Patrick*, 57, enjoyed working from home so much that he did not want to return to the office. His wife, Mélanie*, 52, wonders if her husband can say “bye-bye, boss”!
Posted at 6:00 am
At the beginning of the pandemic, Patrick was forced to leave his office to work from home. “It doesn’t matter to me,” he said over the phone. I don’t see how we can run our department remotely. »
“Patrick watched me work at home before the pandemic, and even with the snowstorms, he really wanted to go to the office, his wife Mélanie added on the phone. But because he was forced to telecommute, he completely took off his hood, he does not want to go there anymore. »
Patrick is happy to avoid unnecessary travel, traffic, and more easily enjoy the cottage he inherited from his mother. However, his employer is categorical: all employees must be present in his place.
“We have several divisions in the company, including factories, and workers are obliged to go to work on site, Patrick explains. To be fair, the employer wants everyone to return, even if it’s not necessary for the workers. In the office. ”
For her part, Mélanie, who is a few years younger, doesn’t really want to retire. “I like my job, I’m happy, I’ve been here 26 years and I left for glory until the end, until I was 65,” she says without hesitation.
But if Patrick stopped working, would they be able to buy a new car in a few years? To make some adjustments to the chalet? “We plan to use the inheritance portion to add a service cellar or additional room,” Patrick explains. In a pandemic, the cost of materials increased and contractors were unavailable. We’ll wait a bit. »
“Our daughter starts at CEGEP in the fall, in September, and doesn’t yet know what she wants to do. So maybe she won’t take all the RESPs. [régime enregistré d’épargne-études] Melanie suggested.
The couple has no pension plan. While watching the decline in investments, Patrick thought it might not be a good time to cash out his Registered Retirement Savings Plan (RRSP). However, the level of work stress has risen so much that he wants to know once and for all if he can retire without endangering the family’s financial health.
Patrick, 57 years old
- Salary: $ 100,000
- RRSP: $ 525,400
- TFSA: $ 80,400
- Unregistered investments: $ 5,700
- QPP at age 65: $ 1,137
- Bank account: $ 20,000
- RESP: $ 23,500
- House: value of $ 600,000
- Mortgage: $ 30,600
- Cabin: value of $ 200,000
- Legacy: $ 129,000
Melanie, 52 years old
- Salary: $ 90,000
- RRSP: $ 330,000
- TFSA: $ 34,000
- QPP at age 65: $ 1,354
- Bank account: $ 20,500
Chantal Matos, financial planner and advisory director at FMOQ Funds ’Private Management Company, looked into the matter. Finally, he has good news for Patrick and Melanie. But let’s look at what led him to this encouraging conclusion.
First of all, even if the child is only one year into a recognized program, he or she can withdraw the full RESP. “I never put RESPs in a retirement plan because I consider it for education. I am not included here either, ”emphasizes Chantal Matos.
Then, Mélanie plans to work for at least another 10 years. Therefore, the planner developed a scenario where Mélanie retired in January 2033. Until that date, she must take advantage of her unused RRSP slots, which cost $ 19,614, and maximize them.
“I suggest she contribute as much as possible to her RRSPs because she doesn’t have a pension plan,” Chantal Matos said. He can contribute 18% of his income each year. Currently, he contributes $ 10,000, which is not the maximum, which is why he has accumulated unused RRSPs. »
Patrick must also take the maximum from this year’s RRSPs in addition to his unused rights, amounting to $ 9,109. He can get RRSP from the Fonds de solidarité FTQ or the Fondaction de la CSN if the purchase of shares is still offered for this year 2022. He can benefit from a 30% tax credit.
Patrick’s Tax-Free Savings Account (TFSA) should be maximized with money from the inheritance. “When he needs money, he can get it without taxing it. »
To increase the amount of his pension from the Québec Pension Plan, the planner advised Patrick to wait until age 65 to get it. Same thing for Melanie.
In the plan, Chantal Matos also deferred the Old Age Security (PSV) pension to age 70 for both spouses. “They can also do it with the Quebec pension as long as they don’t need the money,” the planner said.
The best strategy is for Patrick to start receiving his pension in Quebec at age 68, when Melanie retires in 2033 … unless he decides to continue until 2035.
The planner strongly advised Patrick not to immediately withdraw from an RRSP.
“If she has no income in subsequent years, her husband can claim the tax credit for the husband or de facto wife that is available for an individual who provides for his wife’s needs. »
The maximum credit amount for the 2021 tax year is $ 1,729.
The cost of living
Chantal Matos congratulates Mélanie for the very detailed budget she provided.
“Analyzing, I can’t cut anywhere. There will probably be a drop in gas, but maybe not if Patrick starts riding more in retirement.»
The estimated $ 72,993 cost of living of the couple was rounded up to $ 75,000. This amount includes a $ 1000 per month mortgage that will end in 2024.
The planner made a retirement plan until Melanie’s 95th birthday. With a living cost of $ 75,000, annual income of 3.5% and Mélanie’s rising expenses and salary of 2% per year, the couple will be able to live on their savings, without having to sell or resell the house, or the cottage. .
To support the cost of living, Patrick will need to use $ 15,000 to $ 20,000 a year for three years of his inheritance, or more if he is comfortable, before starting cash out of his RRSPs.
“If I remove the $ 1,000 per month fee from 2024, their cost of living will drop to $ 63,000 per year,” Chantal Matos said. This amount can be used to finance the purchase of the car or make adjustments. »
When it’s time to renovate, Patrick and Mélanie need to evaluate the financing rate offered by their institution and calculate which is most beneficial: paying cash using TFSAs, inheritance or with a mortgage margin. It will all depend on the rates at the relevant time and the interest available to the TFSAs.
According to the specialist, Patrick can say “bye-bye, boss! open without fear, while Mélanie could stop working in 10 years.
“If he decides to continue until the age of 65, it will be for him personally, because he will no longer have to work,” the planner concludes.
* Although the case highlighted in this section is true, the first names used are only fictional.
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