Julia’s investments are up 60 per cent, but is it enough to let her squeak by in retirement?
The challenge, expert notes, is to find a way for a person with a modest income and pension plan to retire before 65
A woman we’ll call Julia, 51, lives in B.C. She works in a school helping special needs kids. Her income, $3,100 per month after tax plus a $100 monthly gas allowance, covers $2,763 per month of expenses including $400 for her mortgage on her $410,000 condo, $303 monthly strata fees (also known as condo fees outside of B.C.) and $100 monthly property taxes. Single, she has to manage on what is a low income in her province. Her plan — work another five years, then retire, when she will be able to travel much more than the two weeks per year that has been her custom. The question — can it work on a modest retirement income and without part-time work?
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Family Finance asked Eliott Einarson, a financial planner with Ottawa-based Exponent Investment Management Inc., to work with Julia. The challenge, he notes is to find a way for a person with a modest income and pension plan to retire before 65.
She has a couple of advantages to realizing her plan. Her investment portfolio has done well, rising about 60 per cent from $89,000 before the COVID-19 lockdowns to a recent value of $143,000. Moreover, her aging parents, ages 81 and 91, will leave their estate to her.
She wants to retire on her income and assets alone. Her present net worth, $501,000, is the basis of her retirement plan.
Julia sees paying off her $64,000 mortgage as a priority. It has about 14 years to run. If she were to pay it off entirely within the next five years so that it would be finished at her age 56, she would have to increase her monthly payments by $713, which is more than her budget will support. The better plan would be to maintain her amortization and retire at 60. At that time, she could take $2,096 pension and bridge benefit plus $462 CPP.