Two septuagenarians feel they are in the final sprint to enjoy their passion for travel while they are still healthy. But do they have the means to finalize their “list of things to do before dying”?
The situation
Carole*, 71 years old, and Pierre*, 77 years old, love traveling the world. Their favorites are undoubtedly South Africa, Zimbabwe and Botswana for the safaris, Northern India for the colors and the change of scenery as well as Vietnam, says Carole.
“We take two trips a year and we would perhaps like to increase this budget, but I don’t know if we can afford it, considering the expenses in the future,” she wrote.
“We know that health and energy won’t always be there, so we would like to complete our ‘bucket list’ within the next three years if possible! »
Carole thought about how much money they would need to check off the remaining items on her list: going to Japan, Australia and a long stay in Paris.
Travel costs more and choices are more difficult. We plan to travel for another five years if possible and would like to increase our annual travel budget from $16,000 to $24,000 for the next three years.
Carole
Carole affirms that the budget of both common-law partners is very well managed. The house is paid for, in good condition, renovations having been made seven years ago. The couple wants to live there as long as possible.
Carole has a non-indexed retirement fund of $30,000 per year while Pierre will receive annual corporate dividends of $20,700 for the next six years.
“We pay all expenses half and half, we value our financial independence even though we have been a couple for more than 30 years. »
Their annual cost of living amounts to $75,000, which includes a travel budget of $16,000, personal expenses of approximately $8,000 each for activities and clothing, as well as the rental of a car at $750 per month.
Next year, the couple will purchase a new vehicle for about $60,000 by paying $20,000 down and financing the rest over four years.
“My partner has two boys and he would like to leave them a certain inheritance, but not defined. I have no children, but a very close nephew to whom I would like to leave an inheritance. »
Taking into account inheritances and car purchases, can the couple increase their travel budget for the next three years?
The numbers
Carole, 71 years old
Pension : 30 000 $/an brut
RRQ : $10,180/year gross
PSV : 8820 $/an brut
FEER: 66 000 $
BACK: $63,000
Pierre77 ans
Corporate dividends: $130,000 ($20,700/year until exhausted)
RRQ : 10 860 $/an
PSV : 9700 $/an
FEER: 103 600 $
RETURN : 148 000 $
Non-registered investments: $90,000
Common asset
Value of the house: $650,000
The advice
Chantal Matos, financial planner, certified investment manager and private manager at Gestion Privée Desjardins, analyzed the couple’s financial situation in order to answer their question.
PHOTO ALAIN ROBERGE, LA PRESSE ARCHIVES
Chantal Matos, financial planner, certified investment manager and private manager at Gestion Privée Desjardins
First of all, the couple will buy a new car in 2026. Carole and Pierre plan to spend a total of $20,000 on the purchase and finance the remaining $40,000 for a vehicle costing approximately $60,000.
“In order to keep the same payments as their current car lease, I put the financing over five years,” explains the financial planner. If they still have a mortgage margin, I suggest they check the rate, which may be lower than the car dealer’s. A mortgage margin is currently between 4 and 5% and it will fall further. »
According to his calculations, the couple’s current income amounts to $105,000 per year, including minimum RRIF withdrawals, and they pay $13,000 in taxes.
“Carole and Pierre don’t pay a lot of taxes, because they split their retirement income and Pierre’s dividends are taxed less,” says Chantal Matos. They also have tax credits. »
The planner added the additional $8,000 in travel budget for three years, which increases the cost of living from $75,000 to $83,000. She considered that in five years, the car payments of $9,000 per year will be over.
In her calculations, the planner used a rate of 3.5% for investments, 2.10% for inflation and 5-year financing at 4.5%.
What happens when they each turn 95? They each still have their TFSA at the current amount and their house is not sold. They therefore have the means to make their travel dreams come true.
Even if, at first glance, you might think that they don’t have enough money saved, that’s not the case, says Chantal Matos. “They don’t need more,” she says. They even have a surplus of $3,000 to $4,000 per year.
In about eight years, Pierre will only have his Old Age Security (OAS) pension and the Quebec Pension Plan (QPP) retirement pension, but he will disburse unregistered funds without drawing on the TFSA. When Pierre no longer has dividends, there will no longer be a car payment to pay for or surplus travel expenses. If, in five years, Carole and Pierre no longer travel, they will free up $16,000.
Carole, for her part, will still have the same retirement income of approximately $48,000 per year.
A clear and well thought out will
If Carole dies, her assets will go to her parents and her living brothers and sisters, recalls Chantal Matos, who suggests making a clear will for the heirs.
They need to think about what they want to leave, because they will only have TFSAs as liquidity, the biggest asset being the house.
Chantal Matos, financial planner, certified investment manager and private manager at Gestion Privée Desjardins
“If Pierre decides to leave $100,000 to each of his children, Carole will have no choice but to sell the house to give it to them,” she explains.
If there are RRIFs remaining at the time of the first spouse’s death, the best strategy is to transfer them to the surviving spouse. “It is not a good idea to leave a RRIF to a nephew or child because they will be taxed. »
In conclusion, Carole and Pierre will never run out of money, they will be able to travel more for the next three years and even the next four years. However, they need to think about how much and how to leave an inheritance, because their biggest asset is the house.
* Although the case highlighted in this section is real, the first names used are fictitious.