The couple should draw from Al’s RRSP in early retirement years and split income with Kate as soon as he can
After years of working 'crazy hours' and with solid savings, Al and his wife Kate have a mortgage-free house in the Greater Toronto Area and a son who is back living at home after finishing a two-year contract abroad.“I came to Canada 27 years ago and started working right away,” Al writes in an e-mail. He’s done well, earning $230,000 a year in a high-demand technical field.
We asked Warren MacKenzie, an independent certified financial planner based in Toronto, to look at Al and Kate’s situation. Mr. MacKenzie also holds the chartered professional accountant designation.Al’s initial question is whether he can retire at the end of the year and maintain the desired $84,000-a-year lifestyle, Mr. MacKenzie says. “The answer to that question is yes, based on reasonable assumptions, he can retire and they will never run out of money,” the planner says.
If they really want to leave a larger estate, they should consider using some of their non-registered funds to purchase a whole life, joint and last-to-die insurance policy, he says. This strategy provides a guaranteed return and saves income taxes and probate fees because life-insurance proceeds are non-taxable and go directly to the beneficiary.
As to when to apply for Canada Pension Plan and Old Age Security benefits, if Al and his wife are in good health and expect to live well into their 80s, they should delay starting OAS and CPP until the age of 70. “Kate is a homemaker and has never contributed to CPP, so while she will be entitled to some OAS, she will not be entitled to any CPP.”
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