Lifestyle | Parents of teens seek advice

Jeannot*, 44, and Marie*, 42, have been common-law spouses for 20 years and parents of two teenagers aged 14 and 15.

The situation

For the most part, the financial situation of this family is based on an annual income of $110,000 and an estimated net worth of $420,000 (value of the house, RRSP, TFSA, RESP, LIRA and cash less mortgage debt).

However, almost half of this net worth is made up of the equity in the family home (after the mortgage).

Meanwhile, registered savings accounts (RRSP, TFSA, RESP) remain low, which worries Jeannot and Marie in terms of financial planning.

“Despite our reasonable family lifestyle, we have the impression that the management of our budget and our savings priorities is deficient”, explains Marie during a conversation with The Press.

First, these spouses and parents seek advice on validating their financial and tax situation based on their limited savings capacity.

They also seek advice on how to optimize the management of this savings capacity in order to enhance their medium and long-term financial planning.

Then, Jeannot and Marie would like to be able to move within two years. This project would involve the resale of their current house in the region, estimated at $325,000 less mortgage liabilities of $116,000, and the purchase of a house estimated at around $500,000 in the suburbs of Montreal.

The situation of Jeannot and Marie was submitted to Guylaine Lafleur, notary and financial planner at Groupe conseil Bachand Lafleur, established in Boucherville and Laval.

Advice

Guylaine Lafleur’s first advice to Jeannot and Marie in order to improve their financial and tax situation is unequivocal: “They should direct their savings to the education savings plan (RESP) of the youngest [de 14 ans] in order to maximize the subsidies” during his three years of eligibility until his 17^e anniversary.

As for the RESP for the 15-year-old, Ms.^me Lafleur considers that it could be “too late” because of RESP tax rules that are more restrictive towards the catch-up of contributions before the end of the “fiscal year” of the 15^e student’s birthday.

Essentially, summarizes M^me Lafleur, the RESP contributions of the eldest before his 17th^e birthday could be eligible for the grant under either of these two conditions: an amount of at least $2,000 has been contributed to the RESP before the end of the fiscal year of his 15^e anniversary ; or a minimum amount of $100 per year has been contributed to the RESP for at least four of the fiscal years until his 15^e anniversary.

Therefore, Jeannot and Marie should quickly validate the situation of the RESP of their two teenagers with their financial institution. In case of doubt about post-secondary education plans between the eldest and the youngest, Guylaine Lafleur reminds us that “the sums paid and accumulated in the family RESP can be used for one or other of the children”.

Also, says M^me Lafleur, “once the youngest has reached 17, it will no longer be worth contributing to the RESP since he will no longer be eligible for grants”.

After the passage of this deadline, in three years, Jeannot and Marie will then be able to “redirect their savings capacity towards the repayment of the mortgage line of credit, which is at a variable and relatively high interest rate of 7%”.

“They can also try to make up for their RRSP contribution deficit, but on condition that they have sufficient leeway in their savings capacity. »

Because for the moment, the budget figures provided by Jeannot and Marie suggest that they are only making the minimum interest payments on their home equity line of credit, and without reducing the current loan balance of $116,000.

“Without a more detailed budget on all their residential and family-related expenses, it is difficult to determine their ability to increase their housing and mortgage financing costs, and therefore to carry out their project. purchase of a more expensive house”, warns Mr.^me Lafleur.

Pension saving

As for Jeannot and Marie’s preoccupation with their long-term financial planning, including their intention to retire from work in about fifteen years, on the threshold of sixty, Guylaine Lafleur makes two main observations.

First, on the matrimonial level, “because Jeannot and Marie are de facto spouses and retirement savings are very concentrated in Jeannot’s hands, they should consider making a cohabitation agreement in order to protect Marie “, advises M.^me Lafleur, who is also a notary by profession.

“De facto spouses are not recognized by the Civil Code of Quebec. Therefore, in the absence of a specific will, in the event of the death of Jeannot or Marie, their children would inherit the entire estate of the deceased and the surviving spouse would have no right to anything. »

Secondly, on the financial level, Guylaine Lafleur observes that Jeannot’s and Marie’s predictable retirement income will be just enough to maintain their standard of living at its current level.

“Taking into account the fact that Jeannot’s defined benefit pension plan should provide him with a pension of just over $20,000 per year, and adding the pensions from public pension plans (provincial RRQ and federal PSV ), the couple’s income after age 65 should be around $82,000 a year, or about $68,000 a year after tax,” said Ms.^me Lafleur, based on financial information provided by Jeannot and Marie.

Consequently, the enhancement of their retirement income after their 65^e birthday will depend a lot on the performance of the assets in John’s locked-in retirement account (LIRA from previous employment), as well as the contributions made to their respective RRSPs over the next 20 years.

* Although the case highlighted in this section is real, the first names used are fictitious.