Financial freedom: Your blueprint to early retirement

July 24, 2025

Drew Maginn

In their 1992 book, Your Money or Your Life, Vicki Robin and Joe Dominguez describe retirement as follows: “Financial independence is not about retirement. It’s about having enough money to support your desired lifestyle without being dependent on a job.” For many Canadians, retirement is the proverbial “carrot on a stick” dangling at the end of a long career, ideally starting in one’s early 60s (if they’re lucky). But what if it could actually start sooner? Yes, in challenging times, many of us don’t necessarily think about an early retirement plan, and the prospect of trying to retire young feels a little far-fetched. But by embracing a different philosophy of how you save and invest for the future, you might find yourself able to step away from the 9-to-5 grind a little bit sooner than expected.

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What does early retirement look like in Canada?

Most Canadians start considering retirement in their early to mid 60s, most notably because this is when a person becomes eligible for the Canada Pension Plan, starting at 60 years old, and Old Age Security, starting at 65 years old. With those goalposts established fairly early on in our careers, most of us rarely sit down and think about whether retiring before our 60th birthday is even possible. With no universal retirement age and access to health care not tied to employment, however, Canadians have a leg up in making this dream a reality.

How to retire early: Understanding the FIRE movement

The FIRE movement, or “financial independence, retire early,” is a financial lifestyle often attributed to Your Money or Your Life. In this book, readers are encouraged to re-evaluate the relationship between their time, their money, and their values. At its core, the FIRE movement requires committing to your early retirement through a series of actionable steps, which include:

Saving and investing a high percentage of your earnings (often as much as 50 to 70 per cent);
Finding ways to live below your means;
Creating opportunities to earn passive income; and
Reaching a point where work becomes optional as opposed to necessary.

To achieve this, FIRE followers begin by estimating their annual expenses, then multiply these annual expenses by 25 to apply the “four per cent rule.” The resulting number, your FIRE number, represents the total value of a portfolio that can withstand a four per cent annual withdrawal rate to cover these expenses over a 30-year retirement period. Most revisit this number on an ongoing basis to adjust for internal factors such as lifestyle changes and additional income sources, as well as external factors such as inflation, cost of essential expenses, and unexpected returns on investments, either higher or lower than expected. Several popular FIRE calculators are available online to help you through the process, just do your research first and try some out to figure out what works best for you.

” With the financial challenges that many Canadians face, talking about retirement, let alone early retirement, might feel a bit far-fetched. ”

Stoking your ‘FIRE’: Your step-by-step early retirement planning guide

To make planning for early retirement a focus in your life, there needs to be a long-term commitment in place. Adopting a future-focused approach to achieve financial independence through strategies like the FIRE movement isn’t for everyone, but it does help outline some consistent steps that everyone should take.

Understand your financial situation: A strong understanding of your finances, achieved through detailed budgeting and net worth tracking, is the best place to start. Not sure how to calculate your net worth? Simply add up all your assets, including property, savings, and investments, and subtract your liabilities, including mortgage, debts, and loans.

Increase your income: There are many ways to increase your income, and diversifying is typically the best way to future proof your portfolio. This includes exploring a variety of options to earn more, such as increasing your primary income (through a promotion or pay increase), finding a side job, building your savings through tax-friendly accounts, making informed investments in stocks, and looking for passive income sources like rental opportunities.

Cut your expenses: To reduce expenses, start with housing, food, and transportation expenses. Depending on your long-term goals, cutting these costs can include small steps like meal prepping or using public transit, all the way to larger steps like voluntarily downsizing your living situation or getting rid of your car. Typically, the larger the sacrifice, the larger the reward. While this mindset isn’t realistic for many people, the degree to which you can prioritize your needs and minimize your wants pays dividends over the long-term, especially when early retirement informs these decisions.

Track and revisit your progress: Despite your best laid plans, your progress toward early retirement will ebb and flow. To plan for these highs and lows, it’s important to revisit your plans at least annually and utilize tools, like your FIRE number, to understand how changes in your lifestyle, returns, and revised goals may force you to recalibrate and recommit to this path.

With the financial challenges that many Canadians face, talking about retirement, let alone early retirement, might feel a bit far-fetched. But even if retiring in your 40s or 50s will never be a reality, the lessons associated with early retirement planning, and approaches like the FIRE movement, should not be dismissed altogether. At their core, the values of committing to a budget, lowering expenses, diversifying income, and goal setting are universal. So why not give it a try? You might surprise yourself with the results.

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