Clara

Henry has a defined benefit pension, indexed to inflation. Can they retire when Henry is 60 and maintain a retirement cash flow of $10,000 a month after-tax?

As a backup, and to ensure they can afford a good-quality nursing home if they need one, the couple also have significant value retained in their home, Mr. Campanella says. “Using simple math, the couple would require about 3.3 per cent of their investment balance to fund their retirement shortfall between ages 60 and 65 and 2.4 per cent thereafter,” he says. The first phase occurs between ages 60 and 65, when they will not be receiving government benefits, and the second phase between ages 65 and 90 when they will be taking CPP and OAS. From age 60 to 65, if they both stop working, they will have a shortfall of $94,500 a year (required pre-tax income of $150,000 minus Henry’s pension $55,500) that they will have to draw from their savings and investments. “Using the assumptions above, and their beginning investment balance of $2,148,000, Henry and Clara should be able to accumulate about $2.9-million in investable assets by Henry’s age 60,” Mr. Campanella says. “To keep things simple and conservative, let’s assume that 100 per cent of the couple’s retirement income is subject to tax at their marginal rates,” the planner says. “Because Clara’s corporation is subject to a low flat tax rate, they are in a unique position to achieve a significant tax deferral by retaining as much money in her corporation as possible and investing through the corporation,” Mr. Campanella says. If Clara takes a salary of $50,000 a year starting in 2022, she would pay personal taxes of about $7,500, or about 15 per cent, the planner says. “These retained earnings can be drawn in a tax-efficient manner via corporate dividends over the course of Clara’s retirement.” We asked Fabio Campanella, a certified financial planner and co-founder of the Campanella Group in Oakville, Ont., to look at Henry and Clara’s situation. Clara and Henry are both in good health and would like to take an early retirement, Mr. Campanella says. Can they retire when Henry is 60 and maintain a retirement cash flow of $10,000 a month after-tax? “I was let go early in 2020 and it took me six months to find a contract position,” Clara writes in an e-mail.