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retirement and rrsps

Welcome to our Living in Retirement blog, where a recent retiree chronicles the ups and downs of her real-life retirement journey.

When I weighed the pros and cons of retiring from my longtime teaching position at Sheridan College in Oakville, I never intended to stop working entirely.

It's not simply that I like to keep busy. It's about following a dream. My plan was to leave the day job I'd had for 25 years to free up time to do what I'd always wanted to do: write.

Sheridan was a second home to me, a comfortable, friendly place to work with interesting colleagues and fresh-faced, eager journalism students, who for the most part, wished to be there. Before teaching, I'd worked in Canadian book publishing for 12 years and after working full time for 37 years, I convinced myself, it was time to launch a new career as a novelist.

Everything I required to retire from my full time job was in place: the defined benefit pension I'd contributed to, coupled with CPP, would pay out 50 per cent of my teaching salary. On top of that, I would continue to teach on a part-time basis at the college. With that, I reasoned, my standard of living would not decrease substantially. I'd downsized to an affordable condo where I believed I could control costs more efficiently than in a larger home. I was mortgage free, with only a pesky car loan to annoy me.

Last spring, I finished the historical novel I'd been working on for five years. Between 2008 when I began the novel and 2013 when I retired, I'd researched and wrote in my spare time, using every possible moment I could. One New Year's Eve, I recall working on the book and thinking, I can't miss out on even one night of writing.

Within weeks of giving notice to the college, a publisher expressed interest in The Cook's Temptation. It will be published in early 2014. Last summer during the first weeks of my semi-retirement, I dove straight into my second novel. I moved into a very simple rustic cabin in the woods for the summer where I could write without distraction.

It was the right time for me to put aside my fears of failing as an author and my constant worries about finances. I'd worked throughout my adult life, taking only six months off after the birth of my daughter, and as The Globe and Mail's recent series on income disparity in Canada clearly confirmed, my living standard hadn't increased in a big way. "By the federal government's analysis, made public this summer, real after-tax income of families in the middle rose just 0.2 per cent in the years between 1976 and 2010 adjusted for inflation."

I started working full-time in 1976 at a tiny, independently-owned book publishing company in Toronto. My annual salary was $6,500. A few years later, I advanced to staff writer at Quill and Quire where my starting salary was $13,500 a year.

Although my college professor's salary had increased substantially between 1988 and 2013, my standard of living hadn't risen in hugely discernible ways. Except for some expensive holidays and extra pairs of shoes that I couldn't resist, I was prudent, not profligate. I owned a house, contributed to an RRSP and to my daughter's RESP.

But I was still living paycheque to paycheque. There was never a moment when I could forget about the ever-increasing monthly bills that needed to be paid. The increase in the value of my home, by far my biggest asset, didn't go sky high as it had for those living in downtown Toronto or Vancouver.

When the Great Recession of 2008 hit, I lost 32 per cent of my portfolio. What finally began to register on me, and likely countless others heading toward retirement, was that actively managed mutual funds cost a fortune in fees and very rarely beat exchange-traded funds or low-cost index mutual funds. If I hung onto my full-time teaching position until 65, in the hope of repairing my damaged portfolio, I was fooling myself. That was when I decided I owed it to myself to retire from full time employment. I figured I could manage reasonably well on my pension while pursuing my dream of becoming a published novelist.

Although my financial situation remains complicated – I dumped my managed mutual funds in 2012 – so far it has worked out. With part-time teaching, I'm managing to maintain the lifestyle I had when I worked full time. The wages I earn from freelancing go directly into a limited company where tax rates are less draconian than personal income tax. Experts, including the government of Canada, suggest that 60 to 70 per cent of pre-retirement income is what's needed for a comfortable retirement. That figure is conservative. Eighty per cent would be better.

I'm quickly learning how to cut back. Luxuries such as restaurant meals, travel, or opera and theatre tickets are options I think twice, no, three times about. My daughter attends university and she needs support. My partner recently returned to college after being laid off from his job in television. But the choice I made is sitting remarkably well with me. Writing has become an important part of my daily life, and that's what matters.

This could be my time. And finances are not going to stop me.

Do you plan to keep working in retirement? If so, will financial necessity or a desire to keep busy be the main driver? Leave your thoughts in the comments section below.