Financial Post Article: This couple wants to retire early, but are their government pensions enough?


The Financial Post recently asked me to review the finances of a couple that want to retire. They have a weekly Family Finance section where they ask financial planning experts.

If you wonder about the benefits of having a Financial Plan, here is an example.

What you will learn:

  • When both spouses have a generous government pension, can they retire early?
  • Why the estimate from your pension statement might be wrong.
  • How a Financial Plan is really a life plan.
  • An interactive Financial Plan can quickly give you many possible scenarios to retire, so you can choose the one that fits with your life.
  • Why having only real estate investments limits your retirement options.
  • How your tax brackets today vs. after you retire affect the benefit of RRSPs for you.
  • How to figure out if it is smart to commute your pension.


This couple wants to retire early, but are their government pensions enough?

Husband is 46 years old working for a Crown Corporation (the Bank of Canada) in Ottawa making ~$120,000 a year.  He’s been with the bank 18 years and can retire in 12 years with his full pension.

Wife is 34 and works for the Federal Government (RCMP) and makes ~$80,000 a year. She’s been with the RCMP 10 years. They both have pensions that are indexed to inflation.

  • Two children age 10 and 2.
  • They maximize their RRSE every year.
  • Live in a house with a resale value of ~$900,000.
  • Mortgage of ~$350,000 to be paid off within the next 9 years. They are paying it off aggressively, biweekly payments are about $2000 including property tax. Their current rate is 2.69% but they will be renewing soon. He anticipates the rate will be 4.89% but they’re comfortable with it and still plan to keep to their timeline of 9 years to pay it off. Payments will go up about $130 biweekly.
  • Own a cottage on the East Coast with a resale value of ~$250,000.
  • Mortgage of ~$70,000 mortgage to be paid off within the next 7 years.
  • Long term rental income covers the cost of the mortgage/taxes etc.
  • Does not generate any profit. They plan to sell it once they retire.
  • Own a cottage in Upstate New York with a resale value of ~$350,000 US.
  • Mortgage of ~$118,000 US mortgage to be paid off within the next 11 years.
  • Short term yearly rental income of $55,000US before cost.
  • Generates profit of ~$20,000 US a year. They will keep this after they retire.
  • They plan to purchase a condo in Florida and have started looking at properties. They will rent this out via Airbnb as they do with the cottage in Upstate New York and plan to make this their winter go-to when they retire.
  • Husband has ~$60,000 invested in RRSP.
  • Wife has $0 invested in RRSP.
  • Together have around $2,000 each in our TFSA accounts.
  • Together have ~$25,000 in cash and around ~$30,000 in other commodities. Note: these are self directed investments, largely stocks in oil and gas and precious metals and tech. His job with the central bank means he can’t own bank stocks and there are trading black out periods when he can’t trade.
  • Have ~$30,000 US in cash.
  • Both vehicles are paid off.
  • No other debts.

He would like to retire in 2035 with an indexed bridge pension of ~$101,00.  In 2036, he would receive CPP of ~$16,000 that would bring my pension to ~$117,000.  In 2041, my bridge benefit would be replaced with the OAS of $8,000 and pension would go down to ~$113,000.

They want to know if you think it will be feasible for him to retire in 2035 at age 59 and for her to retire in 2038 at age 50? 

She would retire with a severely reduced pension and would not have access to CPP and OAS for 10-15 years.  We would have one kid out of university but one just starting!

Retirement at 50:

$12,605 + 10,846 (bridge until 65) = $23,451

She could defer her pension until 60 and not be hit with the 50% early retirement reduction. 

Retirement at 50 but start receiving pension at 60:

$36,057 + 10,846 (bridge until 65) = $46,903

To note, if he dies, she would be entitled to 60% of his lifetime and bridge pension. 

They will also be able to be on our employers health benefits plans after retirement. 

They also want to know if they are too invested in real estate. “Are we neglecting RRSPs? Or some other kind of savings? Real estate is something we enjoy. Are we making a mistake by not contributing more or at all to our RRSPs or TFSAs? We’re focusing on down payments.”


Retirement Goal:

Take home pay today about $150K – mortgage $51K = $100K lifestyle.

Lifestyle $100K – Net Rent $20K *80% = $84,000.

