Financial freedom doesn’t have to mean retiring at 45 and never answering another email.
Maybe it means Fridays are yours.
Statistics Canada reported average employee wages of $37.02 per hour in August. At that rate, cutting one eight-hour workday each week represents roughly $15,400 of gross annual income.
Your investments don’t need to replace an entire salary to make that possible. They only need to start covering the income you’re willing to give up.
Source: Getty Images
Find the gap
Start with spending, not some enormous retirement number.
Someone who needs another $1,000 per month to comfortably cut work hours has a $12,000 annual gap. Using an illustrative 4% annual portfolio withdrawal, covering that amount would require about $300,000 invested.
| MONTHLY INCOME GAP | ANNUAL GAP | PORTFOLIO AT 4% |
|---|---|---|
| $500 | $6,000 | $150,000 |
| $1,000 | $12,000 | $300,000 |
| $1,500 | $18,000 | $450,000 |
| $2,000 | $24,000 | $600,000 |
A 4% withdrawal isn’t guaranteed to last, and taxes, investment returns, inflation, and retirement length can change the math.
Work benefits count, too. Losing employer health coverage, pension contributions, bonuses, or matching programs can make one day off more expensive than simply dividing a salary by five.
The useful number is the actual gap between the lifestyle you want and what reduced work would provide.
Build the bridge
This is where years of investing start buying something beyond retirement.
A diversified portfolio can produce dividends while continuing to grow. Investors with contribution room can also build that portfolio inside a Tax-Free Savings Account (TFSA), where eligible withdrawals generally won’t create taxable income.
That flexibility could make cutting hours easier without immediately drawing heavily from retirement accounts.
For the stock portion, I’d want companies capable of increasing both earnings and income over time. Royal Bank of Canada (TSX: RY) fits.
RY
RBC earns money across personal and commercial banking, wealth management, insurance, and capital markets. That mix means the investment case doesn’t depend on one corner of Canada’s economy behaving itself.
Third-quarter net income reached a record $6 billion, up 11% year over year. Adjusted earnings per share (EPS) increased 11% to $4.28.
The bank’s Common Equity Tier 1 (CET1) ratio, a measure of its capital cushion, remained strong at 13.5%.
RBC also returned $4 billion to shareholders during the quarter through dividends and share repurchases.
The quarterly dividend is now $1.76 per share, or $7.04 annualized.
| YEAR | ANNUAL DIVIDEND PER SHARE |
|---|---|
| 2021 | $4.32 |
| 2022 | $4.96 |
| 2023 | $5.34 |
| 2024 | $5.60 |
| 2025 | $6.04 |
| 2026 annualized | $7.04 |
At $281.35, that produces a yield of about 2.5%. The yield isn’t huge. The growing payout is the point.
Owning a collection of Canadian dividend stocks that increase their payments could let portfolio income shoulder a larger share of expenses over time.
Considerations
RBC isn’t cheap after a strong run. The shares trade around 16 times forward earnings, above several recent historical levels.
Banks also face credit risk. RBC recorded $1 billion of provisions for credit losses last quarter, and a weaker economy could push losses higher.
That makes diversification important. No one should base the ability to work less on a single bank continuing to perform perfectly.
Bottom line
The number that lets you work less may be much smaller than the number required to retire completely.
If your portfolio can cover $500 or $1,000 of monthly expenses, dropping hours can become a financial decision instead of a someday fantasy.
That’s what investing can eventually buy: not just money at 65, but more control over your time before you get there.
