home Commodities Not even a layoff can derail retirement plans for couple with $2.2-million in assets

Not even a layoff can derail retirement plans for couple with $2.2-million in assets

Situation: With one job lost to tough times in Alberta, couple worries their significant savings may still not be enough 

Solution: The math shows that with conservative assumptions and diligent management, they’ll be fine

In Alberta, a couple we’ll call Matt, 52, and Deena, 57, are moving toward full retirement. Matt was laid off in the chemical industry last year and is unsure if he can find work. Dena works for a large energy company as a document manager. Her income, $5,193 per month after tax, helps them pay the bills and avoid dipping into their savings. Their problem — seeing ahead to the end of a retirement that could be longer than they expected. They have the advantage of a portfolio of well-chosen large-cap U.S. and Canadian stocks. In all, their financial assets total about $2.26 million held mostly in RRSPs and TFSAs. But how long will the money last? They are far from the usual mid-60s retirement threshold.

“What is the maximum amount of money we can safely spend each month to last until Matt is 90?” they wonder. Family Finance asked Eliott Einarson, a Winnipeg-based financial planner with Exponent Investment Management Inc., to work with the couple. His view is that full retirement in two years, when Deena would like to quit work, is financially feasible. But there are still choices to be made along the way.

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Shifting to retirement

Assuming that Matt and Deena start their retirement in two years, they would lose Deena’s $98,000 pre-tax income. They could start to use $76,000 of dividends from their taxable stocks. In retirement, Deena would no longer be putting $6,000 a year into her RRSP. They could also use the $6,000 they save annually in their TFSAs. Elimination of Deena’s salary and a shift to spending savings will cut their tax rates, thus cushioning the financial consequences of Deena’s career termination. The age credit, which starts at 65, though it declines with income over about $36,000, should be helpful.