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They also still have to years to build their savings, which they will count on for retirement income.
If they add $12,000 per year to their TFSAs, the current balance of $152,000 growing at three per cent per year after inflation will rise to $185,620 and support $7,800 in annual payments if annuitized for 40 years to Suzie’s age 95. Their RRSPs, meanwhile, with a current balance of $1,480,000 and $9,600 in annual contributions would grow to $1,590,200 and support payments of $66,800 per year for 40 years.
Stage 1 — Neil is 60 and Suzie is 55. Their annual Income would include $24,000 rental income, $7,800 from their TFSAs and $66,800 from their RRIFs, for a total of $98,600. After splits of eligible income, no tax on TFSA income and 18 per cent average tax on the remainder, they would have $6,850 per month to spend but no further savings nor wardrobe expenses for the office for Suzie.
Stage 2 — Neil is 65, Suzie is 60. They would have all the income from Stage 1 plus Neil’s $7,362 OAS income and an estimated $12,470 from his CPP account. The total, $118,432 split and taxed at an average 19 per cent would be $8,120 per month. They could restore dining out and travel spending.
Stage 3 — Neil is 70. Suzie is 65. She draws estimated $11,084 CPP and $7,362 OAS. Their total income would be $136,905. After splits and 20 per cent average tax, they would have $9,260 to spend each month. They would have a surplus over spending. “That would enable restoration of any savings eroded in the first five years of Suzie’s retirement,” Moran explains.
Can they afford $10,000 in travel per year? After Neil is 65, their income will rise and make it possible. The $100,000 renovation would be affordable either now while Suzie Is working or when Neil is 65. The renos would shift some savings to the capital value of their house. They already have $200,000 cash for the reno and weddings. “They have sufficient assets to make the plan work,” Moran concludes.
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