s You aren’t required to constantly research stocks and stay on top of a company’s news. Your time is free to enjoy your life.


  1. The tax situation is better for most Actively managed funds often hold a stock for less than a year. Any realized profits are taxed at the usually higher tax rate for personal income. Index funds typically hold stocks for much longer, resulting in profits being taxed at the capital gains rate, which may be lower than your rate for income.


There are many index funds. The only differences are the index they track and the fees charged to investors. Find an S&P 500 index fund with low expenses.


Investing in an index fund that tracks a foreign economy is another possibility. There’s always an economy somewhere that’s thriving. Owning a portion of that entire market can also be lucrative.


What about my RSSPs and TFSAs?


There’s no doubt these are outstanding long-term investment strategies. Most RSSP programs have some level of employer matching, and the contributions are pre-tax.


The challenge for those that want to retire early is the timing. There are significant penalties for withdrawing money from these accounts before the typical retirement age.


What are the actual ramifications of using retirement accounts on my early retirement?


  1. It may delay your early This money and any earnings won’t be available to you until at least age 59 ½.


  1. It might not delay your early retirement. Knowing that this money will eventually be coming to you can change your You won’t necessarily have to plan on living the rest of your life just on your index fund investments.


Do the math and see what you discover.


“If frugality were established in the state, and if our expenses were laid out to meet needs rather than superfluities of life, there might be fewer wants, and even fewer pleasures, but infinitely more happiness.”


– Oliver Goldsmith




In most cases, the best investment you can make is paying down your debt! It really depends on the interest rate you’re paying. As a general rule, if your debt is above 8%, you’re better off paying your debt than investing that money. If it’s below 8%, make your payments on time, but use your extra dollars for investing.


Avoid accumulating any new debt. Debt and early retirement go together like double-cheese pizza and weight loss. Additional debt is like taking a big step backwards. It increases the time and work necessary to reach your desired destination.


If you have a significant amount of debt to eliminate, it can be incredibly daunting. Losing 100 lbs is similar. But you have a lot of control over the amount of time it takes to lose that debt or weight.


When losing weight, you could choose to target one pound a week and spend the next 2 years dealing with it. You could also talk to your doctors and put yourself on a protein-sparing modified fast and lose 4-5 lbs per week and be done in 6 months. People have successfully done both.


Your debt is no different. You can pay a little extra here and there, or you can totally change your life and take care of it much more quickly. Live in a less expensive home closer to work. Save money on food. Eliminate your cable and internet. Save money everywhere possible and your debt will be eliminated quickly.


Make a habit of regularly reviewing your debt and commit to ridding yourself of it. It’s like trying to climb a mountain with 300 lbs on your back. No one needs that.



“Thrift means that you should always have the best you can possibly afford, when the thing has any reference to your physical and mental health, to your growth in efficiency and power.”


– Orison Swett Marden



The Power of a Money-Making Hobby

A hobby should be enjoyable. It’s something that you would do even if you didn’t get paid. A hobby that generates income, though, is an amazing thing.


The advantages of a money-making hobby:



  1. It’s enjoyable, as all hobbies The more you do it, the more you’ll get paid. Since you enjoy it, it’s a win all the way around.


  1. It can shorten your time to early retirement by generating additional income and The more you make, the more you can invest. The more you’re able to invest, the more quickly you can retire.


  1. It can shorten your time to early retirement by reducing the amount of money that you need to save. Since you’re generating income from your hobby, the total amount of your investments can be The income from your hobby will help to cover your expenses.


Let’s consider an example and suppose the following facts:


  1. Your living expenses are $24,000 per


  1. Using a 4% withdrawal rate, you would need to save and invest $600,000.


If you could earn $1,000 a month from your hobby, you’re already taking care of half of your expenses. That reduces the amount of your required savings by half, or $300,000.







$0 $600,000
$200 $540,000
$400 $480,000
$800 $360,000
$1,000 $300,000
$1,200 $240,000
$1,400 $180,000
$1,600 $120,000
$1,800 $60,000
$2,000 $0



It’s easy to see that a profitable hobby can dramatically reduce your target number!


You might think that your hobby doesn’t lend itself to making money. For example, it might be obvious how to make money from your craft projects, but how could you make money from playing tennis?


A few ways to monetize a hobby:


  1. Sell products related to your You could sell tennis books, racquets, and balls.


  1. Think about going Green products are very popular right now. If your hobby is gardening, you could sell green pesticides and herbicides.


  1. Create a Hobbyists are always looking for more information about their hobbies. A blog can provide that information. Once you have an audience, you can monetize it in many different ways.


  1. Take photos of your hobby. There are websites,, for example, that will sell your photos. They take a commission and you get the rest.


  1. Teach others how to do your hobby. Give tennis lessons. Teach others how to write. Give piano On a larger scale, you could hold a class or seminar and teach multiple people at once. A workshop on growing roses would be an example.


Nearly any hobby can be monetized with a little creativity. It’s also possible to simply find a part-time job related to your hobby. Just remember that it’s not really a hobby if you wouldn’t do it without getting paid. Pick a hobby or part-time job that you love.



“I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.”


– Jeff Bezos




Many things will contribute to retiring quickly, the most important of which is your attitude. Learn to find the beauty in simplicity. Sitting in front of the television watching imaginary people live their lives isn’t living. It’s a sign that your life could be more fulfilling.


Seek to fill your life with meaningful things and activities that are free or have a minimal cost. An aggressive savings plan will force you to prioritize. You might find your life becomes more meaningful.


Calculate your target retirement number. It might seem like a lot, but with a positive attitude about saving money, it will happen faster than you realize.


Before spending money, ask yourself if how it will affect your retirement date. Is it really worth it? What is the long-term cost and consequence? How much money is it really costing you?


Debt is like an anchor pulling you in the wrong direction. Making a big change in your savings and investment activities is challenging and debt makes the process slower and more challenging.

Develop a plan for eliminating your debt and stick with it.


A hobby that earns money is the best possible combination on enjoyment and your finances. Making money, while doing something you love, is the ideal situation. Monetizing your hobby is one of the best ways to reduce the amount of time it takes to retire. The income required of your investments can be reduced dramatically.


Get started today on your new retirement plan. You’ll be surprised how quickly you can make it happen!