Helping Parents Achieve Retirement: A Case Study

We’ve been asked fairly frequently in the past what a “Spring Plan” is like and we often find ourselves at a loss. Our work isn’t really about creating Spring plans – although this is what we call ourselves – it’s really about providing custom (or “bespoke”, if you want to be fancy) advice for the unique people we have the pleasure to work with.

Explaining how one specific individual might benefit from this process can therefore be a little difficult. Sometimes, people will ask, “What is the return on investment?” and we have to give our standard answer of… ”That depends”.

What it depends on is, of course, your own unique situation with your unique family members. It depends on many different details: residency or citizenship in a variety of places, educational goals and dreams, retirement plans, financial targets, etc. From there, factors like what kind of income you do or do not have are taken into consideration; income from employment, pensions, investments, real estate, the company you or your grandparents built, and how you own all the assets that contribute to everything.

Your questions about what strategies make sense for you to employ, what the tax implications are of each one, whether you have enough, or if you can spend more, or if you can give away more, or if you need to consider something that you’d never considered before, like filing a tax return in a different country or revamping your Will to consider your disabled child, or increasing your life insurance because you never realized that you actually didn’t have any… all of this goes into a custom plan just for you.

Given how unique you are, and how unique each person and each family we work with is, we decided that perhaps the easiest way to explain what we do… is to show you.

In 2020, we’ve introduced you to a whole cast of characters, mash-ups of real stories with identifying information altered dramatically, genders swapped and names changed (mostly to TV and movie characters) including:

• Olivia, who sold her PR firm and needed some investment advice;
• Jesse and Tulip and their children Cassidy and Conor, who were trying to plan for Cassidy’s disability while managing careers and goals;
• Troy and Annie and their children Joel and Britta, who wanted to renovate but were already in debt;
• Leela, who was earning money on both sides of the 49th parallel and need some help untangling;
• and many more.

Alexis and her mother, Moira

This month, please allow us to introduce you to Alexis, who brought her mother Moira to us to help her plan her retirement.

Alexis reached out to us on our website after graduating from University. She had been offered an amazing position in Boston, Massachusetts, but was worried about her mother, Moira. Moira is 65 years old and has been Alexis’s only active parent her whole life. 

The Challenge

Moira has always worked hard and enjoyed it, but in the last year, a new manager was hired and she just did not enjoy being there anymore. She has savings and a defined benefit pension plan to draw from and is curious if she could retire altogether or reduce to part-time work in a less stressful environment. Commuting on transit has become a bit of a pain and she’s hoping she could spend more time in her community.

Moira is active at the temple and loves to help others. She really, genuinely can’t stand her boss and was not at all shy about sharing the colourful names she calls him when he’s not around – we knew we had to help her leave and guide her to retirement!

It turns out that Moira has a very low cost of living and she doesn’t think she would spend a lot more money if she was retired as a lot of her enjoyment in life comes from inexpensive activities like helping others, attending the temple, going for walks, and borrowing from the library. She has also fully paid off her mortgage and we found that this, combined with her very low spending, gave her the opportunity to retire fully if she wanted, especially after we discovered that she would qualify for GIS benefits! 

Guiding Moira to Retirement

The ability to retire fully and gain some more income was delightful to Moira. In addition, we advised her that she would benefit from a few other small changes:

The Cash Wedge – like an emergency fund during your pre-retirement years. This chunk of money is guaranteed – a liquid form reduces Moira’s exposure to a sequence of return risk. That’s a swanky way of saying that making withdrawals from your portfolio during a market downturn can really throw your retirement plan off. With a cash wedge, reviewed annually, she can continue to live her lifestyle in the same way, even if the markets have lost their mind a bit.

Maximize TFSA contributions every year – yes, even in retirement. Moira knew that her TFSA should be fully invested, just like her RRSP, so she was ahead in that respect, but she thought she would stop contributing once she retired. However, transitioning money from her non-registered (taxable) investment account each year into her TFSA allows that money to grow and be drawn out tax-free throughout her lifetime. This strategy has the impact of reducing her taxable income throughout her lifetime, without reducing her lifestyle or her exposure to growth opportunities in her portfolio, and maximizing her ability to receive income-tested benefits such as OAS and GIS.

Keep that pre-paid long-term care insurance policy – the plan that Moira purchased years ago isn’t available anymore and provides robust benefits should Moira require long-term care in the future. This made it much easier for us to plan for Moira’s retirement as we were able to factor this into the estimate of what home nursing or facility care would potentially cost. Based on our estimates of these costs (which are, of course, only estimates as prices can change over time!), it’s projected that Moira would be able to live in care without selling her home. This was very important to Moira, as she wants to leave her home for Alexis. Alexis was adamant that she did not need her mother to leave her anything, but Moira was equally adamant that this gift would be available in her estate.

Appoint a Power of Attorney and a back-up power of attorney – this person would be able to manage Moira’s assets even if she later becomes unable to do so on her own. Initially, she wanted to appoint Alexis, but with Alexis moving to the U.S., the additional complexity that this would cause for Alexis compelled Moira to decide to appoint her brother, David, who lives in the same province and would consult with Alexis before making decisions.

The Result

Both Alexis and Moira created Wills, appointing David as executor, with thought put into as many worst-case scenarios as we could envision.

Moira quit her job and now spends a great deal of her time in retirement with her community, helping others, reading books, and walking near a beautiful lake. Alexis is in Boston and talks to her mother several times a week. They’re both thrilled that each one of them is able to live their best lives, doing what they love best – and it’s thrilling for us that we were able to help them both.