Chapter 2 - Retirement

When most people think about financial planning, they imagine budgeting, paying off debt, or saving for a home. But in the Simplicity Approach, we start with something far off - retirement. Why? Because retirement is often the single largest financial goal of your life, and one that depends heavily on the choices you make right now.

Retirement is complex. It requires replacing decades of employment income, predicting your future lifestyle, and accounting for a very big unknown - how long you’ll live. It’s no surprise that many people procrastinate or underestimate what’s needed. But by using backward design, we flip the script. We begin with the outcome, your ideal retirement, and work backward to determine the actions you need to take today to make it happen.

This approach doesn’t mean you need to have all the answers right away. In fact, the goal of this chapter is to ask better questions. When do you want to retire? How much do you need to live comfortably? What programs or pensions will help get you there? By answering these questions early, even roughly, you give yourself more time, more options, and more peace of mind.

Waiting until your 50s or 60s to plan for retirement often means scrambling to catch up. That can lead to higher stress, reduced freedom, and bigger sacrifices. Planning early, even with small steps, can create massive long-term benefits. It also gives you permission to adjust your timeline and lifestyle goals if your situation changes, because you’ll already have a plan in place.

How this fits the matrix:

This article opens the “Retirement” section of the matrix, the first life event addressed through backward design. It frames retirement as the foundation of your long-term financial strategy and reinforces the importance of early vision-setting.

How a financial advisor can help:

A financial advisor doesn’t just calculate numbers, they help you map out your life. By starting with retirement, they can help you create a roadmap that aligns your current finances with your future goals - then refine it as your life evolves.

In the next article we’ll dig into why you might need less than you think in retirement - and how cutting certain costs can dramatically reduce your target number.

[June 2 2025]

When people first try to calculate their retirement needs, the math can be overwhelming. If you earn $100,000 a year and expect to live 25 years in retirement, that’s $2.5 million, right? Not quite. This kind of “income replacement” logic is overly simplistic and often leads to oversized and intimidating targets.

The truth is that retirement expenses are usually much lower than working-life expenses. Once you stop working, you’re no longer commuting, paying into retirement accounts, or raising kids. Your income taxes are likely lower, too, especially in Canada where age-based credits and income-splitting help reduce the burden. So, while your income drops, your disposable income, the money you actually get to enjoy, can remain the same or even increase.

This is where the Simplicity Approach really shines. Instead of planning to replace your full income, you plan to replace your lifestyle. Your lifestyle, surprisingly, doesn’t always require six figures a year. By estimating your actual living costs after those major expenses drop away, you get a far more accurate and achievable retirement target.

Each person’s spending pattern is different, but some patterns hold true. Most people need less in retirement to maintain their standard of living than during their working years. For example, a household earning $100,000 today might only need $50,000–$65,000 in retirement to live comfortably, especially once housing and family expenses are reduced.

How this fits the matrix:

This article shifts your perspective from income-based to lifestyle-based planning. It shows how backward design filters out unnecessary assumptions and simplifies the retirement goal-setting process.

How a financial advisor can help:

A good advisor helps you avoid over-saving and under-living. They can run personalized projections to match your actual lifestyle goals, so you’re not chasing a number you don’t need.

In the next article we’ll break down which specific expenses are likely to disappear and how that impacts your retirement income needs in real-world numbers.

[June 12 2025]

One of the biggest surprises in retirement planning is realizing how many of your current expenses simply go away. Understanding which costs drop off can completely reshape your retirement strategy and bring your savings goal back down to earth. This article breaks down the five most common expenses that tend to shrink or disappear after retirement.

First up is taxes. With lower income, retirement-specific tax credits, and options like pension income splitting in Canada, many retirees move into a lower tax bracket. This instantly increases the proportion of your income you get to keep. Then there’s mortgage and housing, with many retirees have their homes paid off by the time they stop working. Even if they’re still renting, they can often relocate somewhere cheaper without needing to be close to work.

