At Cornwall Wealth Management we take a planning approach to all that we do. We help clients with their financial strategies based on their goals at all stages of life, and as goals change and evolve over time, so do the strategies. For clients who are approaching or enjoying retirement, a current financial strategy often includes how to withdraw money from their investments in a tax-efficient way.
Like many clients, Mary (64), and Bill (68), both retired, have lifestyle goals and wanted a financial strategy to help them answer the question “do I have enough money for the lifestyle I’ve planned for”? Mary and Bill own a cottage and one goal was to maximize the number of years they could enjoy the cottage before eventually selling it. They would like to travel in their retirement and assist with saving for their grandchildren’s education. In addition, Mary & Bill wanted to ensure they could leave a legacy to their children and leave monies to a favourite charity.
It was determined they required $55,000, net of tax, per year for living expenses.
Assets: $300,000 in non-registered investments, $150,000 in TFSAs, $400,000 in registered investments, Home and cottage worth $800,000 and $650,000 respectively
In addition to CPP and OAS, Mary and Bill had been withdrawing over $63,000 per year from RRIFS and we projected that by 2020 they would be paying approximately $12,000 each year in taxes.
Assisting Mary and Bill to maximize and allocate cash flow, and minimize taxes was a goal of our recommendation. To achieve this, we recommended they reduce their withdrawal of registered income each year. An annual withdrawal from a combination of non-registered and TFSA investment accounts, resulted in reducing their taxes paid by $9,000, which in turn produced a surplus to savings. Using the budget analysis, we were able to allocate funds for travel and the grandchildren’s education. The plan confirmed that the asset allocation of their portfolio was consistent with their long-term objectives.
Having us review and suggest an alternate way to access their investment income helped Mary and Bill reduce their income taxes payable and allocate the savings towards other areas. We illustrated that they could continue to enjoy the cottage as their income needs were covered into the future. They have a few exciting trips planned over the next couple of years and are contributing to their grandchildren's RESPs.
The net worth projections indicated that Mary & Bill had significant net worth well into the future. Combined with the insurance analysis this indicated they could leave a legacy to their children and monies to their favourite charity as insurance funds were available to cover potential capital gains owed by the estate. In addition, the projections indicated that Mary & Bill had assets available in the future in case an unexpected need arose.
Mary & Bill were happy with the findings of the plan. They are looking forward to the cottage, vacations and continuing to enjoy the lifestyle they worked hard to achieve. The plan gave them peace of mind that funds were available in case of emergency and that they could leave a legacy to loved ones.