RETIREMENT READINESS

Five stars out of five gaining at $22,296 per year will grow to $512,600 in 2019 dollars by age 60 and support payouts of $ 2,115 per month for 30 years.

He can expect $ 260 per month from the Canada Pension Plan at age 60 and, at 65, $330 per month from Old Age Security based on 22 years residence in Canada after age 18 by his age 65. At age 60, that would combine to provide him with $6,049 per month. After 20 per cent average tax excluding TFSA payouts, Fred would have $4,934 per month

At 65, he could take his OAS benefit, $330 per month based on his years of residence in Canada. His permanent income after tax would then be about $ 5,200 per month. With no savings for his RRSPs, TFSA or taxable investments, Fred would have much more money for discretionary spending than he has today.

If Fred lost his job tomorrow, his present $501,000 of financial assets would grow to $580,796 in five years with no further contributions and support 35 years of payouts of $ 2,186 per month, a reduction of about $ 900 per month in his investment income, but only an 18 per cent cut in total income after tax. What makes his present retirement plan work even with loss of job is the many sources of income he will have, Moran notes.

HEALTH RISKS

If Fred wants to live in his foreign condo in the months it is not rented out, he might want to buy a travel health insurance plan at a cost of perhaps $ 200 per month, depending on benefits, deductibles and exclusions. Permanent health insurance abroad to provide care at a level comparable to that in Canada would be very costly, perhaps tilting the question of where to live to Alberta more of the year.

“If, however, Fred retires to live in his distant condo at least part of the year, his investment in the property will have turned into a valuable asset,” Moran concludes. “His security is his modest lifestyle and aggressive saving. His refuge is ultimately an anchor in a foreign country with a low cost of living and his own supportive family. Retirement plans don’t get more bulletproof than that.”