Child expenses are another major cost that tends to vanish. With kids grown and financially independent, retirees often get a substantial income boost just from no longer paying for groceries, tuition, or activities. Add in transportation savings with no more daily commutes, work travel, or second car insurance and the budget opens up even more. Lastly, the biggest line item disappears entirely: retirement savings contributions. In retirement, you’re spending those funds, not contributing to them.

In practice, this all adds up. For many people, their retirement income goal is 50 to 65 percent of their pre-retirement income - not the 75 to 100 percent that traditional models suggest. And that’s before we account for senior discounts and lower discretionary spending that often occurs naturally in later life.

How this fits the matrix:

This article gives you the first real math-based lens for adjusting your life plan. It’s a bridge between idealized life goals and practical financial planning based on lifestyle change.

How a financial advisor can help:

A financial advisor can help map out your changing cost structure and make sure your savings plan aligns with the lifestyle you want, not what general formulas suggest. They can also help you layer in cost-saving programs that retirees often overlook.

In the next article we’ll put this new understanding into action by showing how to calculate your retirement income target using realistic lifestyle-based numbers.

[June 19 2025]

Once you understand what expenses go away in retirement, you can start focusing on the number that really matters - how much income you’ll actually need. Instead of using outdated formulas like “replace 75% of your income,” the Simplicity Approach helps you build a target based on your lifestyle and not just your paycheque.

Let’s say you earn $100,000 today. After removing taxes, mortgage payments, child-related costs, retirement contributions, and work expenses, your actual lifestyle costs might only total $50,000 to $65,000. That’s your real retirement income target and not the full six-figure salary. This lifestyle-based number can help you avoid over-saving, and in some cases, show you that retirement may be closer than you think.

To make this easier, we use three sample household income levels - $50,000, $100,000, and $200,000 - and combine them with three behavioral profiles: conservative, moderate, and aggressive. The conservative profile plans for a large savings buffer and higher expenses. The moderate profile balances optimism with caution. The aggressive profile assumes a more frugal retirement lifestyle and less years in retirement, which requires more minimal savings.

For example, a $100,000 income conservative household might aim for $70,000 in retirement income, split between government benefits, registered savings, and any pensions. By comparison a moderate profile might assume $60,000 while an aggressive profile believes that $50,000 would be appropriate. That gives you a general number to aim for and helps you start calculating what still needs to be saved.

How this fits the matrix:

This article locks in your personalized retirement income goal. It gives you a benchmark to use across all future planning decisions, making the rest of the matrix more grounded and measurable.

How a financial advisor can help:

A financial advisor can help ensure your retirement income goal is realistic and based on accurate projections. They’ll also help you stress-test that number, so you’re prepared for best and worst-case scenarios.

In the next article we’ll look at how much of that retirement income can be covered by government benefits and how your retirement age affects what you’ll receive. [June 25 2025]

Once you’ve determined how much income you’ll need in retirement, the next step is figuring out how much the government will help cover. In Canada, the key programs are the Canada Pension Plan (CPP) and Old Age Security (OAS), and they can make up a significant portion of your income - especially if you plan wisely.

CPP is a contributory pension program based on your working years and income level. If you’ve worked and contributed steadily, you’ll receive a monthly amount starting as early as age 60, or you can delay until age 70 to receive a much higher payout. OAS, on the other hand, is a flat-rate benefit available at age 65 to Canadians who have lived in the country for at least 10 years after age 18. Like CPP, you can increase your benefit by delaying up to age 70.

These programs were designed to prevent poverty in retirement and not to fully fund your lifestyle. But they can take a serious bite out of your retirement funding needs, especially for lower or moderate-income earners. In our examples, a moderate $100,000 household retiring at 65 could receive nearly $15,000 annually from CPP and OAS, which is about 30% of their total retirement goal. Wait until 70, and that number is around 40%.

Timing matters. Retire early, and you’ll have to make up the difference with your own savings, possibly for several years before CPP and OAS even begin. Retire later, and government benefits could cover a larger share, reducing the pressure on your personal savings.

