Home Economy Couple with $2.9 million in assets and no debt think they won’t...

Couple with $2.9 million in assets and no debt think they won’t be able to make ends meet in retirement

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Situation: Couple in their late 50s with poor investments fears a financial squeeze in retirement

Solution: Raise returns by selling real estate and improve their investment plans

In British Columbia, a couple we’ll call Henry, who is 56, and Julia, who is 58, have complicated financial lives. Henry runs his own consulting company. It makes a $30,000 annual profit and he takes out $1,200 monthly before tax. Julia is a civil servant earning $9,900 per month before tax and benefit deductions. After tax, they have $6,694 per month to spend. They have ample resources, yet they fear a squeeze in retirement. Pessimism and lagging investments dog them.

Julia plans to retire in May 2019. Her take-home pay will drop from her present net of about $5,500 per month to about $5,200 per month until she is 65. At that point, she will lose the bridge in her pension worth about $1,365 per month but gain a similar amount in Canada Pension Plan and Old Age Security benefits.

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The couple’s finances are complex. They have a $1.5 million home and an $800,000 condo in the U.S. that is owned by Henry’s company, which is also holding $250,000 in profits. While he and Julia have $361,000 in their RRSPs, their TFSAs have combined assets of just $800, the low balance reflecting a fear of investing in anything but property and cash. Their investments, apart from real estate are heavily in cash and GICs which, after inflation and tax, generate negative returns. Their goal is to have $5,500 per month after tax in retirement.

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