Want to retire at 55? Prepare for a deep dive

Originally published in The Globe and Mail by Susan Smith
January 12, 2016

Everyone knows that “freedom 55” has turned out to be more marketing slogan than reality for most. But there are still an enviable few who are able to realize the dream.

Cathy Bernaerts is someone who made it to the finish line, retiring three years ago just before turning 56. In making the decision to leave her job as director of finance and operations at Mississauga-based Edwards Lifesciences (Canada) Inc., she considered three factors: family, finances and her future.

For her, it was the first consideration that carried the most weight.

“My husband, Michael, is 13 years older than I am and was already retired,” says Ms. Bernaerts, who lives in Collingwood, Ont. “He wanted me to retire as well so we could spend some quality time together and do some of the things we had always wanted to do.”

At first she resisted. She loved her job and relished working as part of a team in a dynamic company with interesting products. But she was putting in 12- to 14-hour days in a high-pressure environment, and eventually gave in to the argument that the stress might end up affecting her health.

“The first year of retirement was a challenge, and I struggled trying to figure out what I was going to do,” she says. “I relaxed, but I didn’t feel that pressure to get up in the morning. I didn’t feel like I had a purpose.”

Eventually, however, she settled in to a routine that some would consider a picture-perfect retirement – golfing, exercising, travelling and wintering in Florida with her husband.

“I’m happy with life these days,” she says. “So it all worked out.”

Ms. Bernaerts pulled it off with the help of a financial planner, Anna Knight of International Capital Management in Toronto.

Ms. Knight says most of her retirement-planning clients are 50 and older and that about half of them consider retiring before they reach 65. The ones most likely to do so are those with pension plans, especially the fast-vanishing defined-benefit kind.

“My job is to make sure they are financially secure before they do it,” she says.

Her first step in the planning process is asking clients to track three months of expenses and examine the results line by line to separate essential from non-essential spending. Then she asks them to subtract how much of the essential spending is likely to decrease when they leave the workforce.

Next they add a cushion for emergencies and things like home repairs. Ms. Knight advises clients to make sure the essentials are covered by pensions or other income streams they can count on.

The next step is estimating how much discretionary spending they will need to support the lifestyle they envisage.

The discretionary amount, which will fluctuate over the years, can come from their savings and investments. Then she advises clients about investment products designed to meet their goals. (While she is used to working on commission, she also has fee-based services for people who just want her to draw up a plan.)

If the numbers work, Ms. Knight tells clients they are in a financial position to retire, however early it might be.

But money, she stresses, is only part of the equation. Mental preparedness is another. She sometimes asks clients to draw up a list of all the things they want to do in retirement that they haven’t had time for while working, and then to consider how they plan to manage their time to fit them in.

“Some people just want to be able to go out for coffee during the day or go for a bike ride when it’s nice outside or work in their garden,” she says. Others plan to work part time, take up a hobby or give back to the community. “I have one client who is a retired teacher who used to call me and say, ‘I’m kayaking on the Humber River in the middle of the day!’