Joseph and Natalie’s first step should be to review their current spending and identify what may change in retirement so they can estimate their after-tax income needs. Photo by Nuthawut Somsuk/Getty Images

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Joseph* and Natalie,* both 56, are soon-to-be empty nesters and retirement is in sight. Aside from contributing to Joseph’s employer-managed retirement pension plan, this is the first time they have been able to put aside extra money for the future.

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“For a long time it was a struggle to meet expenses, but within the past two years it’s become easier,” said Joseph. “Our only debt is a mortgage and car loan. We want to start investing what we can to make sure we are comfortable when we retire.”

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The couple has a combined annual income of $115,000 before tax. Joseph’s registered pension plan (RPP) from a former employer is valued at $300,000. It is currently invested in an index-based mutual fund designed for investors planning to retire around 2035. He also has $500 in a registered retirement savings plan (RRSP) and $5,000 in a tax-free savings account (TFSA). Natalie has about $2,000 to $3,000 in her newly formed employer RPP.

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While both Joseph and Natalie are planning to retire at 65, ideally they would like to do so at age 62 or 63. They wonder if this is possible. And if so, how? And if they have to work until age 65, what can they do now to ensure they will have enough to meet their cash flow needs?

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The couple live in Ontario and their home is valued at about $700,000. They have a mortgage of approximately $198,000 which costs them $600 biweekly. They also have a $21,000 car loan. Their average total monthly expenses are $4,500.

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When they retire, Joseph and Natalie plan to sell and downsize, preferably in a small community and at a lower price point so they can be mortgage free and direct any excess money to their savings. Joseph will likely take on part-time work after he retires, but doesn’t want to have to work to pay the bills.

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“We don’t have a specific target income goal in retirement,” said Joseph. “We want enough to allow us to live a life of relative ease.”

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What the expert says:

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“Like many Canadians, Joseph and Natalie are doing most of their saving in the final 10 to 15 years before retirement when debt tends to decline, careers advance and child-related expenses fall away,” said Eliott Einarson, a retirement planner at Ottawa-based Exponent Investment Management.

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“Their modest retirement needs put them on track for retirement at 65. However, to understand what is possible, they need a retirement plan to identify opportunities, test scenarios and guide their next steps.”

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Joseph and Natalie’s first step is to review their current spending and identify what may change in retirement so they can estimate their after-tax income needs. They should also determine whether they can increase retirement contributions or accelerate debt repayment over the next nine years.