Couple, one with an indexed pension, worry their income will come up short when wife retires
By Mary Teresa Bitti
How to maintain the same cash flow when both spouses stop working is the question keeping Peter* and Ann up at night.
Peter retired in 2014 at age 60 after a nearly 40-year career with a federal crown corporation. Since then, he has enjoyed an annual income of $51,626 from a defined-benefit pension plan indexed to inflation. He started drawing Canada Pension Plan (CPP) benefits ($12,426 annually) when he turned 62 and he started receiving Old Age Security (OAS) income of $8,354 at 65.
This year, he will turn 70 and his wife, Ann, will turn 65, at which point she will retire. She currently earns an annual income of $77,000, but does not have a company pension, so the couple is concerned about what losing her income will mean for their cash flow. They have an annual expenses/spending target of $90,000 after tax, but their income will fall short of that target when Ann retires.
Ann is thinking about starting to draw both CPP and OAS at 65, which will provide an annual income of $22,394, but Peter wonders if there is more benefit in waiting, and instead convert her registered retirement savings plan (RRSP), currently worth $501,413, into registered retirement income funds (RRIFs) when she retires as opposed to waiting until 71. Ann also has a locked-in retirement income fund worth $48,182.
She may find a job working a few days a week to keep busy, but the couple don’t want to rely on any potential future income and would treat it as a bonus to help with contributions to their tax-free savings accounts (TFSAs), which are invested in a mix of cash, guaranteed investment certificates that will mature this year and bank mutual funds (current total value: $216,144). They have about $40,000 in contribution
Read more on financialpost.com
