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Assuming that they do not tap their RRSPs with a combined balance of $246,000 plus $74,000 added, totalling $320,000, invested for nine years to Bill’s age 60, then with a three per cent annual return based on five per cent gross return less two per cent inflation, these accounts would grow to $417,500. That sum would generate $18,285 per year or $1,523 per month to Cindy’s age 95 assuming that all capital and income are paid out.
Using only savings known to the present and excluding any income from unknown future work, the couple would have paid for their house and have $80,000 per year or $6,670 per month before tax from non-RRSP sources. At 60, Bill and Cindy could add RRSP income of $1,523 per month and his CPP at $6,396 per year or $533 per month before tax for total income of $104,712 per year or $8,726 per month. Two years later, Cindy can start her CPP at $888 per year or $74 per month before tax for total pre-tax annual income of $105,600 or $8,800 per month. Each partner can add $7,362 from OAS in 2020 dollars to income at 65 thus making annual income before tax of $112,962 when Bill is 65, and $120,324 when Cindy is 65. Split and taxed at an average rate of 15 per cent, they would have monthly incomes for the three stages of $7,420, $7,940 and $8,500.
Bill and Cindy must decide: cash in a great investment or hold the Apple shares and sell them as needed. It’s the safety of diversification vs. potential future gains of an extraordinary stock. It is a decision of exceptional difficulty, for in capital markets, past performance does not always predict future returns.
Retirement stars: Five ***** out of five
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