lifestyle | Urgent need to enjoy life

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After the loss of a loved one to a rare and devastating cancer, Audrey*, 34 and Sébastien*, 40, feel an urgency to live and wonder if they can afford more craziness in their lives.

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Released at 06:00

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Isabelle Dube

Isabelle Dube
Press

Situation

They say two public service professionals are at a crossroads. Audrey and Sébastien must make choices to enjoy life before it’s too late.

“My mother, who disappeared at the age of 59, was unable to fulfill her dreams, which she postponed to retirement and never lived,” Sébastien says.

Audrey went through a lot of ordeal, losing her husband while pregnant.

The couple now form a blended family with children aged 14, 12 and 4.

At the start of the pandemic, the spouses took on an ambitious self-build project. With rising material prices, the property cost more than expected. It takes an additional $25,000 investment to finish to their liking.

“We have a very nice property with a very good value on the market. But on the other hand, we feel that we are not living our lives to the fullest and that we are constantly limiting ourselves on a daily basis,” says Audrey.

Our financial situation is not insecure, given the amount impacted by our professions as well as inheritance and life insurance.” We do not constantly splurge for fear of not having enough money to maintain our rhythm of life. »

The couple is considering completely changing their lifestyle by replacing the house with an apartment to focus on fun: travel, activities for kids and restaurants.

“According to our financial planning estimates, we would have had the tools to keep the big house and give us the entertainment we wanted, but we couldn’t quite believe it,” Audrey says.

In his plans, Sébastien retires at 54 when he will receive his full pension, and Audrey will follow him at 48, even without a pension plan. The couple plans to contract for several years.

“We have come to a crossroads and we no longer know which direction to go. Is it the urgency of living because of past experiences that gives us the desire to take full advantage of it? Or is it the influence of our parents, who have saved their entire lives, that makes us not dare to give ourselves the right to spend? »

NUMBERS

audrey

Salary: $80,000
retirement plan: none
Estimated QPP at age 65: $1,006/month
RRSP: $74,974
TFSA: $108,104
Unregistered: $137,492

Sebastian

Salary: $130,000
Pension: $78,300
Estimated QPP at age 65: $1,461/month
RRSP: $220,576
TFSA: $105,922
Unregistered: $25.592
RESP: $86,262

House value: 1.7 million

Mortgage: $590,000

Home equity line of credit: $63,931

Current cost of living: $140,000

Expected cost of living in retirement: $100,000

Cost of living increased by extravagance: $175,000

analysis

Antoine Chaume, a financial planner and asset management consultant at Assante Capital Ltée Équipe Major, reviewed the couple’s finances and questions.

With their annual income and inheritance, the spouses are in a comfortable situation for their age. But they face a dilemma: early retirement or pursuing an expensive lifestyle.

Antoine Chaume, Assante Capital Ltd. Financial Planner and Asset Management Consultant at Team Major

Owning more than $1 million home is a lifestyle choice, elevates the financial planner. Such a prime residence comes with higher maintenance costs than a $700,000 property. “These types of homes sometimes come with social pressure to put flowers and luxury cars in front of the house.”

PHOTO EDOUARD PLATE-FRÉCHETTE, LA PRESSE ARCHIVES

Antoine Chaume, Assante Capital Ltd. Financial Planner and Asset Management Consultant at Team Major

Antoine Chaume asks the couple to think about their real dreams before reorganizing their finances. “They need to find out what is really important to them. With a big house and the status that comes with it, they’re almost certain to retire at an age where almost no Quebecer can retire. »

Unless, of course, they significantly increase their income, he says. But in the civil service, if Sébastien is lucky enough to have a good retirement plan, he doesn’t have that kind of boost.

baseline scenario

The planner estimates that the family currently spends $140,000 without additional splurge. But the net income is around $130,000. He argues that raising the cost of living to $175,000 or even $150,000 to cover the extravagance would spell financial disaster for the couple.

“With a $100,000 annual cost of living, staying at home and completely stopping work at 54 and 48 is an impossible scenario to achieve. 1.6 million lost. At 68 and 74, they will no longer have money. »

Contract scenario

Sebastian and Audrey don’t sell the house, retire in 2035 as planned, but if they add $125,000 a year of part-time employment income for 10 years, they won’t meet their goal either. Antoine Chaume still estimates a million missing. At 78 and 85 the money ran out.

However, if the spouses retire and sell the house in 2035, we are already approaching the target. The planner estimates a $100,000 cost of living would be possible. The planner reminds that the value of the property will reach approximately 2.3 million, as the growth in real estate prices averages 2.5% in normal times. The couple could then buy an apartment for cash and have the money for up to 96 years.

House sale scenario

Antoine Chaume says, “They’re in the same order as the majority of Quebecers, meaning their property is worth 50% of their net worth. If your financial strategy is similar to that of all Quebecers, you’ll get the same result as most Quebecers. Different lifestyles from most people to stand out and achieve financial independence at 48 and 54 years old.” You have to make choices.”

Audrey and Sébastien will save $10,000 a year in maintenance costs and taxes if they immediately sell their home to buy a luxury condo for $1 million in cash. This amount can be used to improve their journeys and other crazes.

They will be able to retire in 2035 by making 10-year contracts, which will add $125,000 a year in income.

In addition, Audrey and Sébastien will have two options, saving $30,000 per year in mortgages: investing $30,000 to provide a $106,000 annual cost of living and reaching age 96 with an excess of $1.5 million.

Or, increase their living costs to $120,000 for the first 10 years and then reduce it to $100,000 and end their life at 96 by consuming all their assets.

The planner observes that, unlike the majority of families, the couple is adequately insured for their needs. However, Antoine Chaume says he’s missing out on the unmaximized 30% government grants for RESPs.

* While the situation highlighted in this section is real, the first names used are fictitious.

Planning a project that requires wise use of your money? Do you have financial problems?

Source From: Google News

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