How to Be Debt Free and Retire Early in Canada?

For many Canadians, early retirement after paying off all their debts is a way of life! However, since approx 25% of pensioners If you’re living in debt in Canada, it makes sense to establish your financial freedom when planning your long-term finances. In this article, the experts from Alpine credits have developed a guide to propel you to debt-free early retirement.

Retirees often have limited sources of income, which means a steady cash inflow every month. This explains why you need insurance against unpaid debt in the first place. Professional money management and an understandable handling of your assets can reduce your weaknesses as a pensioner. Read on to learn how to retire in Canada by age 50 and pay off all your debt.

Early retirement: what does it mean in Canada?

The official retirement age in Canada is 65 years. So offices and jobs have dictated over the years. Even Canada Pension Plan (CPP) and Old Age Security (OAS) payments start at 65.

However, as retirement trends are evolving gradually, Canada has an average retirement age of 63.5 years. Therefore, if you are considering early retirement, you must have an age of 50 in mind.

Given the average life expectancy of 82.5 years, it makes sense to retire at fifty and enjoy your lifestyle with the wealth you’ve accumulated. Therefore, planning your finances for early retirement is imperative as you will happily spend your later years traveling or living a luxurious lifestyle.

However, your debts require attention, and you must pay them off as early as possible. Take a look at these stats to understand the importance of paying off your debt from the start.

  • Around 66% of retirees in Canada have unpaid credit card debt.
  • While 26% are still making their car loan payments, 7% have yet to pay their healthcare expenses.
  • Another 7% of Canadian retirees have holiday arrears.

Early retirement in Canada: what do you need to do?

There are two things you need to prioritize if you want to retire at fifty. First, you must accumulate sufficient savings to cover basic living expenses. Second, you must consider personal preferences in terms of luxury, travel, or any other way in which you choose to spend money. Ideally, you should start investing early in life so that you have enough capital until you retire.

The equation also includes paying off your debts, which ensures you don’t constantly drain your savings or income. Here are specific strategies that can help you achieve that two-pronged financial goal.

Tips for early and debt-free retirement in Canada

Here are a few tips that can help you retire early in Canada:

Reduce your expenses

When you start earning, it might be tempting to get carried away with extravagance. However, if you have an early retirement goal in mind, you should reduce spending. Don’t settle for luxury cars, expensive vacations, or other expenses that may have alternatives.

Take care of your credit card spending as well, as you could end up making impulse purchases. At first, you may feel intimidated by not spending. Once you’ve turned financial best practices into your habit, you can start saving for the future!

Pay off your mortgage fast

To pay off your mortgage faster, be sure to pay more than the base requirement. For example, if you spend $1,750 on your mortgage, try paying $250 more. This will accumulate throughout the month and eventually minimize your interest paid. This would also help bring down the principal amount faster.

Try to make a one-time payment every year. For example, make the most of your annual bonus or tax refund to reduce the principal as quickly as possible.

Start your savings mission early

If you plan to retire at 50, don’t wait until your late 30s to start saving. Instead, start saving as soon as you start earning comfortably. Remember that if you start saving in your twenties, you can take advantage of compound interest.

Also, you have to consider the cost if you have children. Regardless of all these cash drains, saving early can significantly strengthen your finances.

Think about your housing needs

If you set your goal to be mortgage-free, you can achieve it!

If you are planning to buy a home, think about the basics. Just skip it if you don’t need a luxury home with five bathrooms or a library. The reason is that once you fell for such an extravagance, you would end up making hefty EMI payments for the rest of your life.

This would ultimately mess up your savings plan and leave you with no financial security when you retire.

Consolidate your debt into one mortgage

Consolidating multiple high-yield debts into one mortgage is a strategic move when trying to save for your retirement. Even if you have significant debt, lowering interest rates would ease your financial flow.

Many financial institutions and banks in Canada offer debt consolidation loans. With these loans, you can easily consolidate all your outstanding debt into one comprehensive mortgage payment. You only have to shell out one payment each month at a lower interest rate.

If you own a home, you may qualify for a line of credit or home equity loan. This would serve as a reliable financial resource that would stabilize your income. Simply contact one of the experts and speak to them about your eligibility if you want to take advantage.

final grade

While you may be too engrossed in your future plans, failing to invest properly would delay your retirement. Most successful Canadians who retire early choose to a TFSA or RRP. Alternatively, you can invest in one of the recognized plans for your retirement. If you’re not sure where to start, just consult a financial planner. By strategically planning your plan, you can save appropriately for early retirement.

Comments are closed.