home Commodities A layoff on the brink of retirement puts this Ontario couple’s savings plan to the test

A layoff on the brink of retirement puts this Ontario couple’s savings plan to the test

A graphic arts manager recently let go from a four-decade career, Herb has lost his steady income of $80,000 per year, with only a $40,000 separation cheque to tide him over.Gigi Suhanic/National Post photo illustration

Situation: Layoff and meagre settlement package leave husband worrying standard of living will crumble

Solution: Draw down cash savings for monthly income and consider hefty mortgage prepayment

A couple we’ll call Herb, 58 and Marcia, 47, live in Ontario. A graphic arts manager recently let go from a four-decade career, Herb has lost his steady income of $80,000 per year, with only a $40,000 separation cheque to tide him over. Marcia, a health-care professional, brings home $4,500 per month. Understandably, they worry.

Their former monthly take-home income, nearly $9,000 per month, is history, so they have reduced spending substantially. Yet they still have two leased cars that cost them a total of $505 per month, a mortgage with an outstanding balance of $245,000 that will take 28 years to pay off at their current pace and expenses of $310 per month for clothing and grooming. Their problem: adjusting their way of life to substantially reduced income until Marcia’s pension starts.

“Can we maintain our way of life even when my severance package runs out at the end of the year?” Herb asks.

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In the short term, there are only two choices: Either Herb must get another job or they will have to rein in costs until he can start his Canada Pension Plan benefits of $714 per month in two years when he turns 60.