Lifestyle: forced to retire at 65, alas ...

"My friends said to me," Why don't you write a lifestyle? "Me, with my little nonsense, I'm going to write to a lifestyle?»»

Sure why not ?

She did it.

"My case is very ordinary and I think I am part of a majority with few means but having a lot of need for advice," she wrote.

Diane* is 65 years old.She lives alone and works full time, for an annual salary of $ 70,000.

"The business for which I work eliminates the oldest employees because of higher wages," she said on the phone.And I was told that it would soon be my turn, but I have no idea when.»»

She was not ready to retire."I wanted to continue up to 68 years, to finish paying a loan that will drag until August 2022.»»

She does not have a pension plan and will not receive any departure compensation.

After a loss of $ 15,000 under the effect of the crisis, it still has $ 86,500 in RRSP."I started late because I raised my children on my own," she explains.I never had alimony.»»

She started this year to receive her old age security service (PSV) of $ 613 per month.

How much could she receive from the RRQ?

"I'm going to look while I'm talking to you," she replied.My papers are not far away. J’ai tellement calculé dans les derniers temps pour essayer de voir comment je pourrais m’en sortir…»»

The answer falls quickly: $ 848 per month at 65.

Et à combien s’élèvent ses dépenses annuelles ? « Attendez un peu, je vais sortir mon budget !»», reprend-elle avec un rire.

Diane lives in a small apartment which costs her $ 875 per month, electricity and heating included.

Its expenses amount to $ 36,000 per year, she calculates.They include the reimbursement of a loan of $ 20,500 to which she devotes $ 790 every two weeks, and that of a credit card balance of $ 6000, which she wants to pay $ 600 per month.

Clothes, leisure, holidays, personal care, vehicle maintenance are not included in this budget. Elle estime ces « dépenses discrétionnaires»» à environ 10 300 $, c’est-à-dire la différence entre son revenu net et son budget de 36 000 $.

Her debts come from afar, she says."When my children needed help, I made holes in my budget to help them.It's a vicious circle.»»

His plans to free it were turned upside down.

"Should I think of adjusting the balance with part of my RRSPs?"she asks. Je sais fort bien que j’aurai une retraite difficile avec le peu de REER qu’il me restera, et j’aurai besoin du SRG, mais comment faire ?»»

*Although the case highlighted in this section is real, the first names used are fictitious.

Numbers

Diane, 65 years of employment: $ 70,000 PSV: $ 613/Moisreer: $ 86,500 No celipas of ownership paid Consolidated: $ 20,500 credit card balance: $ 6000

The answer

It will be difficult.

La planificatrice financière Josée Jeffrey, du cabinet Focus retraite & fiscalité, a tenté de trancher le nœud gordien.

She first tested the scenario of a retirement at 68.

It is at this age rather than at 65 that Diane will remove her RRQ rent, which will give her an increase of 8.4 %.

But the planner first wants to purify the accounts.She first attacks credit card.

"She is able to reimburse her this year," she says.I give him six months to do it.»»

According to the figures that Diane provided, her current cost of living amounts to $ 46,800, which includes the reimbursement of her debts and discretionary expenses of $ 10,300.

It is by cutting in these that she will have to find the necessary margin for accelerated reimbursement.

The case of the credit card being settled at the beginning of 2021, Diane can therefore accelerate the reimbursement of her personal loan, to pay her during the year 2021 rather than in August 2022.

Once its debts are reimbursed, its living cost is reduced to around $ 30,500 in dollars today.

« Mon but est de lui faire commencer sa retraite sans dette»», explique la planificatrice.

« Elle ne doit pas retirer de REER pour rembourser son prêt personnel, car son revenu net pour l’année 2020 dépasserait le seuil de récupération de la PSV»», avise-t-elle.

With this route, the planner estimates that Diane will be able to generate savings of $ 4,350 in 2021 and $ 22,550 in 2022, placed in a CELI.

Retired, in 2023, Diane will probably receive an annual amount of $ 1,500 in solidarity and TPS credits, plus a payment of guaranteed income (SRG) of around $ 2940.

With the PSV and the RRQ annuity, its revenues available will total $ 24,500.

She will be able to fill the budget deficit by drawing in the sums paid in Celi, without the withdrawals being added to her income, which will allow her to continue to touch the SRG.

However, he will disappear in 2025 when, reached 71 years old, Diane will have to start her compulsory withdrawals from RRSP.

This capital will be exhausted eight years later.

At 80, she can start touching the SRG, which our planner estimates that $ 3,600.She will therefore have to restrict her living cost to her net income, which will ask her to reduce her expenses by at least $ 6,000.

« Elle n’a pas le choix !»», constate Josée Jeffrey.

However, she suggests another scenario: if Diane, from the start of her retirement, reduces her discretionary expenses by 25 %, by some $ 2,600, she pushes the exhaustion of her savings to 85 years - a deadline that, in the circumstances, satisfied the planner.

Second scenario

But what would happen if Diane was laid down at the end of 2020?

Our planner then employs a different strategy.

As this is an end of employment, Diane is entitled to employment insurance for 45 weeks.

Dans ce scénario, Diane n’accélérera pas le remboursement de ses dettes, mais « elle n’aura pas le choix de réduire ses dépenses discrétionnaires de 25 % dès 2022»», souligne la planificatrice

To allow him to touch the SRG as soon as possible and without interruption, Josée Jeffrey has developed a subtle maneuver.

She suggests that he transform her RRSP into an REFER at the end of employment insurance and to use the sum to buy a monthly life annuity whose last payment will fall in June 2023.

« Ses revenus de pension auront pris fin et elle pourra tout de suite demander un formulaire pour qu’on calcule le Supplément de revenu garanti en fonction des revenus à partir du 1^er juillet 2023, et non selon ceux au 31 décembre de l’année précédente»», explique la conseillère.

De cette manière, « on devance d’un an le SRG»».

At 70, with the RRQ, the PSV and the SRG, Diane would maintain a net income of about $ 27,000.Its reimbursed debts, with a reduction of 25 % of its discretionary expenses, its cost of living would then be around $ 30,000.

« Il lui manque toujours 3000 $ par année»», constate Josée Jeffrey.

This is why she suggests that he go and seek during the first years of his retirement a small additional job income, which would add $ 5,000 to her income.

« Depuis le 1^er juillet, et ça commence cette année, on peut gagner jusqu’à 5000 $ de revenus sans que ça réduise le SRG»», souligne-t-elle.

This is the equivalent of eight hours per week at the minimum wage.Just what it takes to distract a retiree ...

*Although the case highlighted in this section is real, the first name used is fictitious.

Did you plan a project that requires judicious use of your money?Do you have financial problems?Submit your case to the lifestyle team.