Shruti is a 59-year-old female who worked tirelessly in the hotel industry for the past 21 years. She came to us four years ago for a retirement assessment, as she was unsure how much longer she could physically continue to work. She had diligently saved $100,000 in RRSP GICs earning 1-3%/yr, and no TFSA with her bank.
After thorough discussion on her goals, time horizon, and risk tolerance, we determined that it would be more suitable to redirect her retirement savings into moderate-conservative investment accounts. As her RRSP GICs mature, we will transfer them to moderate-conservative RRSP mutual funds. A moderate-conservative portfolio earning an average 3-5%/yr would ensure that her money is invested in a comfortable risk tolerance while maintaining long-term purchasing power. We recommended all future retirement savings be directed to a moderate-conservative Tax-free investment account. She can withdraw any money from her tax-free investment account without reporting or paying additional taxes to the government. This will help Shruti make her ‘taxable’ income lower in retirement; the lower we can make her taxable income in retirement, the more government benefits she can gain access to.
At 59, Shruti’s health started to deteriorate. Arthritis in her back, shoulders, knees and feet were making it hard for her to finish her shifts. She visited her doctor and specialists regularly, and each time the physicians would recommend she work less or stop working altogether. One day, she couldn’t finish her shift and had to resign. Over the next twelve months, we regularly met with Shruti to help her with her finances.
We were able to:
- Help Shruti understand the severance and unused vacation money from her employer
- Set up monthly ‘tax-free’ withdrawals from her tax-free investment account, valued at $30,000, for her living needs during this transition phase.
- Apply for a comprehensive private prescription drugs and health plan without medical requirements within 60-days of leaving her employer’s group plan. This gave Shruti the peace of mind that 80% of her prescription drug costs – now and in the future – would be covered.
- Successfully apply for Employment Insurance (EI) Sickness Benefits, a government benefit which provided Shruti with $527/week of income for 15 weeks due to physical disabilities preventing her from working.
- When her EI stopped, we helped Shruti successfully apply for Canada Pension Plan’s (CPP) Disability Benefit, which provides her a $837/mo disability income for severe and prolonged disability which she will continue to receive until she reaches age 65.
- As Shruti was approaching her 60th birthday and her husband was already retired and over 65, we successfully helped Shruti and her husband apply for additional free government benefits: the Allowance (she receives $57/month) and the Guaranteed Income Supplement (he receives $200/month) of additional tax-free income.
- Help Shruti and her husband successfully apply for BC Pharmacare Assistance, which pays for 75% of their Pharmacare-eligible drug costs.
- Downgrade Shruti’s existing private prescription drugs and health plan, now that BC Pharmacare helps to pay for many of her drugs. She chose a more cost-effective plan with lower prescription drug coverage, and now includes dental coverage.
- Successfully help Shruti and her husband apply for lower BC MSP premiums for 2017, based on the new MSP income requirements. This reduces their MSP premiums from $136/mo to $46/mo (in 2017). We saved them $90 per month.
By following the advice we provided, Shruti has been able to reduce the amount of money she withdraws monthly from her tax-free investment account due to the additional income and benefits from the government. Accessing these benefits will help her stretch her savings further into her retirement.
Our plan to help Shruti in the future:
We will continue to strategically help Shruti withdraw money from her large RRSP in future years to ensure she is able to realize the government benefits she is entitled to.