The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: YK-Phil on March 18, 2015, 08:01:50 PM
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When it comes to anything financial, I must admit I am essentially like a 6-year old kid trying to read an astronomy manual. It is very interesting and I am trying very hard to understand, but I have a psychological barrier that makes me lose interest very quickly. So please bear with me, and help me understand what my options are, and give me a bit of advice I can understand, in plain and simple language.
I am 57, my wife is 40. According to my latest statement of CPP contributions, if I were 65 years old today, I would receive the maximum CPP Pension of $1,065.00 per month. I would also be eligible to receive a supplementary amount of $563.74 per month in Old Age Security payment. From my limited understanding, the amount of Old Age Security paid to persons with an income below $72,809 would not be reduced. This, luckily or not, would be my case, so my OAS would not be clawed back. Combined CPP and OAS payments would amount to $1,628.74, slightly higher than my monthly retirement budget of $18,000 per year.
Right now, both my wife and I work full time and our household income is in the mid-six figures, and our expenses are in the high-$20K, much higher than I want mostly because I am away for work for weeks at the time, and when I go back home, we tend to eat out together and with friends more than we should. This budget item will go down significantly once I leave my job. Once we decide to stop working, we plan to move from Calgary to our rural property in BC, and either sell, or rent our current condo. Selling it would net us around $300,000. Renting it would bring an additional $1500 per month net. We also own a rental property with a net rental income of approximately $1000 per month, which would give us a total of $2500 net per month. Both properties are mortgage-free.
We also have roughly $500,000 in RRSPs.
My questions are:
1) When we decide to move to BC, should we sell our condo(s), or rent it (them)?
2) Say we both decided to stop working this year, me at age 57, my wife age 40. Would it be better to withdraw what we need from my RRSP until I reach age 65, or let the money grow and live off our rental income?
3) My wife would not have any income and will not be eligible for CPP and OAS for another 25 years. She only started to contribute to CPP a few years ago when she became a permanent resident, so she will likely not receive much in term of CPP and OAS. My question is: if she has no income, can she claim the rental income if we decide to keep one or both condos?
I am sure I missed a few things in this short synopsis, so please tell me where I am erring.
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Congratulations ykphil! Based on your numbers retirement shouldn't be a problem at all this year.
1) Are you comfortable managing rental properties 1000km+ away from where you live? I know that I would not be so my gut says to sell.
2) I personally prefer spending the RRSP first and letting the TFSA grow tax free, if your income needs stay low. The tax you and your wife will pay on $10k annual income each is peanuts. Save that TFSA for emergencies and future spending needs in old age (assisted living for example).
3) Either you or she can claim the income, just make sure it stays consistent. Theres lots of info online for different scenarios. Its possible the amazing BluntBeanCounter blog did a post on this.
Your $800k+ investable net worth will generate over $30k annually for life, so don't work away from home a day longer than you want to. :)