Solution: Cut investment fees and manage significant private asset, while keeping spending under control
“The family situation even now would be the envy of many,” Moran says. “Their goal is to achieve a $120,000 after-tax annual income when retired to maintain the way of life to which they were accustomed.”Excluding the private mortgage, Phil and Mary have approximately $1,229,000 in financial assets that are invested in mutual funds sold by one chartered bank. They pay management expenses averaging 1.29 per cent, which is quite high for their level of assets.
Dividends are taxed at lower rates than interest income, and so-called “dividend aristocrats” — that is, companies with a history of paying and raising payouts dependably over decades — can be a reliable source of lower-tax funds.Phil and Mary’s largest investment is the $765,000 private mortgage which comes due in 2020. Phil wants to roll the capital into another private interest-bearing real estate deal, likely another mortgage, with what could be a 4.5 per cent to 5 per cent yield.
Mary will be entitled to a $48,914 annual base pension plus a $6,600 bridge to 65, total $55,514 per year. The couple’s TFSAs, which have a present balance of $133,364, can grow at $6,000 per year for the next four years while Mary is still working. If they gain three per cent after inflation, the TFSAs will have a value of $176,000 and support payouts for the following 35 years of $8,200 per year.