Assume mortgage paid off in retirement. Retire on same lifestyle as today, excluding mortgage.

Travel & entertainment – Most couples want more in retirement.

Assume $84K after tax = $99K before tax in today’s dollars.

Retirement date goal: $100K today = $154K in 12 & 16 years. 

*** They will be short. They are not considering inflation.

His pension is $101,000 and they spend about $100,000 (without the mortgage), so they think they can retire early. But $100K today is $154K in 12 & 16 years.

*** Rule of thumb – Government pension after working 30 years is about 50% of final salary.

*** 2 government pensions is still not a comfortable retirement. 50% of their combined final income.


His pension estimate might be a bit high. Estimate $93,000, not $101,000 at retirement.

Her pension estimate might be quite low. Estimate $44,000, not $23,500, at age 50.

*** Confirm her pension with a statement.

Retirement Goal:

*** Recommend: Retirement plan so they know exactly what their desired retirement lifestyle is – in detail. Only then will then know if they will have enough.

Think it through. They want to retire in 12 years for him and 16 for her. Is she okay to work for 3 years after he retires?

When he retires, their youngest child is 14. Going to Florida for months probably won’t work.

When she retires, their youngest child is 18 & just starting university. They may not want to travel yet, unless the child lives away from home. Money should be okay, since they are maxing RESP.

*** They save for their kids education, but not for their own retirement.

Retirement Goal 1: 

Retire at age 59 & 50 (3 years apart) on $100K

Need $370,000 at retirement. Projected to have $143K. Short $225,000.

Would need to invest $950/month or $100K lump sum.

Retirement Goal 2: 

Retire at age 59 & 50 (3 years apart) on $100K with her pension delayed to age 60

Need $410,000 at retirement. Projected to have $143K. Short $270,000.

Would need to invest $1,125/month or $120K lump sum.

Pension does not have huge reduction, but how do they fund retirement from her age 50-60?

*** Delaying pension does not help them. It makes it worse.

Retirement Plan Options:

1.   3 more years of work. On track for retiring at age 62 for him and 53 for her. – Assuming no savings.

2.   $5,000/year less to spend. On track for retiring on $93,000/year, instead of $100,000. This is $7,000/year before tax, or $5,000/year after tax. Should be doable – but they have not added anything for travel (to Florida) & entertainment in retirement. They should look at their retirement goal in detail to see what they would need to cut – less travel?

3.   Invest $1,000/month. They probably have enough cash flow. They probably have quite a bit of RRSP room, since they have not been contributing. They only get about $3,000/year each, but may have had RRSP room from earlier jobs. He is in a 43% tax bracket and she is in a 30%, so $1,000/month RRSP should give them tax refunds about $5,000/year.

a) He can contribute $13K/year in 43% tax bracket and she can contribute $27K/year in 30% tax bracket.

b) Recommend contributing their cash & investments $55,000 total to RRSP.

c) RRSP is better than TFSA for them, since they expect to retire in lower tax brackets.

d) Worthwhile for them to maximize their RRSPs before they retire.

4.   Sell home to buy a condo at retirement to make travel easier. If they get $250K to invest at retirement, they are on track.

5.   2nd rental property with $20,000/year positive cash flow. Can it be $20,000/year if they stay there in winter, which is prime rental time? Need to keep both properties rented for years and not pay down the mortgages. Then ok to retire at 59 & 50. Do they want to manage 2 rental properties for most of the year through their retirement?

6.   Commute her pension. Can be done before age 55 or 50. Probably worth $500K or more. Can earn a higher return than 5% in pension formula. Get pension estimate from her pension administrator and do the math. We have a detailed spreadsheet that figures this out.


Investment return: 6.3% in 100% Canadian equities.

Inflation: 3%. High end of Bank of Canada target rate.

Maximum CPP & OAS. Both may be a bit lower retiring so early.

He may have some OAS clawed back.

Real Estate:

Far too much in real estate – 91% of assets.

Pensions probably are not enough. RRSPs & TFSAs & other investments give them cash flow in retirement.

They would have hardly any liquid investments that they could access if they need.

Rent is fully taxable. Properties should grow in value, but that only helps them with their retirement if they sell the properties.

