They are separated by age, retirement and distance from their respective properties. How can they come together and make their project come true: not to travel?
Posted at 5:00 am
“How can I get my spouse to join me in the campaign as soon as possible to retire together? Jocelyn* asks.
He is 58 years old and plans to retire in a year and a half, at the latest at age 60.
His wife Lucie*, 53, could take hers without reduction at age 60, but would like to be able to join him sooner.
Join him at his retirement and at the house he built in Estrie.
Because therein lies her dilemma: As long as she works in the Montreal region, she can’t leave her home on the South Shore and settle permanently with him in Estrie. “If I stop working, you can’t have two houses,” she says Jocelyn.
But if Lucie retires early, she cuts her pension plan.
He has been working for 15 years in the health sector, where he earns a salary of $45,000. At age 60, she would receive a pension of $6,300 per year.
Our man is a construction worker with an income of approximately $87,000. The Québec Construction Commission’s pension plan, to which he has contributed since the beginning of his career, will provide him with pensions totaling $42,000 per year from age 60 to 70, then $33,500 thereafter.
Jocelyn and Lucie have been together for 25 years. “We’re an internet couple,” says Jocelyn.
She was a single mother of three children. She had none. “I took them under my wing and over time, I considered them my children,” she says with a laugh.
He sold the house he owned on the North Shore to move to Lucie’s on the South Shore. “Since I had no children, he allowed me to invest a little in the family home. »
Ten years ago he bought land in Estrie, where he gradually built the house where he wants to retire.
Jocelyn, 58 years old
Salary : $87,000
Main account: $2600/month for life
additional account: $896/mo up to age 70, $196/mo over age 70
QPP: $760/mo at age 60 or $999/mo at age 65
Cottage in Estrie: $400,000, no mortgage
Lucia, 53 years old
Salary : $45,000
Pension: $525/month at age 60
QPP: $577 at age 60 or $917 at age 65
Legacy : $60,000
Inherited Chalet: $300,000, no mortgage
House on the South Coast: $450,000 value
Mortgage balance: $150,000
Credit margin: $24,000
He currently estimates the couple’s cost of living to be around $72,000. “The only expenses we incur are the restaurants and the visit we receive. »
With one less house, he estimates his retirement budget would be around $48,000. His plans: not to travel.
“We are not ‘travellers’, he says. He’s terrified of airplanes, so we’ve never traveled. And I don’t see why we would travel when we retire. »
Despite everything, they do not want a tight budget that restricts their outings. “We do not want to be locked in the house. »
Part of the solution lies in the sum of $60,000 and the cabin bequeathed to him by Lucie’s recently deceased parents.
“He would like to retire before the age of 60, but his pension would be less,” he explains. He would like to compensate with the country house and the amount that he received from his parents. Shall we put the chalet for rent? He would allow her to earn a salary until she was 60 and then sell the chalet. That is what we ask ourselves. »
“What we are looking for is to go to the campaign as soon as possible. »
How to get there?
“There is no question that by choosing to retire early, Lucie will be sacrificing a significant portion of her retirement pension,” confirms financial planner Benoit Chaurette, an adviser to the National Bank Private Banking Center of Expertise 1859.
In the case of Lucie, who appears to have 15 years of service under the Government and Public Employees Retirement Plan (RREGOP), this reduction is equivalent to 0.5% for each month between her retirement and age 61.me birthdays (ie 6% per year).
Retire on your 55th dayme birthday, Lucie has already had her pension reduced by 36%. But this pension is also calculated on the basis of the number of years of service.
“By working fewer hours, fewer years will be recognized for the calculation of the retirement pension,” says the planner.
According to the figures Jocelyn provided, Lucie would have received a pension of $6,300 per year at age 60. Given the uncertainty surrounding these items, our advisor estimates that Lucie would see her pension cut in half, or just over $3,000. “It’s not that big of an amount, if you look at all the data,” she says.
In fact, your retirement income will be based primarily on your assets.
The sale of the South Shore home would leave approximately $300,000 in equity after paying off the mortgage balance.
The cabin inherited by Lucie is worth about $300,000. She hesitates between renting it or selling it.
Very astute the one who can predict what is more profitable between making the rental of the chalet profitable or an investment. In both cases, there are many unknowns.
Benoit Chaurette, advisor to the National Bank Private Wealth Center of Expertise 1859
To simplify his calculations (and Lucie’s life), he assumes that the chalet and property on the South Shore will be sold as soon as Lucie enters retirement.
However, Lucie could now pay off her line of credit with part of the amount received as an inheritance, the planner suggests.
Distribution and optimization
The remainder of the inheritance and proceeds from the sale of the properties are first used to fund Jocelyn and Lucie’s tax-free savings accounts (TFSAs) to maximize tax benefits.
“During the first years of retirement we will mainly seek the money from the lady’s account and we postpone the disbursement of RRSPs [régimes enregistrés d’épargne-retraite] and TFSAs,” says our advisor. This apparent imbalance is partially offset by Jocelyn’s higher retirement pension.
It is not known, however, how the two common-law spouses separate their income and expenses. “We have to see if the couple agrees to go this far. It is assumed that there may be some form of gift or loan between the spouses to allow the other to optimize their TFSA. »
For the purposes of its calculation, these are government pensions (Old Age Security Pension, PSV, and Quebec Pension Plan, QPP) at age 65, but depending on the situation and health status of the couple, they can be postponed to improve them.
Cost of living and inflation
Can Lucie stop working at 55?
Benoit Chaurette did the math based on his current cost of living of $72,000 rather than Jocelyn’s limited budget of $48,000.
“I was very cautious in my approach, explains our adviser. He wanted to see if it was possible to stay at that level of comfort. »
Assumes a 4% return and uses the 2.1% inflation rate recommended by the Institut quebécois de planification financière in its most recent projection standards.
Some will be surprised at such low inflation. But this is the average rate over the duration of the screening: Lucie has a one in four chance of still being alive in 44 years.
“If you used 5% inflation, you couldn’t use a 4% return,” he says. It would be a bit illogical. With yields, there should be a risk premium. They should do better than inflation. »
“Otherwise, there is no value in buying investments, and we will prefer to buy cane tomatoes, it will be more profitable,” he adds jokingly.
Under these conditions – with investments, not tomatoes – he estimates that the couple’s savings are still substantial at 96 years of age. “There’s still a lot of wiggle room,” she says.
plan for the worst
“Retiring in two years and moving to the countryside is a very realistic plan,” says Benoit Chaurette. Provided, of course, that the couple stays together. A separation could make the project difficult, without saying that this eventuality would mean a return to work. »
The same uncertainty surrounds a possible death. “Will part of Lucie’s assets go to Jocelyn in the event of Lucie’s death or will all of her assets go to her children? »
It recommends that the couple consult a notary and draw up wills and a cohabitation agreement “that would define the rights, obligations and responsibilities of each one.”
Because retirement should not only be comfortable: it should be serene.
* Although the case highlighted in this section is real, the names used are fictitious.
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