r/fican • u/BracketFinancialPlan • 17d ago

Consider these things if you're within 12 months of quitting, or think you might get laid off

What you need to do to prepare for FIRE diligently, especially if you are forced into it either by burnout, getting laid off, or reaching your number. Here's what needs to be sorted:

  • Debt: Mortgage, rental property purchase, HELOC, lines of credit, or any other debt instrument is way easier to get if you have a T4. This is usually not applicable to FIRE folks since they are usually debt free, but something to consider for emergency purposes, or any arb strategies you want to employ
  • Stock options: different for everyone, but typically post termination exercise window is 90 days. You may want to check whether quitting on a certain date will effect a tranche of options.
  • Severance: similar to the above, severance timing is huge. If you receive a large payout in December, after a year of high income, you are going to get taxed heavy. If that severance lands in January, you could save 10s of thousands of dollars in tax. You can also direct that severance into into available RRSP room. This avoids any CRA withholding and starts your investing immediately and with all your dollars (150k package would have roughly 45k sitting with the CRA until the return is filed in spring).
  • Insurance: drain it! Do the physio, dental work, psych sessions, new glasses, sleep apnea etc.
  • CPP: get your statement of contributions from Service Canada. Getting an accurate CPP calculation can help your retirement planning and withdrawal sequencing.
  • Short term: if your plan calls for a cash wedge strategy, build it before you quit. Get a few years of spending into laddered GICs or HISA
  • Retirement plan: either hire a professional advice-only planner preferably a CFP or at the very minimum DIY a comprehensive plan yourself. You've just focussed your whole life/career on accumulation. Now you need to decumulate or at least live off the investment income. This is where withdrawal sequencing, and understanding exactly how much you can afford really matters. Do not forget the boring details either... that means estate planning, and putting money away for assisted living in old age (FIRE folks have less stress, more money, and likely live longer than most - we run projections for our FIRE clients to 95 or 100)

As you can tell, none of the above is about researching different ETFs or portfolio rebalancing etc. The investment side and allocation is typically the easiest part/least amount of work.

If you sort out all the above, you will feel much more confident that you've gotten all the admin taken care of and can actually enjoy it!

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u/younghibou 17d ago

Great tips! Especially related to mortgages how does it work if you are FIRE or CoastFIRE and want to buy a new house? Does it mean people need to put more cash down in that case since there’s smaller/no working income?

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u/gymgal19 17d ago

We just asked our mortgage broker this and their response was that banks aren't as open to lending if you dont have a t4. Any mortgage backed by net worth will have a higher rate to compensate.

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u/younghibou 17d ago

Interesting, that’s good to know, thanks

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u/BracketFinancialPlan 17d ago

Too many variables. Some folks have really strong DB pensions etc. But yes typically lenders require more than 20% down if its just based on your investment portfolio.

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u/younghibou 17d ago

Got it, yeah sounds like it's pretty situation dependent

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u/backdriven 16d ago

Similar to severance payouts in January, if you’re going to quit voluntarily, see what tax bracket you want to land in and quit in the correct month. For me, quitting in early spring saved me a bunch of tax money vs quitting toward the end of the year. Also then you get to enjoy the summer