Can you really have freedom at 55? Plus, how to choose between TFSAs and RRSPs if you’re in debt

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Elijah has a deteriorating health condition that is making it difficult to keep up with his $139,000 government job, he writes in an email. “My desire is to retire early (at age 55) and eventually go into part-time self-employment.” Elijah is 51 and his wife Ava is 50. “We are a one-income couple with no children,” writes Elijah.

Elijah and Ava are debt free with an $800,000 house. They have registered and unregistered investments, with the equity portion of their portfolio consisting primarily of high-quality, dividend-paying stocks. Elijah’s unregistered account consists mostly of guaranteed investment certificates.

Elijah has an inflation-indexed defined benefit pension plan that pays him $45,045 a year at age 55, plus a bridging benefit until age 65.

“We’re a frugal couple, only using about half my current net salary,” he adds. If his self-employment plans don’t materialize or his income is minimal, “would we still be in good financial shape?” asks Elia. “Or is early retirement a bad idea and we need to change our plans or our finances now?”

Her retirement spending goal is $50,000 a year after taxes, less than she is spending now.

In the latest financial facelift, Warren MacKenzie, a Toronto-based fee-only chartered financial planner and chartered accountant, takes a look at Elijah and Ava’s situation.

Want a free financial facelift? E-mail [email protected]

When saving for retirement, should you change your wealth mix over the course of your career?

In the latest Charting Retirement article, Fred Vettese, former Morneau Shepell’s chief actuary and author of Retirement Income for Life, examines whether it’s best to maintain the same wealth mix over your peak savings years here.

I’m 63. Should I invest 90 percent of my money in stocks?

“I’m 63 years old and planning to retire in a few years,” one reader wrote in an email. “My portfolio is 90 percent invested in stocks and 10 percent in guarantee certificates. Is it time to get more conservative, like E.g. a 60/40 mix of stocks and GICs?”

There is no one-size-fits-all solution when it comes to deciding on the optimal asset allocation, says John Heinzl. The answer depends on many factors, including age, risk tolerance, retirement spending plans, wealth, and expected state and company pension income.

In the most recent Investor Clinic, Heinzl weighs the options here.

In case you missed it

TFSAs over RRSPs this year, especially if you’re in debt

Are you going to do an RRSP season guilt trip this winter?

March 1 is the deadline for making a registered contribution to the retirement plan that will be credited against your taxes in 2022. For those who have the money, personal finance columnist Rob Carrick explains, it happens to be a good time to put money into an RRSP as stocks and bonds are rising after last year’s losses and 5 percent guaranteed mutual fund products are yet to come Are available .

If a high debt burden is preventing you from making an RRSP contribution, skip the guilt and focus on the debt instead of saving. As much as we all need to take a long-term view of our finances, there are times when living in the moment takes precedence.

And according to Carrick, right now it looks like borrowers will have to wait about 12 months before interest rates start falling.

Read the full article here.

Online portals facilitate the processing of estate matters. When will the banks catch up?

Managing an estate is no fun for anyone. But with Canadians projected to be transferring inheritances worth up to $1 trillion over the next decade, more and more of us will become familiar with the emotionally strained, bureaucratic obstacle course of distributing a deceased family member’s fortune.

The good news is that the technological advances brought on by the pandemic are making the process a little bit easier. But one persistent pain point seems to be the banks.

Read the full article here.

Questions and answers about retirement

Q: I was wondering if you can talk about travel insurance for the over 65s. I’ve found that most, if not all, credit cards for people over 65 don’t cover health insurance or trip cancellation/interruption. Is it also better to take out annual or single trip health insurance and/or trip cancellation/interruption insurance?

We asked Elliott Silverstein, Director of Government Relations, CAA Insurance, to answer this question:

Recent years have highlighted the importance of travel insurance, no matter the length of your trip. Before you embark on your trip, it is important to include travel insurance in your travel plans. If you have insurance coverage (e.g. from a credit card) it is recommended that you review the details to ensure you know what you are covered for and which items you may not be eligible for.

Also, don’t forget to check if your coverage is excluded from a credit card or other plan based on age. This ensures you don’t have a false sense of security when a plan offers options you are not eligible for. If this is not clear, contact the provider to confirm your eligibility status and procure other options if coverage is not available to you.

Travelers should shop around and speak to different insurance providers as options, coverage and prices may vary. Depending on the length of your trip or the frequency of your vacations, you may want to consider an annual plan that gives you peace of mind for a full year.

When inquiring about insurance, it’s important to include your medical history to ensure you have the correct coverage for any pre-existing conditions you may have.

Do you have a question about money or lifestyle issues for seniors? Email us at [email protected] and we will find experts and answer your questions in future newsletters.