IN GOOD SHAPE FOR A PROSPEROUS FUTURE.

is a $4,000 annual bridge to 65, pushing the value to $45,400. If inflation reduces the purchasing power of the pension and bridge by three per cent a year from age 42 to age 60, during which there is no indexation (indexation starts only when payments begin), the value will, in effect, drop to $28,440.

The couple’s TFSAs have a balance of $86,500. If Mark and Ilsa each add $5,500 a year for 23 years to his age 60, the balance would become $538,400. If that money were paid out over the next 36 years to Ilsa’s age 90 with the capital still earning three per cent after inflation, it would support annual tax-free distributions of $24,600 a year.

The couple’s RRSPs, including a potential $122,000 that would be paid to Ilsa in a termination package, but would then locked into a plan until her age 60, will total $203,000. If Mark and Ilsa continue to add $6,624 in total a year for the next 23 years, it will become $622,000. If that sum is paid out over the following 36 years to Ilsa’s age 90, it would generate a taxable income flow of $28,500 a year.

Mark will qualify for full Canada Pension Plan benefits of $13,110 a year at present maximum rates. Ilsa, who plans to leave the labour force, will get about 75 per cent of the maximum, which works out to $9,832 a year. Both will get full Old Age Security at age 65, $6,846 at 2016 rates.

Adding up the couple’s retirement income at 60, they would have the inflationreduced value of Mark’s pension plus bridge, to $28,440, TFSA income of $24,600 and RRSP income of $28,500 for total pretax income to age 65 of $81,540 a year. After splits of eligible income and 20 per cent average income tax and no tax on TFSA payouts they would have about $5,436 a month for spending. That would cover present expenses of $5,700 a month, less child care, which will no long be needed.

By the time both are 65, the bridge would be lost but CPP and OAS would begin, pushing their pretax income to about $116,000. After splits of eligible pension income and 22 per cent average income tax, they would have $7,450 a month to spend. If they live in southern Canada and have a paid up house, their cost of living might even decline.

“There are many unknowns, including where they may live in southern Canada, but with their high rate of savings and one defined-benefit pension, they should do well,” Moran says. financialpost.com