Professional Documents
Culture Documents
Family making $200,000 a year is feeling the pinch in pricey NWT | Financial Post
NATIONAL POST NEWS OPINION MARKETS INVESTING PERSONAL FINANCE MORTGAGES & REAL ESTATE TECH EXECUTIVE ENTREPRENEUR JOBS SUBSCRIBE
PERSONAL FINANCE
FAMILY FINANCE
FAMILY FINANCE
TRENDING
Greece | Eternal Truth | Bonds | Alberta | Debt | Housing Market | Oil | Apple | Bank of Canada | China
Republish
Reprint
Situation: Couple raising three children in Northwest Territories has high cost of living, risky investments
Solution: Reduce investment risk by cutting carrying costs, allow for lower costs after move south
In the Northwest Territories, a couple well call Tom, who is 53, and Mary, who is 45, make a living that, with income from a rental
suite in their home, is $196,600 a year before tax. After tax, they have $12,111 a month to spend. That would be considered
handsome in southern Canada, but it is not lavish where food prices are at levels of luxury goods in the south and even gasoline is a
third more than it is in Alberta. With three children ages 13, 10 and 8, their grocery budget is $1,500 a month, their two cars cost
$600 a month to run and their utilities heat, light and water add up to $1,070 a month. However, their plan to move south after
retirement will lower their expenses and help stretch their retirement savings.
Related
http://business.financialpost.com/personal-finance/family-finance/family-making-200000-a-year-are-feeling-the-pinch-in-pricey-nwt
1/3
7/3/2015
Family making $200,000 a year is feeling the pinch in pricey NWT | Financial Post
2/3
7/3/2015
Family making $200,000 a year is feeling the pinch in pricey NWT | Financial Post
that this plan could produce savings of about $2,500 a year in after-tax interest costs.
Enhancing returns
The couple could get much more money out of their investments $3,400 in TFSAs, $664,600 in RRSPs, $ 7,000 of bullion and
$53,874 of equity in undeveloped land, or about $729,000 by continuing to add $20,400 a year to their RRSPs. That is possible by
using available space and income from Mary continuing to work for another 10 years, invested to return three per cent a year over
the rate of inflation. That would raise their investments to $1,220,600 in 2025 when she is 55 and ready to retire, Moran estimates.
If that capital were to continue growing at three per cent a year and is paid out completely in 35 years to Marys age 90, it would
generate $56,500 a year from Marys age 55. Along with Toms $3,617 pension, Marys $51,024 pension plus the $10,440 bridge to
65, they would have a total of $121,580 before tax from 55 to 65.
When each is 65, they could add CPP benefits of 80 per cent of the maximum $12,780 per person or a total of $20,448, making total
annual income $131,600 without Marys bridge. When each is 67, OAS would add $6,765, making their total and permanent annual
income $145,120 before tax or, after an average 30 per cent tax (though none on TFSA payouts), leaving them about $8,465 a month
to spend.
With the children gone and their jobs ended, their expenses would drop by $400 a month for piano and sports lessons, $1,700 a
month for RRSPs, perhaps $700 a month for food and $1,000 a month for extensive travel to the kids sports competitions, for total
savings of $3,800 a month. Additionally, $3,400 of mortgage and debt payments would be gone. Their present budget of $12,100 a
month would fall to $4,900 a month. Their budget would allow for additional spending, perhaps the travel they anticipate in
retirement, and a surplus that could be invested in their TFSAs.
With investment and home loans paid off, savings and job pensions should provide a secure retirement, Moran says.
Illustration by Andrew Barr/National Post
E-mail andrew.allentuck@gmail.com for a free Family Finance analysis
Follow
Follow Financial
Post
Get every new post delivered
to your Inbox.
Join 5,774 other followers
Enter your email address
Sign me up
Build a website with WordPress.com
http://business.financialpost.com/personal-finance/family-finance/family-making-200000-a-year-are-feeling-the-pinch-in-pricey-nwt
3/3