Open this photo in gallery:Max and Erica also want to travel more as a family and eventually give each of their children a property.Christopher Katsarov/The Globe and MailPlease log in to bookmark this story.Max is a corporate executive earning $205,000 a year. Erica has her own management consulting company that nets about $150,000 a year after expenses. He is 54 and she is 42. They have two young children, 4 and 8, and a mortgage-free house in the Greater Toronto Area. They also have an investment property.The couple are looking to the day maybe five years from now when they can leave behind their high-stress, full-time jobs and work part-time.In the meantime, they want to buy a roomier house, which would entail borrowing, buy a second investment property, and provide for their children’s higher education. They also want to travel more as a family and eventually give each of their children a property.How much income would they need to maintain their standard of living if they decide to work part-time? Max asks in an e-mail. Their semi-retirement spending goal is $120,000 a year after tax. “It’s a puzzle,” he adds. “We’d like to see how realistic all of it is, or if we need to adjust/make sacrifices on any of these.”We asked Shay Steacy, a certified financial planner at Modern Cents, an advice-only financial planning firm based in Mississauga, to look at Max and Erica’s situation.What the Expert SaysWith Erica being just 42, their financial plan and retirement projections need to cover more than 50 years in the future, meaning they would have to revisit their plan regularly as the years go by, Ms. Steacy says.A good place to start is to explore how their retirement projections would look if they continued working enough to cover their current living expenses, the planner says. They would only stop working when their investments, through continued growth and compounding, were sufficient to provide for their retirement.Given their annual expenses of $120,000, they would need to earn a combined employment income about $160,000 before tax. If most of the income is earned by one spouse, the resulting higher marginal tax rate would mean a higher salary would be needed to net their required take-home pay.“An additional $300,000 mortgage for the new home means total annual mortgage payments of around $20,000,” she says. “Higher expenses would require a higher salary. They’d need to target around $190,000 a year before tax, ideally split equally to minimize the tax payable.”If they worked part-time until age 65 for Max and 60 for Erica, they should have enough investment assets to last for Max’s lifetime, based on his life expectancy, the planner says. “If they don’t want to work part-time that long or earn that amount of money, they would need to look at selling the family home at some point.”“Making these financial decisions becomes about what the clients value,” the planner says. “Do they want to sacrifice an ea
Sab. Gen 18th, 2025
