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How this couple can finance a six-figure renovation of their country house and still retire with plenty of cash flow

WebTechMojo by WebTechMojo
August 16, 2020
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How this couple can finance a six-figure renovation of their country house and still retire with plenty of cash flow
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Estimating retirement income      

For analytical convenience, we’ll treat the RRSPs as one entity. Their $890,210 of RRSPs with contributions of $24,180 per year for seven years to Geoff’s age 65 growing at three per cent per year after inflation would rise to $1,285,700 and then pay $61,225 for the next 32 years to Ginny’s age 95.

The couple’s $26,110 of TFSAs with no present contributions growing at three per cent after inflation for seven years would become $32,120. That sum, annuitized for the following 32 years to Ginny’s age 95 would become $32,110 and then provide $1,529 per year.

When Ed reaches 65, his armed forces pension would lose its $5,004 annual bridge but the pension would soar to $43,000 per year before tax. The country house rental income would be terminated. We assume he would end his $96,000 pre-tax annual consulting income. He could add $13,700 from CPP and $7,362 per year from OAS plus, $61,225 from RRSPs, and $1,529 from TFSAs. Ginny’s pre-tax income, $78,170, would push pre-tax family cash flow to $204,986. Evenly split and with the clawback — which starts at $79,054 at present — taking away about half of Ed’s OAS income and an average rate of 26 per cent, they would have $12,600 per month to spend after TFSA cash flow is restored.

When Ginny is 65, assuming she has retired and her $78,170 work income terminated, they could add her $7,362 OAS income, an estimated work pension of $7,000, and $12,948 CPP for total income of $154,126. With TFSA income removed, clawback cost gone and remaining income split, they would pay tax at an average rate of 20 per cent and have $10,300 to spend each month after TFSA cash flow is put back into income.

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