Skip to main content
the long view

The latest trend in highly paid work consists of leaving it behind – preferably as young as possible.

Patrick Pichette, the Canadian who served as chief financial officer at Google, drew headlines earlier this month when he walked away from his $5.2-million (U.S.) annual salary at the age of 52 to spend more time with his wife and backpack around the world.

A week later his counterpart at Uber, Brent Callinicos, bid goodbye to his post at the popular taxi-calling app despite the lure of a huge payday when the company goes public. "Every day I work, I lose time with my family," he wrote, vowing never again to miss his teenage daughter's school plays or swim meets.

Some of us may be disturbed by this sudden outburst of emotional squishiness in the executive suite, but, really, who can we turn to for role models? Even hardened football players are turning philosophical on us.

Jake Locker, the 26-year-old quarterback of the Tennessee Titans, has packed up his cleats, saying he's lost his desire to play, while Jason Worilds, the 27-year-old pass rusher for the Pittsburgh Steelers, walked away from a multimillion-dollar contract to pursue other interests.

Pretty soon, it's going to be just me and you pushing this economy ahead. And, frankly, I'm a little worried about you. So let's have a chat about three realities of early retirement.

It's rarer than you think

Despite the spate of high-profile early retirements, the trend in the past few years has been in the opposite direction.

Statistics Canada tells us that the median retirement age has shot upward. While people typically retired at 61.6 years of age in 2010, they were retiring at 63.3 years in 2014.

Call it a return to old times. Look over the past few decades and a graph of the median retirement age resembles a U.

Back in the 1970s, most people retired at 65. The median age for quitting work declined gradually over the next generation, reaching a low of 60.6 years in 1997. It remained close to that level for a decade before beginning its recent climb.

It's getting tougher

What's one reason for the rising retirement age? Financial reality.

There's not much justice when it comes to retirement. Two people born a few years apart can follow identical investing plans yet wind up with radically different results, simply because of the way the market performed over the course of their investing lifetimes.

Wade Pfau, a professor of retirement income at the American College of Financial Services in Bryn Mawr, Pa., has come up with an ingenious tool to chart these differences. The Retirement Wealth Index shows how many years of income someone would have accumulated if they had started contributing 15 per cent of their salary to a balanced stock-and-bond portfolio at 35 and continued until they hit 65.

Prof. Pfau estimates that someone reaching 65 this year would have accumulated 10.7 times their annual salary by following the strict investing regimen described above. That's among the poorer outcomes of the past 20 years.

In contrast, an investor who turned 65 in 2000 would have had more than 18 times their annual salary. Even in 2005, a new retiree would have built up a nest egg worth more than 14 times their salary.

Couple the recent rash of mediocre investing results with Ottawa's move to gradually raise the minimum age for collecting Old Age Security to 67 from 65, and planning an early departure from the work force is getting tougher – not easier.

It's expensive

Retiring early means your nest egg must support you for longer – and that can be pricey.

Vanguard's retirement nest egg calculator estimates that someone who needs to make their portfolio last 25 years would require $1-million to be nearly sure of generating investment income of $45,000 a year. (That's assuming a portfolio split evenly between stocks and bonds.)

A person retiring at 65 might consider that 25-year projection to be just fine. But look at what happens if you want to retire at 55 instead. In that case, you should probably plan for a 35-year retirement. Given the longer time span, the Vanguard calculator says you would need more than $1.2-million to generate the same $45,000-a-year income with the same degree of confidence.

That's a big step up in your savings target – and you have a decade less to achieve it than the person planning for a 25-year retirement.

The bottom line here? For most of us who aren't Google executives or NFL players, early retirement is a challenge.

A more realistic plan may be finding work that you actually enjoy doing – or convincing Mr. Pichette that he really needs an all-expenses-paid companion for his new life as a backpacker.