Planning for Early Retirement With a $110,000 Income – Can Eleanor Achieve It?

Q. I have just had my 45th birthday. I am single and earn $110,000 a year, and am debt-free. I just finished paying off my townhouse, worth $625,000, and I would like to continue to put away my mortgage payment of $2,200 a month (or $26,400) annually) as savings. The question is, what should I do with that money? I have never invested before because everything went to debt repayment, but I do have $20,000 in my registered retirement savings plan (RRSP) and $10,000 in my tax-free savings account (TFSA). I will receive an employee pension at retirement but since I plan to retire early, I will take a hefty deduction. It will amount to about $12,000 annually if I take it at age 55. I will need about $45,000 net to live comfortably and do some traveling. What should I do with my $26,400 in annual disposable income? Any suggestions would be appreciated. — Eleanor

Now that Eleanor is debt-free and looking to plan for her early retirement, there are several options she can consider. Financial experts suggest investing in long-term goals, such as retirement, while also keeping some short-term savings for emergencies. By leveraging her disposable income wisely, Eleanor can work towards achieving her retirement goals.

FAQs

1. How should I prioritize between RRSP and TFSA contributions?

Consider your current tax bracket and expected retirement tax rate to determine the best account to contribute to. If you are in a higher tax bracket now, RRSP contributions may be more advantageous. However, TFSA contributions offer tax-free withdrawals in retirement.

2. What are some investment options for retirement savings?

Consider investing in a mix of assets such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs) within your risk tolerance. Consulting a financial planner can help create an investment plan tailored to your goals.

Conclusion

Eleanor’s journey towards early retirement with a $110,000 income is within reach with careful planning and smart investment choices. By leveraging her disposable income and utilizing tax-advantaged accounts like RRSPs and TFSAs, she can work towards securing a comfortable retirement lifestyle. It’s essential for Eleanor to assess her financial goals, risk tolerance, and consult with financial experts to make informed decisions for a successful early retirement plan.