Early retirement can still add up for couple, despite health issues

Family Finance

Acouple we’ll call Freddy, 59, and Mary, 57, live in British Columbia. Freddy manages a construction consulting company, Mary works for the provincial government on a part-time basis. Mary brings home $1,483 per month while Freddy takes home $3,360 per month. The total, $4,843 plus investment income of $700 per month brings their total take home income to $5,543 per month. Their expenses of $4,198 leave a reserve of $1,345 per month for health issues. It’s comfortable living, but looking ahead, they wonder if they can sustain spending of about $5,000 a month when they retire, which, Mary says, should be in the near future.

Pushing them to retire are serious health issues that threaten to cut the number of years Freddy can run his business. Early retirement has a cost in reduced years to earn income, but it’s a reasonable plan to cope with the strain of long days. Freddy plans to close his business. It has no value without him.

“We’d like to quit our present jobs and perhaps do something more fun,” Mary says. “Freddy’s work is strenuous, so it would be good for him to retire. What we need to know is whether we can afford to do it with the income we want.” Their plan is to end their work within two years, sooner if possible. Their dilemma — will their savings, Mary’s government pension, CPP and OAS, get them to their income target?

Family Finance asked Graeme Egan, head of CastleBay Wealth Management Inc. in Vancouver, to work with Freddy and Mary to solve the numerical problem — what will their retirement income be?