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Case study: Empty nesters Francesca and Angelo want a comfortable retirement, but can they afford it?

This is the final post of a five-part series on retirement planning and financial wellness for different life stages and family circumstances.

Francesca and Angelo* are empty nesters approaching their 60s and living in Toronto. Their responsibilities to their children are done, as all three have finished school and launched their own successful careers. Now they are looking forward and trying to plan for what their remaining years as a couple could look like. How strong is their nest egg? What do they want to do in retirement and how much will they need?

Like many baby boomers, Francesca and Angelo have had the advantage of being able to build a lot of equity in their home. They purchased their home 35 years ago for just $35,000 and the home is worth well over a million dollars today.

They are planning to retire within five years and after that downsize by selling their current home in Toronto, cashing in on the equity they have built up, and move to a smaller municipality where housing is less expensive. They also hope to purchase a small condo in the city as an investment property, and possibly rent it out.

To familiarize themselves with being landlords, and because their current house is now too large for them, they are considering converting the downstairs into a rental property, and will get an Equityline® Visa to fund the renovations. They have no debt and have paid off their mortgage and, able to use their equity to get a low-interest loan, they are confident they can pay off the Visa long before they retire.

After consulting with their financial advisor, Francesca and Angelo have come up with an approach that they think will serve them well into retirement. Once they rent out part of their house, they plan to put that rental income into a low-risk registered retirement savings plan (RRSP) portfolio, which they will roll over into an annuity once they retire.  They are also planning to get a five-year guaranteed investment certificate (GIC) as a savings vehicle to use when their daughter gets married, as they would like to contribute to her wedding.

One thing that’s important to both of them is that their children don’t have to worry about them or have to support them as they get older. Although they are in good health now, they have purchased long-term health insurance. More Canadians are living longer but not necessarily in good health and Francesca and Angelo don’t want to deplete their retirement nest egg by having to spend on medical costs or long-term care. But because they are in good health now – and know that average life expectancy in Canada now is about 80 years for men and 84 for women – they plan to delay drawing on Canada Pension Plan (CPP) and Old Age Security (OAS) benefits so they get higher monthly income from them. They figure they can adjust that plan if needed as they get closer to retirement.

What Francesca and Angelo still really haven’t decided is exactly what they’ll do in retirement. They have been very invested in their careers in the food distribution industry and know that retirement will be a big adjustment. They expect to pick up hobbies they dropped during the busy years of work and raising a family – Angelo likes to paint, and Francesca is an avid gardener – but exactly how they’ll be filling their days is a bit of an unknown. Now that their basic financial plan is in place, they plan to focus their last few years of work on preparing mentally for that next chapter in their lives.

*Francesca and Angelo are not actual people, but their story is indicative of what many empty nesters are discussing when it comes to retirement. It should not be construed as financial advice. Reach out to a financial advisor to discuss your situation and try out the Canadian Retirement Income Calculator to help determine what you need to achieve your retirement goals.

This post is one of a five-part series on retirement. Visit the rest of the posts in the series: Dustin and Anna; Jaspreet and Matt; Trish; George

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