Tom and Judy's retirement plans are in question as they navigate the complexities of their financial situation. With a substantial portfolio of $1.16 million, they aim to retire by 63, targeting an after-tax annual retirement income of $120,000. The key to their strategy lies in tax efficiency and strategic wealth distribution. The couple's financial advisor, Ed Rempel, offers valuable insights into their options.
Rempel suggests that Tom should not delay his employer pension beyond age 65, as it would result in a loss of potential income. Instead, he recommends income splitting during pension commencement and maximizing their investment returns. The couple's 75% equity investment portfolio is expected to yield higher returns than the pension's actuarial formula, which assumes a 5% return. Deferring the Canada Pension Plan (CPP) and Old Age Security (OAS) until age 65 provides an implied return of 10.4% on investments, outpacing their equity investments.
Regarding their bicoastal lifestyle, Rempel advises that they can afford a maximum home value of $1.25 million with a safety margin. Selling their Nova Scotia home and using the proceeds to fund a new West Coast residence, while retaining their East Coast cottage, is a viable option. This approach allows them to maintain their desired lifestyle while minimizing debt. The couple's financial focus should be on tax efficiency and strategic wealth distribution, ensuring a comfortable retirement without unnecessary risks.
