We may tend to feel guilty if we haven’t saved for retirement. But sometimes, we can still do very well.

Marc*, 60, is single and earns $90,000 per year as a business manager. However, “for various reasons, each as bad as the next, I don’t have a cent saved for retirement,” he confides. However, he has no debt. And he likes to work, so plans to continue at least until age 65.

Marc also owns a condo worth $320,000. He plans to increase his payments in the fall to finish paying it in a year and a half. Subsequently, he estimates he can save around $40,000 per year due to his modest lifestyle. In retirement, once his condo is paid for, he estimates he can live on $1,500 per month, sometimes even $1,000. If he meets his soul mate, he could go live with her and rent her condo for around $1,300 a month to make an income. Marc is now wondering how much to accumulate and how.

Mark, 60 years old

Annual salary: $90,000

Quebec Pension Plan (QPP): approximately $1,000 monthly at age 65

Condo value: $320,000, which will be completely paid off in a year and a half

Mortgage payment: $2500, and $3000 starting in the fall

Annual interest rate: 3.45%

Condominium fees and annual taxes: $5,000

Inheritance expected within two years: $150,000

Expected monthly expenses in retirement: $1500, sometimes $1000

While he maintains it’s important to take care of your assets as early as possible, at 60 it’s a little late to start doing so, says Hadi Ajab, independent financial planner and savings representative attached to PEAK Investment Services. “But what saves Marc,” he assesses, “is that he has a good salary and a very frugal lifestyle. »

However, he advises him to make a detailed budget. “Does he really need $1000, or $1500, or more some months? He must evaluate his lifestyle realistically, ensuring that he can afford a good quality of life. Because underestimating your expenses by $500 per month makes a big difference in your financial planning. »

Evaluating his lifestyle is also essential for Marc because if he is right, so he will really only spend $1,500 maximum per month in retirement, he has a good chance of not having to worry. with savings. Because when we look at his disposable income in retirement, at the moment, there is only his Quebec Pension Plan (QPP) pension and his Old Age Security (PSV) pension.

“So, if he still does not have a tax spouse, if he retires at age 65 and if he defers his QPP pension, he would only have his PSV of $698.60,” assesses Hadi Ajab. This amount is not considered in the calculation of the Guaranteed Income Supplement (GIS), which would give $1043.45. On $1742 a month he could live very well. »

Then, for each year that he delays his QPP pension between ages 65 and 72, it would be increased by up to 8.40%. “So, if he waits until age 72 to request it, it would be increased up to 58.80%,” specifies the financial planner. As the QPP pension is taxable income, he will lose the majority of the GIS when he receives it, but he would be fine with this income. »

Even if Marc ultimately does not, a priori, have to worry about his retirement, he still has an advantage in saving to have peace of mind and also be able to afford small luxuries. Hadi Ajab also immediately noticed that all of Marc’s assets are tied up: they’re in his condo. The financial planner therefore advises him to first build up an emergency fund for three or four months, approximately $15,000. He could place this amount in a tax-free savings account (TFSA). To go faster, he suggests that Marc reconsider his decision to increase his mortgage payment.

“He’s already paying a good amount on his mortgage at a relatively low rate and has very little left to repay,” he says. He will have finished paying it before he retires. Having no investments, it would be wise to start investing that $500 per month right away. »

Once Marc’s emergency fund is well stocked, he will be able to continue saving in a TFSA which he will dedicate to his retirement. “Thus, when he withdraws amounts, his GIS will not be affected, unlike if he withdrew amounts from a registered retirement savings plan (RRSP) which would be taxable income,” indicates Hadi Ajab.

We must also think about his inheritance of approximately $150,000, which is not taxable, which he will receive soon. “So quickly, your TFSA will be maximized,” notes the financial planner. He will then have to turn to tax-advantaged non-registered investments which will not significantly affect his GIS. »

As Marc has no other residence than his condo, Hadi Ajab wants to calm his enthusiasm regarding the income he could earn from renting it. “First of all, it’s a hypothetical question, but let’s say that one day he goes to live with his partner, he will have to pay her rent or, at least, part of his bills,” he explains. Then, if he ever starts to have rental income, he must consider that it will be taxable, and therefore that it will have an impact on his GIS. So it’s not certain that he will, in the end, make any real gains from this rental. »

In addition, having a tax spouse would greatly change Marc’s situation. “The government would now look at the couple’s income to determine if they are eligible for the SRG,” he explains. If Marc is suddenly no longer eligible for the SRG, he could apply for his QPP pension earlier. In such a scenario, the RRSP could be interesting between now and retirement. Marc must therefore have good financial planning for his retirement and review it in the event of a change in his personal situation. »

Are you planning a project that requires wise use of your money? Do you have financial problems?