Their retirement spending goal is $76,000 a year after tax
Short term, Judy and Charles want to pay off a $15,000 line of credit and travel extensively 'in the early years of retirement,' Judy says. Charles has retired from his $80,000-a-year sales job and will soon begin collecting his defined benefit pension. Judy plans to join him this summer, leaving behind her $68,500-a-year administrative job. She has a defined contribution pension plan.
“This spending goal is higher than what they are currently spending, providing them with some flexibility,” the planner says. This will allow for additional travel in their earlier years and could be used later for potential medical needs. “However, they may want to consider deferring these pensions until age 70,” the planner says. This would give them a greater guaranteed monthly income throughout their retirement and provide some longevity protection, she says. Delaying CPP until 70 would boost their lifetime benefits by 42 per cent. Similarly, OAS can be delayed and attracts a deferral bonus of 36 per cent at age 70.
The current market value of their portfolio is $733,600, which is more than enough to subsidize Charles’s defined benefit pension until they reach 70, Ms. Brown says. Assuming an annual rate of return of 4.42 per cent net of fees, they are projected to have about $608,000 remaining in portfolio assets by Judy’s age 70.
Judy will also need to convert one of her RRSPs to a RRIF this year to create more income to meet their spending goal. “Starting to withdraw from the registered accounts this year will help them get more money out at lower tax rates, before CPP and OAS start and push them into a higher tax bracket,” the planner says.
Judy Charles Age Planner Lif Rrsp Pension Retirement CPP OAS Judy
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