The couple may need to work longer and reduce their lifestyle expenses to maintain their current lifestyle throughout retirement. Read more.
Maintaining your current lifestyle throughout retirement is not possible with $170,000 of savings. But it becomes possible through a combination of working longer, reducing your lifestyle expenses and/or a dependency on your home equity and future inheritance. I think that if you had been given just a little more guidance along the way, you’d be in a much better situation today.Article content
It would have helped to get a sense of how much money would be enough to support your lifestyle over time. Just an awareness of that number can have a positive impact. Of course, you may have always planned to use your home equity and inheritance to support your retirement, but I’m going to assume you did not.
John, you started your CPP and OAS when you turned 65. Your CPP is low because you paid yourself dividends and didn’t contribute to CPP. It’s not uncommon for me to hear of business owners drawing dividends to avoid CPP contributions because they believe they can do better than CPP if they invest on their own. But they often say they haven’t started investing yet when I ask how their investments are doing, so be careful.
As for your OAS, John, you are past the point where you can stop your OAS and defer it to age 70. You only have six months from the time of starting OAS to stop it and defer it to age 70. Reasons for deferring the OAS include a 36-per-cent increased benefit if it is deferred to age 70 from 65, and avoiding the claw back of some of your income between age 65 and 70. In your case, you may continue to lose your OAS up until age 75 when you plan to retire.
A possible solution is making Rita a shareholder of your holdco with a different class of shares. With Rita as a shareholder and you, John, over the age of 65, your holdco can pay Rita dividends. Maybe, John, you can reduce your dividends enough to be able to keep your OAS and at the same time pay dividends to Rita in the amount of your reduction.Article content
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