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Natasha and Trent face a momentous decision. In less than a year, they plan to quit their jobs, sell their Vancouver condo and move to a much less expensive town in Eastern Ontario.

She is 55 and he 57 - young to be putting up their feet and living off their savings for another 30 or 40 years.

Natasha hopes to work part-time in their new location but Trent, who is growing tired of the long commute to his job in the computer industry, wants to retire outright this coming September and pursue his hobbies.

"It's a big decision to make because if we quit our jobs and realize shortly after that we do not have sufficient investments to live off, it will be difficult to find work again," Natasha writes in an e-mail. They have no pensions whatever so how they invest their savings is critical.

They hope to clear enough money from the sale of their Vancouver condo to buy a comfortable house in their new location. They figure they will be able to get by on a relatively modest after-tax income of $30,000 a year.

We asked Gina Macdonald, financial planner and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Natasha and Trent's situation.

What the Expert Says

With more than $820,000 in savings, a mortgage-free home, no debts and modest income needs, Natasha and Trent will easily be able to afford to retire next fall, Ms. Macdonald says.

"If you look at their level of monthly savings through monthly deposits and RRSP contributions, they are effectively saving all of Natasha's net income," the planner says. "This bodes well for their transition to retirement, as they will not have to adjust to a reduced level of spending/lifestyle."

In her calculations, Ms. Macdonald assumed a 5-per-cent average annual rate of return on their investments, an inflation rate of 2 per cent a year and a time span of average life expectancy plus 10 years.

Initially, they will draw from their substantial non-registered savings. When they turn 65, their investment returns, Canada Pension Plan and Old Age Security (both would get less than the maximum CPP benefits) would give them a before-tax income of about $56,000 a year, the planner estimates, a "desirable margin of safety" that would allow them to spend more if they wanted to.

On a cautious note, the planner says some of their expenses seem low and might rise more quickly than the consumer price index; she cites, for example, property taxes, home insurance and fuel.

Buying a new car for $25,000 when they move next year will be no problem.

The analysis assumes that when Natasha and Trent move to Ontario, they will buy a home for about the same price as they fetched for their condo and that they remain in their home for the remainder of their lives. Their home equity will provide a safety net in case they need money in future for health care and medical expenses.

Indeed, given the size of their savings and their relatively low income needs, they could spend much more on a new home or even buy a cottage or rental property and still achieve their retirement income goal of $30,000 a year, Ms. Macdonald notes - albeit with less of a safety margin.

Their RRSP portfolios are fairly balanced in size, so their income taxes should be fairly well split during retirement assuming they spend their non-registered investment portfolio money first, she says. While they continue working, they should maximize their RRSP contributions.

Ms. Macdonald suggests Natalie and Trent review their asset allocation and risk tolerance. Apart from their tax-free savings accounts, they are entirely invested in equity-type securities, mainly through mutual funds. Given their modest income needs, Natasha and Trent don't need to take much risk in their investment portfolio, she says.

If their plans change, Natasha and Trent will still be comfortable financially, Ms. Macdonald says - even if they decide to stay in Vancouver and perhaps buy a vacation home in Eastern Ontario. Being financially independent "puts people in charge of their destiny."

A final note of caution: "I would strongly suggest renting in the area they wish to move to before they make such a large move," Ms. Macdonald says. Perhaps they could vacation in the Eastern Ontario town next summer before they decide to sell their Vancouver home.

The People

Natasha, 55, and Trent, 57

The Problem

Ensuring they have enough money saved to retire next September, sell their Vancouver condo and buy a house in Eastern Ontario - as well as a new car - and generate $30,000 a year after tax for the rest of their lives.

The Plan

Keep contributing as much as possible to their RRSPs, consider renting in Ontario before throwing in the towel in Vancouver and then pursuing whatever decision they make with confidence.

The Payoff

A long and financially secure retirement in the location of their choice with plenty of options.

Monthly net income



Condo $350,000, Trent's RRSP $255,130; Trent's non-registered investments $56,145; tax-free savings accounts $10,000; other savings $12,000; Natasha's RRSP $180,000; Natasha's non-registered investments $308,125. Total: $1.17-million

Monthly disbursements

Condo fee $124; car insurance $120; phones, Internet $110; books $80; clothing $100; life insurance $45; RRSP contribution (hers) $750; RRSP contribution (his) $950; savings (hers) $1,250; savings (his) $1,050; property tax $200; condo insurance $50; gym $35; groceries, drinks $520; travel $175; bus pass $150; hydro $25; entertainment $170; personal $180. Total $6,084.



Special to The Globe and Mail

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