home Commodities All the frugality in the world won’t let this millennial retire at 45

All the frugality in the world won’t let this millennial retire at 45

Michel’s plan to retire at 45 is based on not spending rather than on making a big score in investments.Illustration by Chloe Cushman/National Post files

07Situation: Man hopes good salary, conservative spending and careful investing support retirement at 45

Solution: Even with aggressive savings and low mortgage rate, 60 is a more realistic goal

In Quebec, a man we’ll call Michel, 34, works in financial services. He earns $70,000 a year and takes home $3,640 per month after many deductions for taxes and benefits. Frugal in his spending, cautious in his investing, he wants to retire at age 45 with $40,000 income per year after tax. Assuming a 3 per cent return rate after inflation, that implies he will be able to add $1 million to present savings in 11 years. On present income, it’s unlikely.

Michel’s goal is to quit his niche in the numbers business and travel the world. The problem is how best to finance the years before he is eligible to receive benefits from the Quebec Pension Plan or Old Age Security. In the case of the former, it will be at least 26 years until he can access QPP (albeit with a 36 per cent discount to the normal age 65 amount) and 31 years until OAS kicks in at 65.