After having lived the dream retirement to take it easy on a Caribbean beach, Étienne* realizes that he is bored and returns to Montreal to restart his life.
At age 52, in December 2020, Étienne decided to sell his condo in Montreal to retire in Mexico. In a condo near a beach, bought for $200,000, Étienne enjoyed a lower cost of living than in Quebec with her Mexican husband Alejandro*. This retirement coveted by so many Quebecers cost him $2,000 a month, all inclusive.
He then had $650,000 in registered retirement savings plan (RRSP), tax-free savings account (TFSA), locked-in retirement account (LIRA) and non-registered guaranteed investment certificates (GIC) assets. .
“I lived the sweet life for almost a year on the beaches of the Caribbean to finally decide that retirement was too soon,” he wrote.
In December 2021, Étienne threw his retirement plan into the sea. He sells his condo in Mexico and returns to live in Montreal with Alejandro, who becomes his dependent and is in the process of obtaining his permanent residence.
“Another reason to come back to Canada was to give him his residence and the possibility of having a better life while having time together,” he says. In Mexico, people work 50 hours a week for the Canadian equivalent of $2 an hour and have no time for family. »
Alejandro eventually wants to find a sales position at $30,000 per year and currently has no assets. Étienne’s have shrunk by $100,000 because of the drop in the stock markets.
Etienne, 54 years old
SHOUT : $75,000
QPP estimated at age 60: $837 per month
Rent : $1600/month
Cost of living: $2500/month
Unused RRSP rights: $108,000
Unused TFSA rights: $6500
Upon his return, Étienne worked on his own as a consultant with an income of $150,000 a year, then let himself be tempted by an employee position at $120,000 in order to benefit from group insurance.
“Did I do well to make this change for insurance, but with a lower income? he wonders. The option of resuming work on my own account is always possible, because I kept my incorporation. »
Étienne explains that he made this choice because he and his spouse have health issues. “I suffer from anxiety, which costs $160 per month in medication, while my spouse, HIV stable, takes antiretrovirals at $1,300 per month. »
As for his second retirement, Étienne does not plan to take it at the same time as Alejandro, since he is currently 29 years old. “Now that I’ve given up on Mexico and we’ve resumed our life in Canada, my plans for the future are still to be defined, but they won’t be more ambitious than living as I live now: having some personal activities, time with my spouse and some travel. »
As Alejandro is not comfortable in a big city, the couple would like to move to the countryside and adopt a dog. “Should I buy property or keep my investments for retirement and stay in housing? “, he seeks to know in order to plan this new start.
Pierre-Raphaël Comeau, expert advisor in wealth management for Laurentian Bank’s private management, wanted to verify whether, from a mathematical point of view, Étienne had made the right choice by opting for the position of employee with insurance. collective.
“The government plan covers their types of medication at 65% instead of 80% in its group plan,” he explains. The difference is $225 per month, but on his own account he earns an additional net income of $1313 per month. »
From a purely mathematical point of view, it is therefore more profitable for Etienne to work on his own. Especially since the retirement fund offered by his employer is no longer an incentive for him, because he could return to retirement.
“But the real question is not there”, assures Pierre-Raphaëlle Comeau.
Being self-employed is not the same pace of life as being an employee. Often, it’s not the same stress either. It’s more about lifestyle choices than pure finance.
Pierre-Raphaël Comeau, Expert Advisor in Wealth Management for Laurentian Bank Private Management
Choosing to spend more time with your new spouse as they acclimatize to a new country, new climate, new environment, and new language could outweigh the extra $1,000 per month.
Tenant or owner
Étienne said he could buy a property for $500,000 with a down payment of $200,000. With current market rates, a monthly payment on a $300,000 mortgage amortized over 25 years is less than 10% off its current rental cost, or $1,627, estimates Pierre-Raphaël Comeau. “Yes, there are other expenses associated with maintaining a home, but they have enough cash to meet them,” says the planner.
Again, it comes down to lifestyle choices.
“Will investments outperform real estate in the next 20 years?” Very smart who can predict it, ”explains the specialist.
The retirement plan
If Étienne buys a property in July 2023 at $500,000, continues his same savings habits (RRSP, TFSA and employee retirement fund) and Alejandro has annual income of $30,000, Étienne would leave then the labor market at age 65, easily sustaining a cost of living of $2,000.
Upon his death at age 95, he would even leave Alejandro a sum of $890,000 along with said property.
As financial planning is also about seeing the human being beyond the figures, specifies Pierre-Raphaël Comeau, he would like to remind Étienne that he can already financially carry out his projects, but must think about the essentials. .
“The important thing now is to find happiness. Retiring young under the palm trees in the Caribbean is beautiful and romantic in the movies, but happiness is not “one size fits all”, illustrates the planner. Sometimes we realize that real happiness is made of the little things. Étienne is lucky to have realized this fairly quickly and to be able to reorganize his life to take full advantage of it,” he believes.
* Although the case highlighted in this section is real, the first names used are fictitious.
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