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They are separated by age, retirement and distance from their respective properties. How can they come together and realize their project: not to travel?

The situation

“How can I get my spouse to join me in the campaign as soon as possible to retire together? asks Jocelyn*.

He is 58 years old and plans to retire within a year and a half, at age 60 at the latest.

His spouse Lucie*, aged 53, could take hers without a reduction at age 60, but she would like to be able to join him earlier.

Join him in retirement and in the house he built in Estrie.

Because there lies their dilemma: as long as she works in the Montreal area, she cannot leave their house on the South Shore and settle permanently with him in Estrie. “If I stop working, you can’t have two houses,” says Jocelyn.

But if Lucie retires early, she cuts her pension plan.

She has worked for 15 years in the health sector, where she 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 pension plan of the Commission de la construction du Québec, 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 are a couple formed on the internet,” says Jocelyn.

She was a single mother of three children. He had none. “I took them under my wing and over time, I considered them my children,” he says, laughing.

He sold the house he owned in the North Shore to move into Lucie’s on the South Shore. “Since I didn’t have any children, it allowed me to invest a little in the family home. »

10 years ago, he bought a piece of land in Estrie, on which he slowly built the house where he wants to retire.

Numbers

Jocelyn, 58 years old

Salary : $87,000
Retirement pension:
Main account:
$2600/month for life
Additional account: $896/month to age 70, $196/month from age 70
QPP: $760/month at age 60 or $999/month at age 65
RRSP: $80,000
TFSA: $18,000
Country house in Estrie: $400,000, mortgage-free

Lucia, 53 years old

Salary : $45,000
Pension: $525/month at age 60
QPP: $577 at age 60 or $917 at age 65
RRSP: $25,000
TFSA: $8000
Legacy : $60,000
Chalet inherited: $300,000, mortgage-free
House on the South Shore: value of $450,000
Mortgage balance: $150,000
Line of credit : $24,000

He currently puts the couple’s cost of living at around $72,000. “The only expenses we incur are the restaurants and the visit we receive. »

With one house less, he estimates the retirement budget would be around $48,000. Their plans: not to travel.

“We are not ‘travelers’, he says. She’s terrified of planes, so we’ve never traveled. And I don’t see why we would travel when we retire. »

Despite everything, they don’t want a tight budget to restrict their outings. “We don’t want to be locked in the house. »

Part of the solution lies in the sum of $60,000 and the cottage that Lucie’s recently deceased parents bequeathed to her.

“She would like to retire before age 60, but her pension would be less,” he explains. She would like to compensate with the cottage and the amount she received from her parents. Do we put the chalet for rent? It would allow him to earn a salary until he was 60, and then sell the chalet. That’s what we wonder. »

“What we are looking for is to go to the campaign as soon as possible. »

How to get there?

The answer

“There is no doubt that by choosing to retire early, Lucie will sacrifice a significant portion of her retirement pension,” confirms financial planner Benoit Chaurette, advisor at 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 her 61e birthday (i.e. 6% per year).

Retiring on the day of his 55e birthday, Lucie has already seen her pension reduced by 36%. But this pension is also calculated on the basis of the number of years of service.


PHOTO KARENE-ISABELLE JEAN-BAPTISTE, SPECIAL COLLABORATION ARCHIVES

Benoit Chaurette, Advisor at the National Bank Private Wealth Center of Expertise 1859

“By working shorter hours, fewer years will be recognized for the retirement pension calculation,” notes the planner.

According to the figures that Jocelyn provided, Lucie would have received at age 60 a pension of $6,300 per year. Given the uncertainty surrounding these elements, our advisor estimates that Lucie would see her pension cut by about half, or just over $3,000. “It’s not that big of an amount, if you look at all the data,” he says.

Indeed, his retirement income will be based mainly on his assets.

Fewer properties

The sale of the South Shore house would leave a principal of approximately $300,000 after paying off the mortgage balance.

The cottage inherited by Lucie is worth approximately $300,000. She hesitates between renting it and selling it.

Very clever the one who can predict which is more profitable between making a return on the rental of the chalet or on an investment. In both cases, there are many unknowns.

Benoit Chaurette, Advisor at 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 begins her retirement.

However, Lucie could now repay her line of credit with part of the amount received as an inheritance, suggests the planner.

Distribution and optimization

The rest of the inheritance and the proceeds from the sale of the properties are first used to fund Jocelyn and Lucie’s tax-free savings accounts (TFSA) in order to optimize 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 de facto spouses separate their income and expenses. “We have to see if the couple agrees to go that far. It is assumed that there may be some form of gift or loan between the spouses to allow the other to optimize his TFSA. »

For the purposes of its calculation, it involves government pensions (Old Age Security pension, PSV, and Quebec Pension Plan, QPP) at age 65, but depending on the couple’s situation and state of health, they may be postponed to improve them.

Cost of living and inflation

Can Lucie stop working at 55?

Benoit Chaurette did the math based on their 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. I wanted to see if it was possible to stay in that level of comfort. »

It assumes a return of 4% and uses the inflation rate of 2.1% recommended by the Institut québécois 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 projection: Lucie has a one in four chance of still being alive in 44 years.

“If I used 5% inflation, I couldn’t use 4% return,” he says. It would be a bit illogical. With returns, there should be a risk premium. They should do better than inflation. »

“Otherwise, there is no value in buying investments, and we will rather buy canes of 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 old. “There is still a lot of leeway,” he says.

Plan for the worst

“Retiring in two years and moving to the countryside is a very realistic plan,” notes Benoit Chaurette. Provided of course that the couple remains united. A separation could make the project more 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? »

He recommends that the couple consult a notary and draft wills and a cohabitation agreement “which would define the rights, obligations and responsibilities of each”.

Because retirement should not only be comfortable: it should be serene.

* Although the case highlighted in this section is real, the first names used are fictitious.

Are you planning a project that requires a wise use of your money? Do you have financial problems?



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