My $5,000,000 retirement plan in 2025

The Reality of Retirement: No More Active Income

What if you lose your job tomorrow? Will you be able to sustain yourself for an entire year? What about two years? What about 30 years? That’s exactly what happens when we retire. We will have zero active income in 25 to 30 years, yet we will still have expenses for the next 20 to 30 years that we are alive after retirement. How do we plan for this? That’s exactly what this blog is all about.

Why People Avoid Thinking About Retirement

Retirement is a topic that many people, including me a few years ago, tend to avoid thinking about because it can be stressful. Everyone has different circumstances, but there is a basic plan that I believe anyone who wants to retire in Canada can follow. This plan is based on my situation, and I will provide all the necessary context.

Key Questions for Retirement Planning

When planning for retirement, we need to ask ourselves a few critical questions.

1. What is Your Target Retirement Number?

For example, my number is $5 million. Is that $5 million in cash? Is it in assets? I’ll explain why I chose this number. If you’re retiring in India, this number may be lower, but we will discuss that further.

2. Why is That Your Number?

What do you need from this $5 million? For most people, the answer is financial freedom and peace of mind. After 60, I may not be capable of working, I may not want to work, or I may want to simply enjoy life with family. My goal is to retire before 60, and financial freedom means that I won’t have to work for money. Instead, I will have enough assets that generate passive income, allowing me to choose whether I want to work without financial pressure.

3. When Do You Want to Retire?

My answer is in 25 years. If you are 25 and want to retire at 55, that number is 30 years. I am currently 37 and plan to retire at 62, which is 25 years from now. If you are in your mid-20s and thinking about retirement, congratulations—you are ahead of many people. You have more time to invest and plan for retirement.

4. Where Do You Want to Retire?

My answer is Canada, not India. Many immigrants from India prefer to retire back home, but my justification is that after living in Canada for decades, my entire social circle and family will be here. Over time, I will likely have fewer ties to India. Additionally, if you have children, their lives and futures will be built in Canada, making it less likely that they will want to move back to India.

5. How Will You Achieve Your Retirement Goal?

Will it be through stocks, real estate, savings, or a combination of these? My approach is a mix of stocks and real estate investments.

How I Calculated My $5.2 Million Retirement Goal

Before breaking down my retirement plan, let’s talk about how I arrived at my $5.2 million target. This number isn’t arbitrary—it’s based on calculations using a financial tool available on my website. I started planning at the age of 32, shortly after moving to Canada. My target retirement age is 62, meaning I have 30 years of active work and investment ahead. Given an estimated 3% annual inflation rate, my living expenses will more than double by the time I retire.

Estimating Future Expenses: What Will Retirement Cost?

Currently, my monthly expenses are just under $5,000, excluding mortgage payments. My goal is to be mortgage-free by the time I retire. This includes utilities, property taxes, home maintenance, groceries, car insurance, phone bills, dining out, travel, and miscellaneous expenses. Assuming a 3% inflation rate, my estimated monthly expenses at retirement will be around $11,500, translating to an annual post-tax income requirement of $137,000.

The 4% Rule: Ensuring a Lifetime of Financial Security

Using a 4% withdrawal rate from my retirement fund, I calculated that I would need approximately $5.2 million in assets to sustain my retirement lifestyle indefinitely. This amount will generate passive income without depleting my principal investment. If my investments grow at 6–8% annually while I withdraw 4% each year, I will have enough income to last a lifetime.

Renting vs. Owning: A Critical Decision for Retirement

If I were to rent instead of owning a home, my required retirement savings would be even higher—closer to $7.5 million. While renting provides flexibility, it also means continued housing costs. Personally, I prefer to reduce my expenses by owning a home outright by the time I retire.

Building My Retirement Portfolio: Real Estate and Stocks

Breaking down my retirement portfolio, my goal is to eliminate mortgage and rent expenses. I bought my first home in 2020 for $635,000 and recently sold it for $825,000. The outstanding mortgage was around $516,000. After deducting 5% in selling expenses, my net proceeds were significant, contributing to my overall retirement plan. My next step is to invest in a mix of real estate and stocks to build a diversified portfolio that can generate stable passive income.

The Path to Financial Freedom and a Secure Retirement

At retirement, I want financial security with multiple streams of passive income. A well-diversified portfolio will provide stability, ensuring that I don’t rely on any single asset class. By planning carefully and making informed investment decisions, I aim to achieve financial freedom and retire comfortably in Canada.

Early Mortgage Payoff Strategy

Starting November 11, 2025, I plan to make early payments on my mortgage. By doing this, I’ll be able to pay off a 30-year mortgage in just 20 years. This approach will save me approximately $328,000 in interest payments, which is about 37% less than the total interest I would have paid otherwise. Additionally, I’ll become mortgage-free 33% faster. The $15,000 figure I mention annually represents the additional payment I’ll make each year to achieve this goal. While $15,000 annually is a significant amount, it’s a worthwhile investment for a peaceful and secure retirement.

The Importance of Being Mortgage-Free

The primary reason for this strategy is not the potential future value of the house — which could be anywhere from $600,000 to $3 million — but the freedom from mortgage payments upon retirement. When my income becomes fixed or limited in retirement, having a paid-off home will provide financial security. If the house value appreciates, I’ll have the option to downsize and invest the difference into the stock market, contributing further to my retirement funds.

Investing in the Stock Market

In addition to paying off my mortgage early, I plan to invest $2,500 per month in the stock market. I’ve already accumulated a portfolio worth $75,000 over the past four years, with my Tax-Free Savings Accounts (TFSAs) maxed out. My portfolio is well-diversified, including U.S. top 500 companies (S&P 500), U.S. tech companies, India’s top 50 companies, and Canada’s top dividend companies. Over the next 25 years, assuming a conservative 6% return, my portfolio will grow to around $2 million. With an 8% return, it could reach $3 million, and at 10%, it might exceed $4 million.

Upon retirement at age 62, I plan to withdraw 4% annually from this portfolio, providing me with a pre-tax disposable income of approximately $117,700. This covers more than 50% of my target passive income.

Real Estate Investment for Passive Income

My plan also includes purchasing two cash flow properties. Assuming a purchase price of $500,000 and rental income of $3,500 per month, the expenses — including mortgage payments, property taxes, insurance, maintenance, and property management — would total around $3,105 per month. This leaves a monthly cash flow of about $400.

In 25 years, after the mortgage is paid off, the net operating income (NOI) from each property would increase to approximately $2,395 per month, and with a 3% annual rent increase, the total rental income would rise to around $7,300 per month. With no mortgage payments, the combined annual cash flow from two properties would amount to approximately $120,000.

Achieving the Retirement Goal

To reach my target of $227,000 in passive annual income before taxes at age 62, my strategy is threefold:

1. Pay off my primary home’s mortgage in 20 years by making additional annual payments of $15,000.
2. Invest $2,500 monthly in the stock market, building a portfolio worth around $3 million, providing an annual income of about $117,000.
3. Purchase and hold two cash flow properties, generating approximately $120,000 annually once the mortgages are paid off.

By following this approach, I’ll achieve financial independence and enjoy a comfortable, mortgage-free retirement with multiple streams of passive income.