Nick and Heather, a retired couple in their mid-60s, are planning their financial future. They aim to purchase a waterfront property, assist their children with down payments, and ensure a comfortable retirement lifestyle. Despite owning investment properties and having diversified investments, they face questions about when to start drawing Canada Pension Plan benefits and whether whole life insurance is worth the expense. Financial planner Warren MacKenzie evaluated their situation and provided recommendations.

Purchasing Property and Supporting Children

MacKenzie advises Nick and Heather on buying a new home and contributing to their children's first home savings accounts. By selling rental properties over three years, they can minimize capital gains tax while achieving their spending goals.

After acquiring a new residence, their annual basic lifestyle expenses will be $70,000, supplemented by mortgage payments of approximately $60,000 and an annual $20,000 cost for a whole life insurance policy. The forecast assumes that by age 85, they will sell their sailboat, reducing expenses by $10,000 annually. To prevent potential conflicts among heirs, they appointed a lawyer as their executor rather than one of their children. Their contributions of $40,000 to each child’s First Home Savings Account provide a head start for their offspring's homeownership journey.

Optimizing Investments and Retirement Income

The planner suggests strategies to optimize their asset mix and retirement income sources. A revised portfolio structure would simplify their finances and enhance tax efficiency. MacKenzie recommends delaying Canada Pension Plan benefits until age 70 for increased payouts and starting Old Age Security at 65 due to their current income levels below the clawback threshold.

Nick and Heather’s asset mix includes interest-bearing investments, stocks, and real estate. Adjusting holdings to place more stocks in taxable accounts could reduce taxes on capital gains. With projected net worth reaching $2-million by age 70, they should consider withdrawing funds from RRSPs and RRIFs to utilize lower tax brackets effectively. Additionally, reevaluating the necessity of the expensive whole life insurance policy might allow them to allocate resources toward other priorities like travel or hobbies. Regularly reviewing their plan ensures adjustments can be made if circumstances change, securing long-term financial stability without depleting assets prematurely.