Françoise, a 66 -year -old reader, is still on the job market and does not benefit from an employer pension fund. She wonders if her savings will be sufficient to ensure the same standard of living in retirement.
Françoise earns $ 44,500 a year.
“I think I work full time until I was 69, and subsequently part-time if I am in good shape to do it,” she writes to us.
It estimates its cost of living at $ 2,000 per month, which allows it to save more than $ 20,000 per year! A tour de force that she succeeds in accomplishing because she is very disciplined and that her rent remains relatively affordable, at $ 710 per month.
Tax credits to consider
Jean-François Rémillard, financial security advisor and representative of a collective savings broker at Little Heritage Management, first welcomes the high level of savings of Françoise, taking into account her income. “This is proof that with a tight budget, it is always possible to save,” he notes.
According to him, a budget of $ 2,500 per month retired is more realistic, an annual net income, after taxes and inflation, of $ 30,000.
To achieve this, tax programs and credits are there. Since she is over 65 years old, she is entitled to the tax credit for career extension, with a maximum credit of $ 1,750, since her salary does not exceed the reduction threshold of $ 56,500.
“In addition, since she already receives her RRQ pension – around $ 5,000 – she could continue to contribute to the RRQ, which would allow her to increase her monthly retirement service. She could also ask to stop her contributions in order to have more money in her pockets now, ”says Jean-François Rémillard. He stresses that if Françoise is in good health and that she does not need this money, she would however have an interest in continuing to participate, especially since her employer will also contribute.
Disburse from 69 years old
With a retirement at 69, the best option is to quickly disburse your RRSPs ($ 63,000) in order to reach the guaranteed income supplement (SRG) as soon as possible.
“By withdrawing them in three years, when she is 72 years old, the annual salary used for the calculation of the SRG will be $ 14,000, which would give it the right to an annual amount of $ 4,000 non -taxable,” said Rémillard.
It should also withdraw money from its unregistered account in order to limit taxable interest income and at the same time increase the amount of the SRG. Thus, by transferring $ 7,000 from his placement account to CELI each year, the latter would reach around $ 220,000 to 76 years. She could then gradually disburse him until her 88 years.
In his calculations, the advisor based on a rate of return of 3%, because the vast majority of Françoise’s investments are invested in interest and guaranteed products. However, with a rate of 4%, its savings would last two more years, up to its 90 years.
“However, he would have to accept to live with a little volatility, but that remains sustainable, since his investment horizon is more than 25 years,” said Jean-François Rémillard.
Second scenario
The other possibility would be to work part -time from 69 years old, everything affecting the old age security pension (PSV) and asking for the SRG. Recall that it is allowed to earn a maximum of $ 5,000 without affecting the amount of the SRG.
At 72, she must start to remove sums from her ferr. She could subsequently quickly disburse her ferr and follow the same steps as those explained in the first scenario.
Good to know: at the age of 75, the PSV was improved by 10%, which will improve its income.
In the situation
- Return: 110 700 $
- The family: 63 100 $
- Unregistered account: $ 75,800
Would you like to have the opinion of an expert for your retirement projects? Write a detailed message and we will submit your situation to a professional. The answer will then be published in The Montreal Journal et Le Journal de Québec.
