Why I Retired

Although I’m younger than the typical retiree, I retired about 8 months ago. It may seem obvious why someone would want to retire, but I’ve been reflecting on what caused me to take the plunge when I did. There were a number of factors that influenced my decision.

1. Adequate savings

I wouldn’t have retired if I didn’t have enough savings. The thought of running out of money makes me conservative about my savings. But my best effort at analyzing my future spending and investment returns shows I have more than enough buffer. Even my wife seems (mostly) convinced we’ll be okay.

2. Autonomy

I’ve never been very good at doing what others want me to do instead of working on whatever interests me at the moment. As I age, my desire for autonomy has been increasing. My employer gave me tremendous freedom to work on just about anything that might help the company. Even so, work chafed me when I wanted to do other things.

3. Taxes

I’m not asking anyone to feel sorry for me that I had a good income and had to pay high taxes. However, I needed to make a decision for myself and my family, not for others. It was disheartening to see part of my income get more than half taxed away. This was most directly visible with bonus payments where I could see that the after-tax amount less than half of the pre-tax amount.

However, taxes on my working income weren’t the only factor. Because my RRSP and TFSA are full, I was adding to non-registered savings. So, I faced significant annual taxes on non-registered investment gains. It began to feel futile to continue earning and saving. Again, I don’t expect any sympathy, but you have to expect me to act in more own interests. I judged the after-tax benefit I’d get from more savings to be not worth the effort.

I tried taking a month at a time off work without pay, reasoning that I’d be eliminating the most heavily taxed part of my income. But in the end I decided to extend that to a full 12 months each year. There’s a good chance I’ll pay less income tax over the rest of my life than I paid in 2017, adjusting for inflation.

4. Wealth Taxes

Currently in Canada, we tend not to tax wealth. We tax incomes at the federal and provincial levels, and have sales taxes on consumption. The main exception to this lack of wealth taxes is property taxes on real estate. However, this could change. Thomas Piketty called for a huge expansion of wealth taxes in his book Capital in the Twenty-First Century. British Columbia recently expanded property taxes on homes worth over $3 million. This is a small start, but it could easily be just the beginning of the spread of wealth taxes.

I hope we don’t see expanding wealth taxes from spendthrift governments thirsty for more cash, but it’s hard to say this is an unlikely outcome. If this does happen, then any further saving I do would become completely futile.

5. Changes at work

My employer made some major changes to the company’s structure and the types of business they would seek. The management team had some big winners and big losers. While these changes didn’t affect me much, they created a natural breakpoint for me. This made it easier to bow out without feeling like I was abandoning my company.

Conclusion

In a less charitable moment, my wife might summarize all this as “lazy.” There’s probably some truth to this, but this is my blog and I get to put these reasons into my own context.

I had been thinking about retiring for some time, but the changes at work were what sparked me to pull the trigger. I wouldn’t have considered retiring if I wasn’t confident I had enough savings. Taxes weren’t a dominant consideration, but even if I wanted to save more to be able to afford a more extravagant lifestyle, income taxes and possible wealth taxes make this difficult anyway. I have more than enough things I want to do to fill my days, and I now have the autonomy to do what I want.