*** Ed’s Rule of Thumb for Real Estate: When the mortgage is down to half the value, probably better to sell and invest to get higher retirement income + less tax + no work.

  • Their New York condo will have a 5.7% fully taxable return when the mortgage is paid off.
  • Their cottage will have a 4.7% fully taxable return when the mortgage is paid off.

*** Lesson: Real estate is usually only a decent investment with a large mortgage.

  • If they want to invest only in real estate, they should plan to keep the mortgages high.

Do they want to manage two properties AirBNB through their retirement?

What happens if AirBNB rules change? Toronto requires licensing. Other cities might, too.

Do they want to keep house after retirement if they are going to be in Florida for months each year?

Sell & buy a condo to make travel easier and give them money to invest.

Cottage: $250K – $70K mortgage = $180K invested. $0 return.

           *** Once mortgage paid off: 4.7% rate of return.

US cottage: $470K invested – $160K mortgage = $310K invested. $27K return = 8.7% return.

           *** Once mortgage paid off: 5.7% return.

Florida condo: Only worth owning if they will be there at least 4 months per year, or if a good rate of return and keep a mortgage.

Focusing on down payments gives them leveraged real estate. However, they are trying to pay their mortgages off. Real estate is low return after mortgage is paid off.

Education Savings:

They are maximizing RESP, which should probably be enough.

RESP provides grant money to help them.

Good to discuss how much they specifically want to pay for.

Estate Planning:

Life Insurance: They probably need about $650,000 each now to provide their existing lifestyle in case something happens to one of them before retirement.

Disability insurance: They probably both have adequate at work.

After retirement:

If she outlives him, she will lose about $60,000/year of pensions, or about $48,000/year cash flow. 40% of pension, 40-100% of CPP, & 100% of OAS.

If he outlives her, he will probably lose about $45,000 of pensions (assuming 60% of her pension), or about $35,000/year of cash flow.

Survivor can probably adjust to $15-20,000 less, but not $48,000 or $35,000.

*** Need about $1.2 million to provide for survivor. Could adjust retirement & get $800,000.


1.   Get term-to-100 joint policy for $800,000 – $1 million.

2.   Ask about higher survivor pensions – Recommended is 100%.

3.   Invest $2,000/month + tax refunds of about $10,000/year. Have $1.1 million at retirement, or almost $600,000 more than they need.

Invest in equities for 8% before & 7% after retirement. Have $1.25 million = $750K more than they need.


  • High equity is good.
  • All in Canada is bad.
  • They don’t sound knowledgeable. Better to have diversified global investment, either index ETF or managed.
  • With global & US investments, return should be higher – 7-8%/year, not 6.3%/year.
  • This would make a huge difference if they invested more effectively.


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  1. Ed Rempel on April 8, 2023 at 10:53 PM

    Hi Joe,

    Yes. Rule of thumb – Government pension after working 30 years is about 50% of final salary. That is for the government pension + CPP combined.

    The bridge benefit is temporary and stops at age 65, but is normally replaced by Cpp which should be a similar amount. So it is included.

    The government pensions pay 2%/year x the average of your best 5 years. If you worked the maximum 30 years, that’s 2% x 30 = 60%.

    The average of your last 5 years is roughly the 3rd year before you retire, so say 6% less than your final year. So 60% of 94% (100%-6%) is 56%.

    That is what you get if you are single. Most government employees are married. The spouse gets a surivor benefit if they outlive you, which is usually 60% of your pension. Taking that benefit typically reduces your pension by 5-10%, depending on the age & gender of your spouse.

    So 56% less 5-10% of 56% is roughly 50%.

    If you are getting 68% of your final year, there is something else going on. Some areas are allowed to work 35 years in the pension and can get up to 70% (less 3rd last year & spousal reduction). Your best years may not have been your final 5. I you are not married, then the spousal deduction does not apply.

    Do you know why in your case, Joe? You seem to certainly be more than the average.


  2. joe bleau on March 23, 2023 at 9:20 AM

    *** Rule of thumb – Government pension after working 30 years is about 50% of final salary.

    I was a civil servant and retired with 68% of my final salary. Why you said 50%. Is it because the bridge is over at 65 year old?

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