Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

-

Christinne Muschi/The Globe and Mail

Ruth has lived modestly, invested her savings and paid off her debts.

Now, at age 52, she wonders when she can retire.

She earns $58,800 a year before tax, an amount that varies depending on how many days she works. In addition, she gets $10,000 a year for life, a bequest from a relative. Ruth has joint custody of her teenage daughter, for whom she gets some child support.

Story continues below advertisement

Glancing at Ruth's monthly budget, one number stands out – $600 for vacation and travel, or $7,200 a year. To spend so much, she pinches pennies in other areas.

"I probably spend even more on travel some years," Ruth writes in an e-mail. "It's what I love to do the most."

As long as she is working, she has no intention of scaling back.

"Once I retire, I hope to travel, but maybe to places where I can travel on more of a budget; let's say $400 a month," she adds. "It may be high, but my expenses for most other things are low."

Indeed, excluding travel, she spends a modest $2,240 a month, or $26,880 a year.

Ruth is mortgage-free, so her housing costs are only $680 a month, with $300 of that being property tax.

For the next little while, all of her extra money will go to some much-needed maintenance and repairs on her Montreal-area house.

Story continues below advertisement

Her goals: To ensure her savings are invested wisely and to retire, if possible, before age 67.

We asked Heather Franklin, an independent Toronto financial planner, to look at Ruth's situation.

What the expert says

First, the investments. For Ruth, getting the best return possible is important, Ms. Franklin says.

Unfortunately, Ruth holds mutual funds with deferred sales charges and high management expenses "that are handicapping the performance of her investments," the planner says.

Depending on the penalties for selling early, "extricating herself from these mutual funds and changing her investment strategy might be a viable option," she says. The deferred sales charges expire in four years.

Story continues below advertisement

Ruth could then begin to build a balanced portfolio (some stocks, some fixed income) of low-cost mutual funds with strong performance records and/or low-cost exchange-traded funds, which track the performance of various stock and bond indexes.

New contributions should be directed immediately to such low-fee investments.

The planner recommends Ruth keep working until she is age 65 because she has no work pension and so must rely heavily on her savings.

In preparing her retirement forecast, Ms. Franklin assumes that Ruth continues to contribute to her RRSP and TFSA at the current rate, that her average annual return on investments is 5 per cent and that she lives to age 90. Inflation is assumed to average 2 per cent a year.

At age 65, Ruth will begin collecting Quebec Pension Plan benefits. Her lifestyle spending of $2,640 a month (current spending plus $400 for travel) will leave her with a shortfall that will have to come from her savings. By then, her TFSA will have grown to about $115,000, the planner estimates. Withdrawals will not be taxable.

At age 67, Ruth will begin collecting Old Age Security benefits, which will trim her monthly shortfall. Still, by age 72, Ruth may well have exhausted her TFSA savings. She will begin making mandatory minimum withdrawals from her RRSP, which by then will have been converted to a registered retirement income fund.

Story continues below advertisement

Ms. Franklin estimates the minimum withdrawal (assuming the RRSP will have grown to $475,000) will amount to $35,000 in the first year. That, plus Ruth's $10,000 bequest and her government benefits (all of which are taxable), should provide her with enough money to live comfortably for the rest of her life.

Living costs will be higher by then because of inflation, and health care costs could throw a wrench in Ruth's budget. If unexpected expenses arise, she will still have her house to fall back on.

Client situation

The person

Ruth, 52

The problem

Story continues below advertisement

When can she retire?

The plan

Continue with her current savings, retire at age 65 and travel on a reduced budget.

The payoff

A clearer view of her financial future and how she can help make it secure.

Monthly net income

Story continues below advertisement

$4,230

Assets

TFSA $36,000; RRSP $221,000; RESP (for daughter) $51,000; residence $425,000. Total: $733,000

Monthly disbursements

Property tax $300; utilities, insurance $180; maintenance and improvements $200; transportation $310; groceries $465; child care $25; clothing $105; gifts, charity $40; vacation, travel $600; personal discretionary (dining, entertainment, clubs, sports, grooming) $340; dentist, drugstore $110; connectivity (telecom, cellphone, Internet) $125; RRSP $815; RESP $90; TFSA $450; professional association $40. Total: $4,195

Liabilities

None

Want a free financial facelift? E-mail finfacelift@gmail.com

Some details may be changed to protect the privacy of the persons profiled.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies