{"id":260767,"date":"2025-07-13T05:19:23","date_gmt":"2025-07-13T05:19:23","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/260767\/"},"modified":"2025-07-13T05:19:23","modified_gmt":"2025-07-13T05:19:23","slug":"they-saved-feverishly-and-now-have-3-5-million-can-sharon-62-retire-with-craig-64-next-year","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/260767\/","title":{"rendered":"They saved feverishly and now have $3.5-million. Can Sharon, 62, retire with Craig, 64, next year?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Craig and Sharon are wondering if they should buy a house in town that they could move into when they are too old to run their hobby farm.Ashley Fraser\/The Globe and Mail<\/p>\n

Seven years ago, in their first Financial Facelift<\/a>, Craig and Sharon were looking to the day when they could leave the working world behind and spend more time on their hobby farm. The years they spent enjoying a bohemian lifestyle had left them behind financially and they were striving to catch up. They were also saving to put their two teenagers through university.<\/p>\n

Their net worth in 2018 was $1.7-million; Now it is $3.5-million.<\/p>\n

Today, Craig is 64 years old and Sharon is 62. Their children are in their 20s. Craig, who has been working part time for the past three years, plans to retire fully from his career in education this year. Sharon is still working, earning $110,000 a year in the sciences. Their hobby farm is populated with a variety of animals, including two cats and two dogs.<\/p>\n

While Sharon loves her work, Craig has been trying to persuade her to retire next January. <\/b>If she does, he wonders if they can sustain their current lifestyle, or if they\u2019d have to make sacrifices. <\/p>\n

Craig has a defined benefit pension plan that has been paying $30,000 a year, indexed to inflation, including a bridge benefit to age 65. After 65, he\u2019ll be getting $23,260 a year. <\/b>Sharon has a defined contribution pension plan to which both she and her employer contribute. <\/p>\n

Financial Facelift: Laid off with $2.5-million in savings, should Jake and Wanda retire permanently?<\/a><\/p>\n

Craig\u2019s father died last year, leaving his estate to his children. Craig\u2019s share was $830,000. With that money, Craig and Sharon topped up their tax-free savings accounts and gifted their two children $105,000 each toward a future down payment on a first home. <\/p>\n

Their questions: Should Craig defer his Quebec Pension Plan benefits? Can they afford for Sharon to retire in 2026? Should they buy a house in town that they could move into when they are too old to run the farm? <\/p>\n

Their retirement<\/a> spending goal is $90,000 a year after tax.<\/p>\n

We asked Denny Oenar, a certified financial planner and partner at Macdonald, Shymko & Co. of Vancouver, to look at Craig and Sharon\u2019s situation.<\/p>\n

What the expert says<\/p>\n

Mr. Oenar <\/b>looks at three scenarios in which they are both fully retired. <\/p>\n

\u201cSo starting in 2026, we have assumed all sources of employment income will be gone.\u201d<\/p>\n

In Scenario 1, they begin collecting Quebec Pension Plan and Old Age Security benefits at age 65. This would allow them $113,000 a year in sustainable spending, beyond their $90,000 target, the planner says. <\/p>\n

His assumptions include a 5-per-cent rate of return on their investments, a 3-per-cent inflation rate and that they live to be 98 for Craig and 95 for Sharon. <\/p>\n

In the early years of retirement, their taxable income will be significantly lower, so starting an early withdrawal stream from their RRSPs<\/a> or registered retirement income funds makes sense given the RRSPs are their largest financial assets, the planner says. <\/p>\n

\u201cFinding an optimal withdrawal plan will be an important component of their overall plan to ensure tax optimization, avoid OAS clawback and minimize the final tax bill on their estate.\u201d<\/p>\n

In this example, there would be $2.4-million of assets left in their estate \u2013 $1.4-million of real estate and $1-million of financial assets, mostly in their tax-free savings accounts<\/a>. They would never have to withdraw from their TFSAs, lessening the impact of taxes for the estate, Mr. Oenar says.<\/p>\n

Their cash flow in 2026 would break down as follows: Craig\u2019s pension $23,900 a year; Craig\u2019s QPP $13,600; Craig\u2019s OAS: $8,925; and the estimated minimum required withdrawal from Craig\u2019s RRIF $14,000. <\/p>\n

\u201cThey could plan a further withdrawal from Sharon\u2019s RRSP or defined contribution pension plan of $35,000,\u201d he says. The remainder would come from their nonregistered portfolio as needed.<\/p>\n

\u201cAfter pension income splitting, their taxable income should be in the $50,000 \u2013 $55,000 a year range each, which is an ideal level for managing tax brackets while simultaneously reducing RRSP\/RRIF assets.\u201d <\/p>\n

Financial Facelift: With $2.4-million and a portfolio of bank stocks, what should Jeremy, 71, do for an easy retirement?<\/a><\/p>\n

In Scenario 2, they defer QPP to age 70 but take OAS at 65.<\/p>\n

If they take QPP at age 70 instead, all other things equal, they would have $117,000 of sustainable spending. They\u2019d have about $2.6-million of assets left, $1.4-million in real estate and $1.2-million of financial assets, mostly in their TFSAs.<\/p>\n

