In their mid-50s, Craig and Sharon are turning their thoughts to the day they will leave their successful careers behind and be free to spend more time on their hobby farm. His job in education pays $79,500 a year, while she makes $85,000 a year in the sciences.
They have two children, ages 13 and 18, who they hope to help through university.
"We started our careers late after spending time in very bohemian lifestyles during our 20s," Sharon writes in an e-mail. In their early 40s, they worked in the non-profit sector. Now that they are in their 50s, with higher-paying jobs, "we have begun to save feverishly," she writes.
The goal is for Craig to retire at the age of 63 and work part-time for another couple of years. Sharon would retire at 65.
"We feel strongly about setting up our children for financial success," Sharon writes. They have opened in-trust accounts for the children "so they do not start saving late, like we did." They are contributing to a registered education savings plan.
The couple's retirement spending goal is $64,000 a year after tax, including $15,000 for travel, and they wonder if they can achieve it without having to dip into their capital. "We want to leave our children with a large inheritance if possible."
We asked Jason Pereira, a financial planner at Woodgate & IPC Securities Corp. of Toronto, to look at Craig and Sharon's situation.
What the expert says
First off, Mr. Pereira recommends the couple pay off their $5,000 car loan because it is costing them 5.19 per cent a year. They are also planning about $20,000 worth of home improvements this year. Their son will start college this fall at a cost of $14,000 a year. And they need to replace their car at a cost of $15,000. The planner suggests they set aside $54,000 for an emergency fund to cover six months of current expenditures.
Next, he looks at the children's trust accounts, which are set up as informal trusts in the children's names. "I highly advise against doing this," Mr. Pereira says. All interest and dividends are taxable to the parents until the children are 18, he notes. "The bigger issue is that the kids will have legal ownership at 18 and can do as they please with it," the planner says. "While we all hope our kids will turn out perfect, we can't count on it. Best not to create that problem in the first place."