I'm in my early 60s, make $200K and I'm planning to retire in a year. How do I figure out if I'm truly ready to retire, and how can I make the most of my final year of work?

Will you be ready to retire in one year?

You may be eager to retire for a variety of reasons, whether it’s burnout at work or the desire to spend more time with family. But before you make your decision official, make sure you’re ready both financially and emotionally.

First, look at your savings. A recent BMO report found that Canadians think they will need $1.54 million to retire comfortably.

That doesn’t mean you’ll need a $1.54 million nest egg to pull off retirement. You may have other income, like a generous CPP benefit, that allows you to get away with saving less. But it’s important to see what shape your savings are in, and also, how much annual income your savings will give you.

Remember, $1.54 million might look like a lot of money. But if you apply a 4% annual withdrawal rate to that sum, that gives you $61,600 in annual income, not including adjustments for inflation. Whether that will suffice for your retirement depends on what you want your senior years to look like.

It’s also important to estimate your retirement expenses — and make sure you’re accounting for unknowns, like home repairs or higher-than-expected health care costs.

Additionally, make sure you have a plan for how you’ll spend your time once you retire. Will you work a few hours a week to stay busy? Or maybe volunteer? Do some traveling? It's important to make sure you have a concrete vision so you don’t end up unhappy in retirement.

In fact, according to Lifeline Canada, being socially active can also help curb the development of depression, so making sure you're spending free time engaged in multiple activities, such as spending time with loved ones, exercise, hobbies and travel is vital to feeling fulfilled when you're not working any longer.

Take control of your investments with CIBC Investor’s Edge

Smart investing isn’t guesswork—it’s research. CIBC Investor’s Edge gives you the tools to spot opportunities, minimize risks, and grow your wealth. Ready to invest with confidence? Here’s how to get started.

Read more

How to make the most of your final year at work

If you're retiring in a year, you may be excited to kick off that countdown, but it's also important to make the most of your final months of having a job. Doing so could make you feel a whole lot better about your planned retirement date.

Here are a few things you can do to strengthen your finances ahead of retirement.

Boost your savings

First, if possible, work on boosting your savings as much as you can. You can make a higher catch-up contribution in your RRSP plan worth $32,490, or 18% of your yearly income.

CPP

It's also a good time to think about when you'll claim the CPP. Since you’re in your early 60s, you can begin to collect your CPP. However, with each year you delay collecting it, your monthly payment will increase by approximately 8.4%, up to a maximum increase of 42% if you can wait until 70. That could be a smart strategy if you expect a longer life expectancy.

Update your investment portfolio

Another move to make when you're a year out from retirement is checking up on your investment portfolio. It's a good time to make sure you're scaling back on riskier assets, like stocks, and replacing them with assets whose value doesn't tend to swing as wildly, such as bonds.

Build your cash savings

It's also smart to have cash savings on hand when you're on the cusp of retirement. Aim for one to two years' worth of expenses in cash, so you're able to leave your investment portfolio alone in the event of a market downturn. A high-interest savings account is a great option for cash savings — not only will you earn money in interest, but your cash remains liquid and easily accessible.

Also, think about one-off expenses that could arise once you retire, like a major home repair or having to replace an aging car. You may want to pile onto your cash savings to prepare for those potential expenses specifically.

Reduce debt

It's also a good idea to reduce your debt as much as possible ahead of retirement, as not having to pay debts allows you to stretch your retirement income.

But don't assume you have to pay off every debt. For example, it's a good idea to rid yourself of expensive credit card balances, but if you're paying 3% or so on your mortgage and you still have a few years left, you may want to carry that loan into retirement.

Based on what high-interests savings accounts are paying today, it's possible to earn more money in interest than what you're paying on your mortgage if your rate is very low.

Sources

1. Fidelity: What is the ideal age to retire?

2. Lifeline Canada: Make social interaction a priority for seniors (Oct 3, 2023)