In our second video in this series, can you retire on $750,000, we look at Mr. & Mrs. Wilson’s financial situation.
Let’s see what their financial picture looks like.
Financial Picture
Let’s start with Mrs. Wilson. She is currently 68 years old and has the following,
RRIF: $350,000
TFSA: $100,000
Mr. Wilson is 67 years old and has the following,
RRIF: $200,000
TFSA: $100,000
In total, they have $750,000, and together they jointly own their home with no debt against it valued at $450,000.
Their total net worth today is $1,200,000
Assumptions
Moving forward what does the retirement picture look like? To find that out, we will need to make some assumptions.
Life expectancy – Age 90.
Growth of home per year – 3%.
Investment returns per year (RRIF & TFSA) – 5%
Inflation – 4%
*This means their expenses every year are going to grow by a 4%
Mr. Wilson started taking his CPP at age 65 and is receiving $1,050 per month. Mrs. Wilson also started taking her CPP at age 65 and is receiving $1,125 per month
They’re both receiving their Old Age Security (OAS) which is $686 each per month.
Can they retire on $750,000?
Just like in the previous video, the answer is it depends. Let’s look at 3 different scenarios and find out how much they will be able to spend monthly based on their financial picture and these assumptions.
The 1st Scenario
The first scenario that we’re going to look at assumes that their expenses stay level throughout retirement, beginning at age 67 (using Mr. Wilson’s age since he is younger) until age 90.
These expenses would grow with inflation but for today we’re just going to use a constant number.
If they were spending $5,625 per month that would sustain them from 67 until 90. Once they’re 90 they’d be out of money, meaning there’s no money left in their TFSAs or RRIFs. They would still have monthly CPP & OAS payments of $3,547 per month and the value of their home which could be now worth $920,000.
So, can they retire on $750,000? If they think their expenses are within this range, then absolutely yes!
For scenarios 2 & 3, watch the video above!
