Between consecutive waves of COVID-19 and an economy battered by a short supply chain, many older Canadians are feeling overworked and burned out. And for those with enough savings to retire, 2022 might seem like the best year to punch the clock for the last time.
But is 2022 really a good year to retire? Before you give up your primary source of income, let’s take a look at some obstacles new retirees could face this year.
The real estate market is bonkers
If you’re a homeowner, you might think the housing market is working in your favour. After all, if you have home equity, your house is almost as liquid as solid cash. The moment you list it (nay, before you list it), you’ll likely get multiple offers, all of which will be far above the price you paid. Cash in on that equity, and you could boost your retirement savings.
That sounds good — in theory.
In reality, a hot seller’s market can work against you. If you have one primary residence — that is, you don’t own more than one house or property — you’ll need a house to live in after you sell. You might sell your house for a great price, but if you turn around and buy another for an inflated price, how much did you actually earn?
Sure, you could downsize your primary residence, or rent, or move to another country with less expensive housing (Portugal, anyone?). Shoot you could move to another part of Canada with a cooler housing market (if that still exists).
But if you prefer to live in the same area, cashing in on equity means entering a market that’s making everyone’s hair turn grey. Yeah — happy retirement.
Inflation is through the roof
Perhaps the number one reason I would reconsider retirement in 2022 is high inflation.
For the 10th month in a row, inflation has stayed above the Bank of Canada’s 1-3% targeted rate. And it doesn’t look like it’s going down anytime soon. Yes, the Bank of Canada has a plan (maybe?) to bring inflation back to pre-pandemic levels. But with the way things are looking, I doubt they’ll curb it in 2022.
High inflation doesn’t have to stop you from retiring. After all, you might have enough retirement savings to take on a slightly higher cost of living. But for those whose budgets are tight, I would play it safe and postpone retirement until at least 2023.
The stock market is volatile
The stock market got off to a rough start in 2022. And while we’re finally starting to see some rebound, the rest of the year is still shrouded in uncertainly.
High inflation, the continued outbreak of COVID-19 and its variants, geopolitical turmoil in Ukraine, as well as the expected interest rate hikes from the Bank of Canada have all caused high short-term volatility.
Hopefully you’ve allocated less of your portfolio to risky investments like stocks and more toward conservative securities like bonds. That said, if you haven’t, and your retirement egg looks noticeably smaller, don’t be impatient. You’ve come this far: let’s wait until the market looks a bit more stable before you clock out for the final time.
Should you retire in 2022?
As eager as you may be to retire, it might be better to wait until 2023 before you do. Of course, if you have a solid retirement plan, and you’re certain you can outlive your savings, you could navigate the challenges above. But if any of the factors above could force you to retire on less than you were expecting, you might want to rethink your retirement strategy.
