Depending on what she would be most comfortable with, Nell could get a job, sell her house or borrow against her home equity
Like others before her who have grown weary of their careers, Nell took a leap, accepting a buyout and leaving her six-figure job to pursue her dream of opening a small storefront business. Like many others who live in high-priced Toronto, her main asset is her $1.4-million house.Now, after two difficult years during the COVID-19 pandemic, Nell is tired of working long hours for a mere $2,000 a month after expenses, and being forced to dip into her savings.
“Nell very much wants to sell her business and travel, maybe do some volunteer work, while she is in good health,” he says. With her cash on hand and the proceeds from the business sale, she could pay off all her debt. Then, with a net worth of about $1.7-million and modest spending goals, she would have more than sufficient resources to retire and enjoy life – provided she uses her wealth wisely, Mr. MacKenzie says.
Two, she could sell her house and invest the proceeds. The pros would be more than $60,000 a year in investment income even if she invests only in guaranteed investment certificates. That assumes about $1.4-million in capital at an interest rate of about 5 per cent. She wouldn’t have to work any more. The cons would be paying more in income tax and having to move from the home she enjoys, Mr. MacKenzie says.
Naturally, her living costs will rise with inflation. “But if she is invested in a well-diversified, conservative, dividend-producing investment portfolio, based on history it would be reasonable to expect a rate of return of 5 per cent a year ,” the planner says. This will be enough to address all her financial needs.
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