Timothy, 57, and Margaret, 53, plan to retire in two years after supporting their children through weddings, careers, and first home purchases. With Timothy qualifying for his full defined-benefit pension following 30 years of service, the couple aims to enjoy travel, including winters in warm destinations and summers across Canada, on a $20,000 annual budget.
Current Financial Snapshot
Timothy earns $115,000 annually before tax, while Margaret brings in $94,000. Starting in 2028, their pensions will provide $46,200 and $49,000 yearly before tax, respectively, dropping to $23,000 and $35,000 at age 65. They own a mortgage-free Ontario home valued at $750,000 and intend to remain there long-term.
Their investment holdings include $506,000 in RRSPs focused on growth-oriented mutual funds and $208,000 in TFSAs with GICs and ETFs. Current annual expenses total $40,000, but they target $84,000 after tax in retirement, equating to about $7,000 monthly.
Key Retirement Questions
The couple seeks the most tax-efficient method to bridge income shortfalls and avoid government benefit reductions. Options under consideration include early RRSP withdrawals or Canada Pension Plan (CPP) claims. They also evaluate the ideal age to begin government pensions and whether retiring in 2028 is viable, alongside strategies to ensure lifelong investment sustainability.
Expert Insights from Retirement Planner Eliott Einarson
Eliott Einarson, a retirement planner at Ottawa-based Exponent Investment Management, confirms the couple can retire comfortably in two years. Their disciplined saving aligns with the principle that steady accumulation builds substantial wealth over time.
Einarson advises crafting a customized retirement income strategy. “Their $84,000 after-tax goal, including $20,000 for travel and buffers, exceeds current expenses. Until Timothy reaches 65, unreduced pensions alone deliver about $67,000 after tax,” he notes. Supplementing with RRIF income allows continued TFSA contributions for the next 35 years.
Pensions and government benefits will cover most needs despite limited indexing. Einarson recommends starting CPP and Old Age Security (OAS) at 65, using registered investments for pre-65 gaps, and maximizing annual TFSA contributions for tax-free growth without withdrawal mandates.
“At 65, bridge benefits drop, but delaying CPP until then ensures steady income with maximum, fully indexed lifetime payments,” Einarson explains. Post-65 income splitting on pensions and registered funds minimizes taxes, prevents OAS clawbacks, meets targets, and supports TFSA growth.
A detailed plan enables testing various income scenarios to optimize taxes and TFSAs—their strongest long-term assets. Draw down RRSPs while both are alive for splitting benefits, as survivor taxation hits highest rates otherwise. “Higher income to fund ongoing TFSA top-ups aids survivor and estate planning,” he adds.
Professional guidance provides clarity on income streams, tax savings, surplus for TFSAs, and projected net worth growth.
