Naresh and Whitney, both 51, are contemplating their retirement plans. With a combined income of $163,000 and a desire to retire in Canada in five years, they are seeking expert advice on their financial strategy. The couple's situation is unique, as they have worked in Europe for a decade and are now returning to Canada, bringing with them a mix of Canadian and international pensions. They have no children and no desire to leave an estate, which adds a layer of complexity to their financial planning.
Their financial assets are substantial, including $1,528,665 in various investment accounts and $890,000 in real estate. However, their retirement spending goal of $84,000 per year after tax is a significant challenge. The couple's top priority is to secure a comfortable retirement, and they are willing to make strategic decisions to achieve this goal.
Financial expert Ian Calvert suggests that their primary focus should be on maximizing their investment accounts and cash savings over the next five years. He recommends fully funding their tax-free savings accounts (TFSAs) to the tune of $70,000, which would provide a substantial boost to their savings. This strategy is particularly important given the uncertainty surrounding Naresh's taxable income.
Calvert's plan involves a careful withdrawal strategy from their Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). Starting in 2031, they should withdraw $25,000 from each of their RRSPs annually, providing a total of $50,000 in taxable withdrawals. This approach is designed to keep their incomes within the lowest tax bracket, ensuring a more tax-efficient retirement.
The couple's pensions will play a crucial role in their retirement plan. While taking early, reduced pensions might offer immediate benefits, Calvert advises against it. Instead, they should wait until age 65 to receive the full, unreduced pensions. This strategy will provide a larger safety net of guaranteed income in the later stages of their retirement, allowing them to draw down their assets at a higher rate for the first nine years.
Calvert's plan also emphasizes the importance of estimating annual expenses in retirement, which can be challenging. He suggests that the true and accurate expense figures may only be discovered in the first three years of retirement. Given the uncertainty of time and cost, he recommends keeping five to 10 years of assisted living costs within their portfolio to ensure a secure financial cushion.
In summary, Naresh and Whitney's retirement plan involves a combination of strategic savings, pension management, and a careful withdrawal strategy. By following Calvert's advice, they can confidently meet their retirement goals and ensure a comfortable financial future, even with the complexities of their international work history and lack of an estate.
