They can’t afford to spend $800 a month on two trucks, a truck camper, one all-terrain vehicle, two sports cars and a fishing boat
This is the story of an Alberta couple fallen on hard times. Now 59, Jesse, as we’ll call him, was a computer consultant with his own company. Due to a heart condition, he has been unable to work for eight years, and his company is now worth nothing. He has a disability benefit from a private plan that pays him $2,400 per month.
Spending exceeds incomeFamily Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Jesse and Miranda. At 65, the couple’s base income from CPP and OAS will be $35,000 before tax. Even with RRSP income, they will struggle to maintain their current level of spending. Cuts are needed.
Jesse and Miranda spend $870 per month on utilities, phones, cable and web services. $370 of that is connectivity to the web. Diligent shopping among service providers could also save some money, perhaps $200 per month or $2,400 per year. Added to other savings, they would cut total spending by $1,000 per month.
While they could use their $355,000 of RRSPs to pay off the HELOC, the move would be unwise. If they take out $200,000 to pay the line of credit, they would face a substantial tax hit, plus be left with only $155,000 for their retirement. If that sum were to generate three per cent after inflation for 35 years, it would produce only $7,000 per year before tax.
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