Max and Peg, a successful couple in their 50s, are grappling with the decision to retire early and move to the East Coast. With a retirement spending goal of $120,000 per year after tax, they face the challenge of ensuring their financial plan can support their desired lifestyle. This article delves into their unique situation, the expert analysis, and the steps they can take to achieve their retirement dreams.
Unlocking the Path to Early Retirement
Rethinking Priorities After a Health Scare
Max's unexpected heart surgery in his mid-50s has been a wake-up call, prompting him and his wife, Peg, to reevaluate their priorities and explore the possibility of retiring as soon as possible. The couple, who have no children, currently hold high-paying executive and communications positions, earning a combined annual income of $380,000. This financial stability has allowed them to accumulate a substantial investment portfolio and plan for their future.Navigating the Real Estate Landscape
The couple's retirement plans involve several real estate transactions. They currently share ownership of a house in the Greater Toronto Area with Max's parents, and they had previously put a down payment on a pre-build condo in a nearby town, intending to retire there. However, they have since decided to sell the condo and move to the East Coast instead, purchasing a new home for $320,000.Assessing the Financial Viability
To determine the feasibility of their retirement plan, the couple sought the expertise of Matthew Ardrey, a portfolio manager and certified financial planner at TriDelta Private Wealth in Toronto. Ardrey's analysis revealed that the couple's current investment strategy, with 92% of their assets in cash, may not be sufficient to sustain their desired $120,000 annual retirement spending.Exploring Investment Strategies
Ardrey suggests that Max and Peg could improve their investment strategy by engaging the services of a portfolio manager focused on income generation. This approach could potentially increase their expected return from 2.44% to 5%, significantly improving the likelihood of their retirement plan succeeding. Additionally, the planner recommends that the couple delay their Canada Pension Plan (CPP) and Old Age Security (OAS) benefits until age 70 to take advantage of the higher payouts.Adjusting Spending Targets
As an alternative to improving their investment strategy, Ardrey suggests that Max and Peg could consider reducing their retirement spending target by 17%, or $20,000 per year, to $100,000 annually. This adjustment would also increase the likelihood of their retirement plan succeeding, even without changes to their investment approach.Navigating the Retirement Landscape
Despite their financial success and the significant assets they have accumulated, Max and Peg's retirement plan faces some challenges. The planner's analysis using a Monte Carlo simulation reveals that the plan only has a 46% chance of success in its current form. To improve the odds, the couple must make strategic adjustments to their investment approach or be willing to accept a lower spending target in retirement.By addressing these financial considerations and making informed decisions, Max and Peg can position themselves to enjoy the retirement they have worked hard to achieve. With the right strategies in place, they can confidently transition into the next chapter of their lives and embrace the freedom and fulfillment that early retirement can offer.