When you’re single and planning to retire, you really have to make sure you’ll have enough money to support yourself, because you won’t be able to get a helping hand from a spouse. in case of a glitch. With good control of your expenses and savings, it is possible to achieve this, and even to have peace of mind.
The situation
The last few years have been difficult for Manon*, 62, and she wants to retire as soon as possible. Single without children, she has worked as a professional in an MRC for 25 years. She has a group Registered Retirement Savings Plan (RRSP) partially funded by her employer. If possible, she would like to apply for her Quebec Pension Plan (QPP) pension only at age 65. She lives in the countryside and her house is paid for, but in the medium term, she must replace the septic tank. She has no debts and her car is paid for.
“If I don’t count this expense, I estimate that I need about $23,000 a year to be comfortable,” says Manon. Do you think it’s realistic for me to retire now? And what money should I take out first to support myself after I retire? »
Numbers
Manon, 62 years old
Annual revenue : $78,000
Registered Retirement Savings Plan (RRSP) – in mutual funds: $114,000
RRSP – in the Solidarity Fund QFL: $175,000
Tax-Free Savings Account (TFSA): $89,000
Guaranteed Investment Certificates (GICs): $96,000
Savings account : $50,000
Current account : $33,000
House : paid, value of $325,000
Seek peace of mind
While Manon is wondering about the feasibility of her retirement project, Léa Saadé, financial planner and regional vice-president, wealth management, at the Professionals’ Financial, would first like to congratulate her.
“Several people tell themselves that they will be correct without really looking into their project,” she notes. Manon takes her responsibilities. And if she has fewer responsibilities than someone with kids or a spouse who might be in need, she can’t trust anyone to help her with her finances if things go wrong. It is therefore very important that she validates her project. »
Continue to invest in your TFSA
The first thing that strikes Léa Saadé is the importance of the sums of money present in current and savings accounts. As an emergency fund, she advises him to have three months’ worth of living expenses. Even if she withdraws $10,000 from her current account to carry out the work on the septic tank in 2023, Manon will still have plenty of money to invest.
PHOTO MARCO CAMPANOZZI, THE PRESS
Léa Saadé, Financial Planner and Regional Vice-President, Wealth Management, Professionals’ Financial
“Manon’s TFSA is probably maximized, but since new contribution room is added every year, I would advise her to invest the surplus in her TFSA,” says the financial planner.
Manon also has $96,000 invested in non-registered GICs. “She would do well to take as much as possible out of it each year and invest it in her TFSA,” she adds.
Assess your financial needs properly
One of the keys to ensuring that you will have enough money to meet all your retirement needs is to properly assess your needs. Manon has few expenses at the moment, since her house is paid for. But Léa Saadé keeps in mind that this could be called to change.
“For example, Manon could decide to sell her house to buy a smaller residence,” she says. Or she might need to pay monthly rent at a nursing home. She will always need to live somewhere, so I didn’t factor the value of her house into the retirement projection. She will then be able to use this money to live in a new residence. »
The car is also to be considered because Manon lives alone in the countryside. “She needs a car in good condition, so I took into consideration that she will buy a new one at $35,000 every five years,” says the financial planner.
She also finds that $23,000 is a very low cost of living, so to be sure, she increased it to $29,000.
While Manon’s investor profile seems rather cautious, Léa Saadé used a portfolio composition of 75% bonds and 25% equities to make her calculations. According to the standards of the Quebec Institute of Financial Planning, the expected return is 2.7% and inflation is 2.1%.
The financial planner also considered that she had maximized her QPP and that she would begin to receive her pension at age 65.
Result ? “She doesn’t have to worry and she can retire now,” says Léa Saadé. With an annual living cost of $29,000, she will have enough funds until age 96,” she says.
As for withdrawing money to meet her retirement needs, given that her tax rate will already be low with this lifestyle, she recommends that she not touch her RRSPs until she has to. to do so, at age 71. She advises him to sell off his non-registered investments first, then his TFSA.
Prepare well for retirement
The financial planner stresses, however, that retirement is not just a question of numbers. “Manon must also think about the psychological aspect,” she specifies. At the moment, she is working, she sees people, she has an active life. But what will she do in retirement to be well and not spend her days alone at home? Psychologists are specialized in this type of support which is very important. »
Finally, it cannot ignore the question of the will and the protection mandate. “In the event that she becomes disabled, it is important to designate someone in a legal document who can act on her behalf,” explains Léa Saadé. Moreover, Manon has no children or spouse, so who does she want to bequeath her assets to? She would do well to take a closer look at her overall situation in the company of a financial planner. This will help him make the best decisions and have greater peace of mind. »
* Although the case highlighted in this section is real, the first name used is fictitious.
Are you planning a project that requires a wise use of your money? Do you have financial problems?