Skip to main content

Retirement Trevor and Tara are tired of their jobs. Can they to move to B.C. and maintain their standard of living?

Trevor and Tara.

JOHNNY C.Y. LAM/The Globe and Mail

Trevor is growing tired of the military life, with its frequent moves and disruptions. He’s 43. His wife, Tara, is growing tired of her public-service job. She’s 37. They have two children, ages 5 and 7.

They’d like nothing better than to settle down on Vancouver Island, where they would be close to family, then could renovate and expand their ancestral home. First, though, Tara wants to go back to school to get her master’s degree and start a new career in health care. Trevor wants to retire.

After their latest transfer, Tara and Trevor decided to sell their Eastern Ontario home and when that sale closes this summer, they will move into a rental unit they own in the area. They’ll stay there until she’s done school and they move out West. They own five other properties besides their principal residence, all rentals, all mortgaged. They plan to sell one rental this year.

Story continues below advertisement

Looking ahead, they’re not sure of their goals except that they’d like to move out West, maintain their standard of living, travel and help their children through university.

Will it work out financially?

We asked Jason Pereira, a partner and senior financial planner at Woodgate Financial Inc., to look at Trevor and Tara’s situation.

What the expert says

Based on their actual spending, Trevor and Tara are living on about $51,000 a year after tax, Mr. Pereira says. He assumes they maintain this spending after they retire and that they move to Vancouver Island in 2025 after Tara has finished school. The forecast also assumes a 5.6-per-cent rate of return on investments.

On the expense side, the planner assumes $300,000 in renovation costs for their Vancouver Island house, $30,000 every 10 years for new vehicles, $30,000 a year for each child for university expenses for a total of $240,000, and $34,000 for Tara’s tuition.

She plans to take a leave from work twice, studying over the fall and winter and working over the four summer months. She’d take time off in the fall and winter of 2019 and again in 2024.

This is how the plan unfolds. They sell their principal residence and one investment property this year, with the net proceeds of $216,640 going to savings. Trevor retires in mid-2020 at 44. In his first full year of retirement, 2021, their income is as follows: Tara’s salary $100,156; Trevor’s veteran’s pension $7,560; Trevor’s military pension $57,087; and the Canada Child Benefit $406. They also have rental and investment income, so they do not have to tap their savings.

Story continues below advertisement

In 2025, when Tara embarks on her new career, they move West. She earns $60,500 a year before tax (in 2025 dollars).

Because retiring is not yet on Tara’s radar, the plan assumes she continues working in her new career to 64. In Tara’s first full year of retirement their income is as follows: Trevor’s Canada Pension Plan benefits $14,480; their Old Age Security benefits $15,399 (she collects only part of the year); Trevor’s veteran’s pension $7,560 (not indexed); his military pension, indexed to inflation, $80,002; her civil-service pension $30,321. They also have investment income. Tara begins taking CPP benefits at 70.

In the meantime, Mr. Pereira has a few recommendations. First, sell the remaining rental properties, but not all at once. “Liquidate one per year,” the planner says. “Selling them all at once would push Tara and Trevor into higher tax brackets.” The net proceeds are added to their investment portfolio.

Trevor contributes the maximum to his RRSP this year because of his 43.41-per-cent marginal tax rate, the planner says. Tara no longer makes RRSP contributions because her marginal tax bracket “doesn’t warrant it” after factoring in her pension contributions.

They continue to contribute the maximum to their tax-free savings accounts each year for the rest of their lives. “These will not need to be touched and will pass to their children tax-free,” Mr. Pereira says. The couple set aside $38,000 of their surplus cash flow from the real estate sales this year for an emergency fund.

As their non-registered portfolio grows, fattened by the proceeds of the rental property sales, Trevor and Tara might want to consider investing in corporate-class mutual funds, Mr. Pereira says. Doing so will convert most if not all the income into deferred capital gains, thereby reducing their tax bill. This would increase their estate substantially.

Story continues below advertisement

“Just about every major player offers these funds,” the planner says, active or passive type, either individually or as portfolios. Their performance mirrors that of regular funds but they offer the added tax advantage, he says.

Trevor and Tara continue contributing $2,500 for each child every year to their registered education savings plan to take advantage of the Canada Education Savings Grant of $500 a year each. To take full advantage of the grant, they contribute $36,000 over 15 years. The maximum lifetime RESP contribution is $50,000, so that leaves $14,000 that they can contribute as a lump sum this year. “This will not benefit from the grant but will compound tax-sheltered,” the planner says.

Finally, Trevor and Tara could afford to spend more if they chose to, Mr. Pereira says. His forecast shows they could increase their spending to $122,000 before tax (roughly $100,500 after tax) and still not run out of savings. That assumes they live to the age of 95. Or Tara could join Trevor in his leisure well before she turns 64.

Client situation

The people: Trevor, 43, Tara, 37, and their two children

The problem: Can Trevor and Tara build a new lives for themselves out West and still meet their financial goals?

The plan: Trevor retires next year, Tara goes back to school and when she’s finished, they move. They spread the sale of their rental properties over five years.

Story continues below advertisement

The payoff: They both achieve their different goals.

Monthly net income: $9,790

Assets: Residence $255,500; rental properties $2,065,000; non-registered $194,035; his RRSP $82,912; her RRSP $52,273; his TFSA $63,508; her TFSA $65,656; RESP $41,000; commuted value of his pension $1,038,856; estimated present value of her pension $328,750. Total: $4,187,490

Monthly outlays: Rent $2,400; property insurance $150; utilities $370; transportation $395; groceries $550; child care $160; clothing $25; vehicle loan $577; charity $25; dining, drinks, entertainment $670; club membership $5; sports, hobbies $40; pets $40; subscriptions $20; dentists, drugstore $35; life, disability insurance $265; cellphones, internet $160; RRSPs $400; RESP $400; TFSAs $1,100; her pension plan contribution $755; his pension plan contribution $990. Total: $9,532

Liabilities: Residence mortgage $194,495; mortgages on rentals $1,208,224. Total: $1,402,719

Want a free financial facelift? E-mail

Story continues below advertisement

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 If you want to write a letter to the editor, please forward to

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 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 Readers can also interact with The Globe on Facebook and Twitter .

Discussion loading ...

Cannabis pro newsletter