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Neil is a professional with a high-paying job, a wife and a six-year-old daughter. He's 47, his wife, Nina, is 41.

So concerned is Neil about meeting his family's financial goals that he plans to work until he is 69, owns an investment property and is heavily invested in stocks and other equity securities.

"Are we on track to accomplish our financial goals of a quiet retirement, our child's education and leaving some inheritance?" he writes in an e-mail. Should they sell the rental property and pay down their loans? he wonders. Their main goal is to pay off the mortgage on their Regina home and to save money for international travel as part of their child's education.

Neil has a defined contribution pension plan at work in which his employer matches his contributions up to a certain point. As well, he has a registered retirement savings plan of his own and contributes to a spousal plan for Nina. He figures they will need $50,000 a year after tax to live on when he retires.

We asked Ron Graham, principal with Edmonton's Ron Graham & Associates Ltd., to look at the family's situation.

What the expert says

To meet his retirement income goal, Neil will have to save $1.5-million in his combined company pension and RRSP, Mr. Graham says. That assumes an average annual rate of return on investment of just 4 per cent. If he earns 6 per cent, he could retire earlier or spend more.

If Neil continues contributing at the current rate, he will accumulate $1.9-million by the time he retires at age 69. His non-registered investments, Tax-Free Savings Account investments and rental property are surplus.

Although it is not necessary, it would make life easier for the couple to sell the rental property and pay down the mortgage on their principal residence, Mr. Graham says. As it stands, the mortgage will be paid off in about 11 years. But because they borrowed against the rental property to buy the family home, interest on the loan is not tax deductible, he notes.

Neil's company pension leaves him with only about $1,500 a year in RRSP contribution room. He should contribute this to a spousal RRSP for Nina. As well, he should give her $10,000 to take advantage of her unused Tax-Free Savings Account room and continue contributing the maximum each year for both of them.

Their line of credit was taken partly to invest in stocks and partly for personal use (home renovations), the planner notes. He suggests they split it and pay off the personal-use portion first because the interest is not tax deductible. He also suggests they save money, say in income-producing securities in their TFSA, for personal goals such as buying a car. If they want to borrow to make an investment outside the TFSA, the interest on the loan would be tax deductible.

Given the family's modest goals, Neil is taking far more risk with his investments than necessary, Mr. Graham says. His pension is in a balanced growth fund, which could be about 60 per cent in equities, his RRSP is in an aggressive growth portfolio (80 per cent equities) and his TFSA is invested entirely in stocks. While his returns may be higher, he doesn't need the extra money. If he shifted gradually to a less aggressive investment mix, he would have less stress in his "investment life," the planner says.

Nina and Neil aim to save enough money in their daughter's registered education savings plan to generate $7,500 a year. Mr. Graham suggests they continue making the maximum contribution until their daughter is 15, at which time the government grant of $500 a year to a maximum of $7,200 would run out. They could set up a separate savings/investment account to finance the travel they plan as part of the child's education.

When he retires at age 69, Neil will be entitled to the Canada Pension Plan and Old Age Security. Assuming Nina does not work outside the home, she will qualify only for OAS.

With his company pension, Neil could buy a registered retirement income fund and begin drawing on it when he retires. (Company pensions are not locked in after retirement in Saskatchewan.) He could shift his RRSP to a RRIF when he is 71.

No tax is held back on minimum RRIF withdrawals. Mr. Graham advises that Neil have the mandatory minimum withdrawal from his RRIF based on Nina's age because she is younger and so the amount they would have to withdraw each month would be smaller. They could split the pension income, lowering income taxes payable. She would begin withdrawing the minimum amount from her RRIF when she reaches 71.



The People



Neil, 47, Nina, 41, and their six-year-old daughter



The Problem



Making sure they're on the right track to a secure financial future, a good education for their daughter and a comfortable retirement.



The Plan



Sell the rental property, which is only breaking even, and pay off the mortgage on the family home. Pay off debt on which interest is not tax-deductible first. Save to spend and borrow to invest. Cut unnecessary risks in Neil's investment portfolio.



The Payoff



Easily meeting their retirement income goal without struggling too much during the working years and taking on undue risk that could undermine their security.



Client Situation



Monthly net employment income: $8,490.



Assets



Stocks $23,000; TFSA $11,000; his RRSP $34,420; spousal RRSP $32,660; employer pension plan $175,000; residence $550,000; rental property $300,000, RESP $28,000. Total: $1.15-million.



Monthly disbursements



Spousal RRSP $250; employer pension plan $820; groceries, dining out $500; clothing $200; lunch/coffee $75; RESP $375; mortgage payment $2,500; property tax $250; property insurance $265; utilities $200; telecom, cable, Internet $175; repair and maintenance $100; vacations $350; reading, music, movies $50; education $650; auto expenses $350; loan payments $780; daughter's activities $150; group insurance $25; donations $250; professional dues $105; line of credit $500; gifts $25. Total: $8,945. Deficit: $455.



Liabilities



Line of credit $30,000; home mortgage $267,280; rental property mortgage $175,000. Total: $472,280.





Special to The Globe and Mail

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