How this fits the matrix:

This article adds the first major income stream into your retirement plan. It highlights the power of timing and how your government contributions today shape your benefits tomorrow.

How a financial advisor can help:

A financial advisor can project your estimated CPP and OAS benefits based on your work history and help you decide the optimal age to begin collecting. They can also coordinate benefit timing with your other income sources to minimize taxes and maximize stability.

In the next article we’ll explore how the age you choose to retire affects the entire picture, from your government benefits to how many years of income you’ll need to fund.

 [July 3 2025]

Choosing when to retire isn’t just about lifestyle - it’s one of the biggest financial decisions you’ll ever make. The age you retire determines how many years you’ll need to fund, whether government benefits are available right away, and how much those benefits will be.

In Canada, CPP can be taken as early as 60, but if you wait until 70, your monthly payment can increase by over 40%. OAS starts at 65, but again, delaying means a higher payout. Most Canadians default to 65, but from a financial planning perspective, the optimal retirement age is often 68. That’s when the balance between benefit increases and the number of years to collect usually peaks - especially if you expect to live into your 80s or 90s.

If you retire early, say at 60, you’ll need to self-fund your retirement for up to five years before OAS kicks in. That adds pressure on your savings and investment returns. On the other hand, waiting until 70 means fewer years of retirement to fund, higher government income, and a smaller total savings requirement. But it also means working longer or having other income sources in the meantime.

For many, the decision comes down to health, job satisfaction, and lifestyle goals. If you love your work and can continue comfortably, retiring later makes planning easier. If you're burned out or eager to travel while you're young and healthy, you may be okay with the trade-offs of an earlier retirement - so long as you're prepared.

How this fits the matrix:

This article helps you anchor your retirement timeline, which affects every financial decision that comes before it. Retirement age determines your savings horizon and defines the funding timeline for your entire financial plan.

How a financial advisor can help:

A financial advisor can run different retirement age scenarios and show you how each option affects your required savings, expected benefits, and retirement duration. They’ll also help you consider the non-financial aspects, like personal goals and quality of life.

In the next article we’ll break down how employer pensions and retirement savings accounts fill in the remaining gap after government programs are accounted for.

 [July 10 2025]

Once you know how much government benefits will cover, the next question is how to make up the difference. That’s where employer pensions and retirement accounts come in. If you’re lucky enough to have a workplace pension, it might cover most, or even all, of your remaining retirement needs. But for many Canadians, retirement accounts like RRSPs and TFSAs will need to do the heavy lifting.

There are two main types of pensions. The traditional defined benefit pension provides a fixed income for life, usually based on your salary and years of service. These are common in unionized or public sector jobs but are becoming rarer in the private sector. Defined contribution plans, like group RRSPs or DPSPs, work more like investment accounts. Your employer may contribute, but the final amount depends on investment performance and it's up to you to manage it.

If you don’t have a workplace pension, or if it doesn’t cover enough, you’ll need to rely on personal savings in RRSPs or TFSAs. RRSPs are tax-deferred, meaning you deduct contributions now and pay tax when you withdraw. TFSAs are tax-free, meaning you contribute with after-tax dollars but don’t pay tax on withdrawals. Most Canadians will use a mix of both, depending on their income today and expected tax rate in retirement.

The good news is that employer-matched plans can significantly boost your retirement savings. Even if the plan options are limited or fees are higher, that “free money” often outweighs the drawbacks. If you’re self-employed or working for a company without a plan, you can still build your own retirement nest egg - you’ll just need to be more proactive.

How this fits the matrix:

This article bridges the gap between government support and your personal responsibility. It emphasizes how workplace plans, personal accounts, and employer contributions all factor into your overall retirement income strategy.

How a financial advisor can help:

A financial advisor can review your workplace pension or group RRSP options, help you coordinate personal contributions, and project how your investments will grow over time. They can also help optimize your TFSA/RRSP mix based on your income and goals.

In the next article we’ll calculate how much income still needs to be covered by personal savings and how to estimate a realistic retirement goal.

 [July 16 2025]