Case Studies

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Dave & Judy saw no light at the end of the debt tunnel.

Planning Objectives:

Dave and Judy wanted to secure their future and transition into semi-retirement, but a $150,000 mortgage was obscuring their vision. They were both in their mid-50s and felt like they should be debt-free, given Judy's past health scare that reminded them of life's brevity.

Situation Before Planning:

Projections indicated they could retire comfortably in seven years by working full-time, but they didn't want to carry a $100,000 mortgage into retirement. They were also exhausted from full-time work.

Results Of Planning:

Dave seized a limited opportunity before turning 55 to commute his pension. His 35 years in the public service would yield a maximum pension, not just unreduced. With a $76,000 five-year average salary, his commuted value became $1,439,000. They invested $810,000, paid off their mortgage, and set aside $200,000 for semi-retirement. Though they faced a $275,000 tax bill, having $1,000,000 invested, no debt, and semi-retirement eased their financial concerns.

I can relate to Dave & Judy

Myth Buster: Turns out Kevin doesn't have to work until he reaches his 85 factor.

Planning Objectives:

Kevin despised his job, including his superiors and subordinates. His deep desire was to retire and enjoy time with his common-law wife at their peaceful Northern Ontario cottage. Despite his misery, he believed he had to endure two more years to reach his 85 factor and qualify for an unreduced pension. However, we found a better way.

Situation Before Planning:

Kevin had a $1,000,000 investment portfolio and a frugal lifestyle costing only $3,500 per month after tax, despite earning $109,000. His prudent financial habits helped him accumulate an additional $600,000. He was determined not to leave money on the table and remained unhappy in his job.

Results Of Planning:

We demonstrated to Kevin that with $1,000,000 in conservative investments, CPP starting in two years, and Old Age Security five years later, he could meet his $3,500 monthly requirement even without a work pension. This made taking a reduced pension seem reasonable. Kevin retired the following day, now residing in his Northern Ontario cottage for eight months each year, and by all accounts, he's content.

I can relate to Kevin

Fran living the life she wanted.

Planning Objectives:

Fran's job was causing her a great deal of stress in a low-morale environment. She had a part-time job that she enjoyed and believed she could earn $35,000 annually if she were self-employed while working three days per week. She had taken in a family member, leading to a cash flow shortfall. Fran's pension plan indicated she could retire without reduction at age 57, but she was unsure if she could endure seven more years of her current situation. She wanted to retire and go into private practice as soon as financially feasible.

Situation Before Planning:

Fran's cash flow was tight until her retirement age at 57, improving with wage increases and once she stopped contributing to her son's RESP. If she could endure her current job until 57, her part-time income and pension would produce annual cash flow surpluses, making her debt-free four years before her scheduled mortgage pay-off in June 2027. These surpluses were projected to last for the rest of her life after retiring at 65.

Results Of Planning:

We explored using the commuted value of Fran's pension annually up to age 55 (as her plan only allows this before age 55). By taking the commuted value, she'd exchange monthly pension payments for a lump sum at retirement's outset. We determined that Fran could take her commuted value at age 51 while maintaining her lifestyle with income from her part-time practice, six years earlier than she initially thought she could retire.

Fran realized she didn't need to work until her "85 factor" to live life on her terms. Alternatively, she could wait until one month before turning 55 to leave the public sector and then commute her pension, resulting in a larger inheritance for her son.

However, for Fran, the decision was not merely financial; it was about using her pension to achieve her desired lifestyle:

Less Stress from Work
Shorter Work Weeks
Becoming Debt-Free Now
Having Emergency Funds Available
Enjoying Peace of Mind

I can relate to Fran

Lisa wanted to use her money while she had her health.

Planning Objectives:

Lisa, diagnosed with stage 3 rheumatoid arthritis, experienced constant pain and aimed to make the most of her life while she still had some health left. She didn't believe she would reach her 85 factor for an unreduced pension due to her health condition and desires to use her pension funds to fulfill her bucket list.

Situation Before Planning:

Lisa and Michael had consumer debt and a $120,000 mortgage. They held modest RRSP savings of approximately $50,000 each. The commuted value of Lisa's pension was $550,000.

Results Of Planning:

This decision was less about finances and more about lifestyle. Planning suggested that Lisa and Michael would benefit more in the long term if Lisa worked until her 85 factor for an unreduced pension or potentially qualified for long-term disability (LTD) and began her pension at age 65. However, Lisa's perspective was that even if she managed to work long enough for a pension or to access LTD, she wouldn't have the time, money, or health to check off her bucket list items. Therefore, Lisa opted for the commuted value, paid off her mortgage, and has been enjoying her bucket list ever since.

I can relate to Lisa

Two good jobs and two good pensions.

Planning Objectives:

John and Mary, both tired of their current jobs, are looking forward to retirement, but not to stop working completely. Mary, a school principal, is concerned about potential staff reductions, while John, a police officer, aims to qualify for an unreduced pension with lifetime benefits.

Situation Before Planning:

John's normal retirement date (NRD) is at 60, allowing the commuted value option before he turns 50. Mary's NRD is 65, but her pension plan restricts the commuted value option to those under 50. They have a $90,000 mortgage and $150,000 in investments (RRSPs and TFSAs), and they've maintained a comfortable lifestyle, but their children's extracurricular activities are slowing down.

Results Of Planning:

The commuted value of their pensions, around $1,000,000 each just before turning 50, can be split into $600,000 in a LIRA and $400,000 in taxable income (resulting in $180,000 in tax), leaving $220,000. John won't use the CV option due to lifetime benefits. Mary plans to pay off the mortgage and start her consulting business with the $220,000. John will work for two more years until age 52 and then retire with a generous pension. They will have modest incomes for the next decade and flexibility to draw down on Mary's LIRA/LIF/RRIF, allowing them to live life on their terms.

I can relate to John & Mary

Let's Connect

Fowler Financial Group Ltd.

5161 Tecumseh Rd. E.
Windsor, ON N8T 1C3

519-944-7895

financialcoach@fowler-financial.com

Few people are aware that their pensions can be turned into large lumps sums of capital.
Let's chat about helping you creating more financial flexibility.

Case Studies

Let's Connect

Few people are aware that their pensions can be turned into large lumps sums of capital. Let's chat about helping you creating more financial flexibility.

Few people are aware that their pensions can be turned into large lumps sums of capital.
Let's chat about helping you creating more financial flexibility.