Dark clouds over this couple’s retirement are mostly a state of mind

Family Finance Already retired, a couple we’ll call Matti, 73, and Jack, 64, make their home in B.C. They are financially secure with a yearly income of $61,860 after tax. Part of their income is cash flow from a corporation which holds two rental properties from which they take $18,000 a year. It looks like a solid retirement and it is. Yet they worry that their approximately $1.58 million in total worth and their ample income will not see them through. Their pessimism is embedded in their view of the world. In financial terms, they are better off than they think.

“Will we have enough to last through retirement?” Matti asks. “We would like to be able to save $1,500 to $2,000 every month and possibly to travel across Canada.” Their concerns include a belief that post-2008 banking law changes will destroy their savings.”

Family Finance asked Daniel Stronach, head of Toronto-based Stronach Financial Group Inc. , to work with Matti and Jack. In his view, their feelings of vulnerability after careers that generated substantial income — his in building trades, hers in personal services — are understandable but unfounded. They have ample income for their needs. For now they are subsidizing their largest asset, a company that rents out two units, by taking a very low return from their invested capital. They have underutilized RRSPs out of a mistaken belief that they trap money and have not maximized their TFSA contributions even though they have had the cash flow to do both.

“They are diverting too much current income to their property investments and effectively robbing themselves of future income,” Stronach explains.