Ezra and Leanne, both aged 63, are contemplating their financial future as they approach retirement. With substantial savings, two rental properties, and concerns about funding their daughter's education, they seek advice on the most tax-efficient strategies to secure their financial well-being. Their primary objectives include ensuring comfortable retirement years while supporting their daughter’s aspirations to attend medical school. A detailed analysis by financial planner Matthew Ardrey reveals that despite some uncertainties in their budgeting, they have a strong chance of achieving their goals.
Ezra and Leanne currently earn $95,000 and $84,000 annually from their respective jobs in hospitality and administrative assistance. They own two rental properties, which unfortunately do not generate profits but were acquired to fund their daughter’s education. Despite these challenges, their combined assets amount to approximately $3.88 million, including real estate and investment accounts. The couple plans to retire at age 65 but expresses concern over whether their funds will last throughout their lifetimes. To address these worries, Mr. Ardrey provides insights into optimizing their financial strategy.
A significant recommendation involves delaying the sale of their rental properties until after retirement. This approach aims to minimize capital gains taxes. Furthermore, selling one property per year over consecutive years can further reduce the tax burden. According to the forecast, this process would occur in 2027 and 2028, with proceeds directed towards non-registered investment accounts.
In addition to property sales, Ezra and Leanne should consider when to begin drawing government benefits. Based on their immigration history to Canada in 1994, they may qualify for approximately 70% of Canada Pension Plan benefits and 80% of Old Age Security payments upon retirement. However, potential increases could arise if reciprocal agreements exist between Canada and their country of origin.
Another critical aspect of their financial plan involves diversifying their portfolio. Currently holding an aggressive asset allocation favoring stocks, they risk heightened volatility during decumulation phases. Mr. Ardrey suggests reducing stock exposure to around 60%, enhancing geographic diversification, and prioritizing income-generating investments.
Ultimately, Ezra and Leanne possess robust resources to meet their retirement objectives comfortably. Through careful planning, including reassessing their spending habits and adjusting investment strategies, they can ensure long-term financial stability while fulfilling familial obligations. Although uncertainties remain regarding actual expenditures, adopting conservative projections strengthens the likelihood of success.