Special to the The Globe and Mail – By Dianne Maley
In 2013, the year of Marguerite’s first Financial Facelift, she had left her home to care for her ailing mother in Vancouver. Marguerite was 51 and worried that working part-time while overseeing her mother’s home care would jeopardize her plan to retire from work at age 60. Marguerite’s spending target was $50,000 a year after tax.
The planner, Ngoc Day of fee-only financial planning firm Macdonald Shymko, concluded that Marguerite would either have to substantially increase her income, work past the age of 60 or plan to spend less when she retired.
More than six years have passed. Marguerite is 57 and back living with her partner. Her mother died in 2015. Marguerite and her siblings shared their mother’s estate.
The inheritance provided “some measure of financial security as I head toward my life in retirement,” Marguerite writes in an e-mail. She has found work as a supply teacher and plans to continue working part-time to age 65, after which she hopes to travel more. Her retirement spending target is still $50,000 a year after tax.
Marguerite has most of her inheritance in short-term guaranteed investment certificates. “I’ve been hesitant about investing while the markets are high and a correction appears to be on the horizon,” she writes. “When and how should I invest for the long term to earn higher rates?” She wonders, too, whether she should buy an investment property.
Once again, we asked Ms. Day of Macdonald Shymko & Co. Ltd. in Vancouver, to look at Marguerite’s situation.
WHAT THE EXPERT SAYS
After getting by on part-time work for a number of years, Marguerite recently landed a job as a substitute teacher and hopes to earn at least $26,000 a year until she retires at age 65. Marguerite says she can live comfortably on $26,000 a year after tax because, while she shares household expenses and food bills, she does not pay rent.
Ms. Day’s calculations show Marguerite could indeed retire at the age of 65 with income of $50,000 a year after tax. She has a defined benefit pension plan from a previous employer that will pay about $30,500 a year, including bridge benefit, at 60, falling to about $27,700 at 65.
“The strength of her financial independence lies in two contributing factors,” the planner says: Marguerite’s retirement cash flow need is moderate, and her Canada Pension Plan, Old Age Security and defined benefit pension benefits will make up a substantial percentage of her desired retirement income.