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GEOFF ROBINS/The Globe and Mail

Clive and Clara have raised four children, paid off their small-town Ontario house and amassed an investment portfolio. Both have good jobs, but Clara wants to quit in a year or two "because of the physical demands of my job," she writes in an e-mail.

Both are 55. Clara works in health care and has a defined benefit pension plan that will pay her about $15,700 a year, plus a bridge benefit, starting at the age of 60. Clive works in sales and has a group registered retirement savings plan worth about $155,000.

She earns $85,000 a year, while he makes about $130,000 a year plus a bonus last year of $47,500.

"We started saving later in life due to money demands of bringing up a family," Clara writes. They have been trying to live off Clive's income and using Clara's to pay off their car loan.

"It seems like every time we start to get ahead, something breaks down or another expense pops up," Clara adds.

One luxury they enjoy is travelling twice a year at a cost of $10,000 to $15,000, she says. "We realize we will have to cut back tremendously once I retire."

Clive plans to keep working until he is 65, although not necessarily at the same job.

"Is it feasible for me to retire next year?" Clara asks. "Could we live on $55,000 to $60,000 a year in retirement and sustain that style of living?"

We asked Warren MacKenzie, founder of Weigh House Investor Services of Toronto, to look at Clara and Clive's situation.

What the expert says

Based on reasonable assumptions, "there is absolutely no financial reason for Clara to continue working beyond the fall of 2015," Mr. MacKenzie says. That assumes an average annual return on investments of two percentage points more than the rate of inflation.

Clara expects to have to cut back on travel when they retire, but that's not the case, Mr. MacKenzie says. "Their financial plan shows they will be able to maintain this luxury."

Their investment portfolio is about $600,000, the planner notes. Because Clive plans to work for another 10 years, they will not have to draw on their savings until he retires.

"By that time, with additional savings of about $30,000 per year including contributions to the RRSP and TFSAs, and modest growth, their investment portfolio should be over $1.2-million," the planner says.

"They do not have enough capital to make huge investment mistakes, but as long as they earn a reasonable rate of return, they should have no fear of running out of money."

To maintain their current lifestyle, they will need an income of about $110,000 a year (in dollars with today's purchasing power), the planner says. This would give them about $92,000 after tax. Clara's pension ($18,207), Canada Pension Plan ($10,203 and $16,340) and Old Age Security ($7,881 and $7,881) would add up to about $60,000 before tax, leaving about $50,000 to come from their investment portfolio.

"They should be able to generate the required income without taking high risk," he says.

As for their investments, Mr. MacKenzie suggests they adopt a disciplined process rather than trying to pick the best products. They could start by drawing up an investment policy statement that sets out why they are buying a security and when and why they will sell it.

Then they could simplify their holdings – they have 11 different accounts – to make them easier to manage and rebalance.

Next, they could cut their 20-per-cent cash allocation and raise their international exposure from the current 2 per cent. He also recommends they shift some of their long-term bonds to shorter-term ones to lower their interest-rate risk.

They might want to compare their performance with a portfolio of exchange-traded funds with similar risk to see how they are doing. "If they are underperforming, they should stop buying individual stocks and start to buy ETFs," Mr. MacKenzie says.

These few simple steps could save them enough to cover their travel expenses.

"They could probably increase their return by $10,000 to $15,000 a year simply by following a disciplined investment process, including regular rebalancing of the investment portfolio," the planner says.

To minimize income tax, they should take advantage of low income tax brackets between the ages of 65 and 72 by turning Clive's RRSP into a registered retirement income fund when he stops working at 65 and splitting the income.

As well, if they are in good health, they may wish to consider delaying Canada Pension Plan and Old Age Security benefits. "By doing this, they will earn more [assuming] they live into their 80s," Mr. MacKenzie says.

Client situation

The people

Clive and Clara, both 55.

The problem

Figuring out whether Clara can stop working in 2015 without jeopardizing their retirement income.

The plan

Go ahead and retire because they should have more than enough money. A more disciplined approach to investing could improve returns enough to cover travel spending.

The payoff

Better use of their savings and the peace of mind that comes from financial independence.

Monthly net income



Stocks $214,800; mutual funds $156,000; other non-registered $23,800; her TFSA $27,400; his TFSA $28,500; his company pension $155,000; estimated present value of her DB pension plan $350,000; residence $200,000. Total: $1.16-million

Monthly expenditures

Housing $900, vehicles $1,300; groceries, clothing $1,110; car loan $3,000; gifts $660; vacation $1,200; helping out children $415; personal discretionary $245; health, dental, disability insurance $370, drugstore $80; telecom $185; RRSPs $1,345; non-registered savings $265; TFSA $665; pension plans $1,300; association $105. Total: $13,145


Car loan $33,000

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