THE GLOBE AND MAIL - DIANNE MALEY
After 35 years of working for the city, Tom is keen to retire in January. He is 58 and earns more than $155,000 a year. His wife, Liza, is 59 and plans to retire at the same time, leaving behind a $95,000 job in education.
They both have defined benefit pension plans partly indexed to inflation. Tom’s would pay up to $93,440 a year, depending on the survivor benefit, and Liza’s $22,300. They have a mortgage-free house, a rental property and three adult children.
When they leave the working world behind, they plan to “travel the world,” Tom writes in an e-mail. They also want to winter in a warmer climate, perhaps in Europe, and get involved in volunteer work at home. “Learning to sail is on our agenda and we hope to take formal lessons next spring,” Tom writes. “Depending on how that goes we may entertain purchasing a used sailboat.”
Tom and Liza hired an adviser to assess whether they should draw on their registered retirement savings plans (RRSPs) first or leave them intact as long as possible. The adviser said to leave them as long as possible. “This really does not make too much sense to me,” Tom writes. They also ask when they should begin drawing government benefits.
The question they have the most difficulty with, Tom writes, is which pension survivor option he should take since he has the larger pension: a two-third survivor benefit or the joint lifetime benefit?
Their retirement spending target is $110,000 a year after tax.
We asked Ian Black, a fee-only financial planner at Macdonald, Shymko & Company Ltd. of Vancouver, to look at Tom and Liza’s situation. Mr. Black holds the advanced registered financial planner (RFP) and trust and estate practitioner (TEP) designations.
What the expert says
Tom and Liza’s retirement spending target is substantially higher than what they are spending now after taxes and saving, Mr. Black says. As well, many of their current outlays will end or be reduced after they have retired. “That said, travel expenses will increase significantly.”