Valeria, a 53-year-old single woman with a million-dollar investment portfolio, is considering retirement in two years. Her goal is to achieve a monthly income of $4,500 before tax, similar to her current expenses. With her investments in RRSPs, TFSAs, and GICs, along with a defined employer pension plan and a bridge benefit, she is well-positioned to retire comfortably. However, her retirement plan needs careful consideration to ensure a smooth transition and a secure financial future.
Valeria's investment portfolio includes $600,000 in an RRSP, $130,000 in a TFSA, $50,000 in GICs, and $41,000 in a conservative mutual fund. She also has $100,000 in cash and $205,000 in cashable GICs. Her home, valued at $350,000, will provide additional equity. With her annual income of $92,000 pre-tax, she has a defined employer pension plan with a bridge benefit that will provide a steady income until age 65.
Eliott Einarson, a retirement planner at Exponent Investment Management, suggests that Valeria's modest income goal and healthy RRSP balance will allow her to meet her cash flow needs in retirement using just her employer pension and registered assets until age 65. Once the bridge benefit ends, CPP and OAS can replace her income without increasing her marginal tax rate. Einarson recommends a clear retirement plan, supported by simple illustrations, to help Valeria make informed decisions about her asset mix and retirement timing.
Einarson advises Valeria to put the taxable long service award into her RRSP and to hold her longer-term growth investments in her TFSA to maximize tax-free compounding. He suggests keeping the rest of her funds in cash and some GICs for a more conservative overall allocation, reviewed annually based on her income plan and comfort level. By following this approach, Valeria can ensure a secure and comfortable retirement, with her investments and pension providing a steady income and her non-registered savings available for growth, discretionary spending, or emergencies.