Deferring QPP to age 70 gives them a 42-per-cent increase in their guaranteed benefit. OAS deferral to age 70 is another option \u2013 that would give them a 36-per-cent benefit increase. <\/p>\n

\u201cAs long as they have good health, QPP and OAS deferral makes sense to increase their guaranteed benefits and protect them from longevity risk,\u201d Mr. Oenar says. <\/p>\n

In this second example, cash flow breaks down as follows: Craig\u2019s pension: $23,900; Craig\u2019s OAS $8,925; minimum withdrawal from Craig\u2019s RRIF $14,000; and an additional withdrawal from Craig\u2019s RRIF $6,000. The remainder would come from the non-registered portfolio. <\/p>\n

\u201cThey could plan a further withdrawal from Sharon\u2019s RRSP\/DC plan of $45,000,\u201d Mr. Oenar says. After pension income splitting, their taxable income should still be in the same $50,000 \u2013 $55,000 range each, he says.<\/p>\n

In Scenario 3, they buy a house that they would eventually move to when they sell the farm, renting it out in the meantime. They\u2019d put $200,000 to $250,000 down and take a mortgage of $300,000. Moving into the house in the future might trigger capital gains due to a change of use, the planner says. <\/p>\n

They could elect to postpone reporting the disposition of the property until they actually sell it under subsection 45(3) of the Income Tax Act, he says. \u201cWhen calculating the final capital gain, Craig and Sharon would declare how many years they owned the property, as well as how long it was used as a rental property and as a primary residence.\u201d<\/p>\n

This third example assumes they buy the house next year and rent it out for $18,000 a year, which would be cash-flow neutral because of the mortgage and other expenses. They sell their farm when Craig is 80 years old, move to the house in town and pay off the mortgage. <\/p>\n

\u201cThe sale of their hobby farm would be tax free and would inject a significant amount of after-tax capital into their retirement assets, resulting in $135,000 a year in sustainable spending,\u201d the planner says. <\/p>\n

There is also a family cottage to be passed on to the next generation, he notes. Sharon and Craig could plan now for ways of spreading the capital gain out in advance to avoid the higher marginal tax the estate would pay, Mr. Oenar says. <\/p>\n

\u201cFamily cottages are often a great source of disputes,\u201d the planner says. Craig and Sharon should convene a family meeting at some point and put agreements and procedures in place to avoid conflict.<\/p>\n

In all three scenarios, Sharon can afford to retire in 2026, the planner says. \u201cBut they have expressed that her job is her passion, bringing her great satisfaction, so there are more than financial reasons for her to continue working.\u201d <\/p>\n

Craig and Sharon will be relying on their investments so they should ensure that their asset mix is within their comfort level, Mr. Oenar says. The current self-directed portfolio is 100 per cent in stocks, \u201ca concern given their age and need for portfolio withdrawal,\u201d he says. \u201cThis should be revisited, perhaps with professional advice.\u201d <\/p>\n

Recommendations such as all-in-one exchange-traded funds could be appropriate low-cost solutions, the planner says.<\/p>\n

Client situation <\/p>\n

The people:<\/b> Craig, 64, Sharon, 62, and their two children, 21 and 26.<\/p>\n

The problem:<\/b> Can they afford for Sharon to retire in January? Should they defer government benefits? Should they buy a second property?<\/p>\n

The plan:<\/b> Start drawing down their RRSPs\/RRIFs when they first retire and their income is lower than it will be later. Defer government benefits. Ensure their all-stock portfolio is in line with their comfort level. <\/p>\n

The payoff:<\/b> The satisfaction of knowing they are on track for a comfortable retirement.<\/p>\n

Monthly net income:<\/b> $13,335.<\/p>\n

Assets:<\/b> Bank account $5,000; inheritance in bank $532,000; his RRIF $340,604; her RRSP $444,930; her spousal RRSP $62,704; her defined contribution pension plan $107,215; his TFSA $120,413; her TFSA $117,083; joint investment $41,628; registered education savings plan $20,000; cottage share $400,000; residence $1,000,000. Total: $3.2-million.<\/p>\n

Estimated present value of Craig\u2019s defined benefit pension:<\/b> $357,594. This is what someone with no pension would have to save to generate the same income.<\/p>\n

Monthly outlays:<\/b> Property tax $387; home insurance $600; electricity $200; heating $150; maintenance, security $1,015; garden $100; cottage expense $350; transportation $510; groceries $1,500; clothing $50; gifts, charity $300; vacation, travel $500; dining, drinks, entertainment $300; personal care $25; animals, food and vet care $1,000; sports, hobbies $50; subscriptions $80; health care $140; phones, internet $250; RRSPs $1,300; TFSAs $500. Total: $9,307. Surplus goes to saving and unallocated spending.<\/p>\n

Liabilities:<\/b> None.<\/p>\n

Want a free financial facelift? E-mail finfacelift@gmail.com<\/a>.<\/p>\n

Some details may be changed to protect the privacy of the persons profiled.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Craig and Sharon are wondering if they should buy a house in town…\n","protected":false},"author":2,"featured_media":260768,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[51,474,9121,2499,16,15],"class_list":{"0":"post-260767","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-financialfacelift","11":"tag-personal-finance","12":"tag-uk","13":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114844241973273300","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/260767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=260767"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/260767\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/260768"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=260767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=260767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=260767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}