If You Start Investing Today, When Could You Retire?

Have you given a thought to how you plan to retire? Your decision depends significantly on how much your investments can earn for you.

| More on:
Early retirement handwritten in a note

Image source: Getty Images

When are Canadians retiring, and when could you retire? Many Canadians retire around 65, as that is when the Old Age Pension (OAS) begins. A June 2023 Labour Force Survey found that 80.5% of Canadians aged 65 to 69 years retire partially or completely. What triggered their decision to retire was either finances or health. Those who retire due to health stopped working at a younger age and retired earlier than those who retired due to financial reasons.

Percentage of Canadians completely or partially retiredAge Bracket
21.80%55 to 59 years
44.90%60 to 64 years
80.50%65 to 69 years
90%70 years
June 2023 Labour Force Survey

The same survey also found that more than half of people planning to retire would continue to work part-time or do work that is less stressful and physically demanding. The reasons to continue working were not just financial but psychological. Imagine having worked for 40 years and suddenly changing your routine. Work gives individuals an identity and a sense of purpose. 

When could you retire?

It makes you wonder when you could retire. Life can be unpredictable. You never know how things will pan out. For this reason, it is always better to start investing as early as possible. The longer you stay invested, the bigger the retirement pool you can build and be financially prepared for life events. 

Coming to the question of when you could retire depends on three things: 

How much do you need to retire? 

The money you need to retire depends on your lifestyle, health, and the kind of retirement you want. If you have built up multiple sources of passive income that are replacing about 75 to 80% of your household income, you could consider retiring and living a comfortable lifestyle.

How much are you investing? 

Think of it this way. The Canada Pension Plan (CPP) enhancement program deducts 11.9% from your gross income for 40 years of working life and aims to give you 33% of your average income post-2019. If investing 12% income can cover a third of your expenses, would investing another 24% from your net income help you earn 100% of your working income from investments? 

It depends on the performance of your investments. Some portfolios may earn higher returns and some lower. It is not how much you invest but how you invest and compound your returns. 

What is your investment horizon? 

Depending on your investment strategy, your investment horizon could vary. Note that your money will remain invested even after you retire, as you will only withdraw smaller amounts. Suppose you have an investment pool of $1.5 million with 0% returns. If you withdraw $90,000 annually, it will take you 16.6 years to exhaust your pool. But the balance of money will stay invested. And even if it gives a 7% annual return, your money will double in 10 years, extending the life of your retirement savings. 

The challenge is to build that $1.5 million retirement pool, which could take at least 20 to 25 years.

Start investing today to retire in the next 25 years 

If you are in your 30s, it is an ideal time to start investing for retirement. You have 30 years to retire by age 60. If you achieve your target investment in 25 years, the choice is yours when you want to retire.

In the early stages, consider investing in long-term stocks that can grow your money tenfold in 15 to 18 years. 

You could consider investing in Nvidia (NASDAQ:NVDA) as it has the potential to grow your money severalfold and make you a millionaire in 10 to 15 years. The semiconductor company is at the top of artificial intelligence (AI) and autonomous vehicles (AV), with its unbeatable graphics processing units (GPUs). Those who invested $20,000 in the stock in 2014 and 2015 are already millionaires with over $3 million in their portfolio. If you invested through the Tax-Free Savings Account (TFSA), the US$3 million is also tax-free. 

Investor takeaway 

Since you have 30 years to retire, you can invest a portion in risky stocks with high growth potential and balance the risk by investing in low-volatility dividend stocks. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Nvidia. The Motley Fool has a disclosure policy.

More on Tech Stocks

Businessman holding AI cloud
Tech Stocks

5 Artificial Intelligence (AI) Stocks That Could Be Millionaire Makers

AI stocks like Kinaxis (TSX:KXS) are rallying in the markets.

Read more »

Businessman holding AI cloud
Tech Stocks

If You Like Nvidia, Then You Will Love These 2 Hot AI Stocks

Hot AI stocks like Open Text Corp (TSX:OTEX) have been rallying lately.

Read more »

Different industries to invest in
Tech Stocks

Why Shares of Hut Stock Are Climbing This Week

Hut stock (TSX:HUT) surged by 23% after the company reported strong earnings, and even more growth occurred in 2024.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

Woman has an idea
Tech Stocks

Prediction: 1 Stock That Could Trounce the Market 

The TSX has been favouring tech stocks, but not this one. However, it has the potential to trounce the market…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Businessman holding AI cloud
Tech Stocks

AI Will Transform Everything: Investors, Be Early Adopters and Buy These 3 Stocks

Investors looking to invest in companies doing big things in AI should consider these three stocks for their portfolios.

Read more »