Case Study 1: Preparing to retire—but to what?

Jack Adamson, 58, and his wife Sandra, 57, are looking seriously at their retirement plans. The Adamsons have talked about their life after work for the past few years and have had some preliminary discussion with a Financial Planner. Jack is a supervisor at a local manufacturing plant and Sandra has been an elementary school teacher for over 30 years.

Recently Jack has encountered some health issues that have left him wondering whether he can continue to work full-time for much longer. In fact, his health challenges have led the couple to take a look at their retirement plans. Jack enjoys his job and would like to continue in some capacity in the future; on the other hand, Sandra is looking forward to leaving the classroom. While she wants to stay active, she finds the stress in her job to be at an uncomfortable level.

Their financial situation

Jack will receive his full pension at age 65 but can receive a 75% pension at age 60. Sandra is eligible for her full pension when the school year ends at age 60. The Adamsons are considering full retirement when Sandra is able to leave her job. Their combined retirement income is expected to be over $5000 per month, more than enough to look after their needs in retirement.

Jack and Sandra feel that they are well-prepared financially to leave work. Not only have they continued to keep their debt level at a manageable level, but they have also made a concerted attempt to pay down their mortgage. In fact, they expect to make their last mortgage payment by the time Jack is 60.

The Adamsons have not managed to save a lot of money, but each has a small RRSP of less than $50,000. They have invested their money conservatively in GICs and low risk mutual funds.

Their Family

The Adamsons have three children. Their eldest daughter Mary, 26, is married and has two children. Their son Rick, 22, is working at a local business and has recently moved into his own apartment. The youngest child, Jason, is 17 and finishing his last year of high school. He has already committed to a university in the U.S. and will be moving out within the next few months.

Sandra's mother has recently been placed in a long-term care facility; Sandra is the primary care giver and knows that she will have to devote more time to looking after her mother. Thankfully, Sandra's mother is financially set and can afford the health care that she will need.

Their concerns about the future:

• How much does retirement actually cost?
• Do they have enough to enjoy their lives?
• Are they properly invested in their RRSPs?

What needs to be thought out

Like many, Jack and Sandra are clear about what they are retiring FROM but not all that clear about what they are retiring TO.

The following will give you a sense of the types of considerations that would be addressed when Jack and Sandra meet with a BMO Investment Representative:

• Their family situation. This will not only include Sandra's mother's situation, but also whether they want to help any of their children or grandchildren.
• Sandra's mother's financial situation. What financial responsibilities will Sandra have to take on?
• What to expect after becoming empty nesters. Will downsizing or moving free up additional capital that can be added to their retirement nest egg?
• Jack's health issues and their concerns about the future. How long can he actually work and would he consider part-time work in the future because he likes what he does?
• Jack and Sandra's pension plans. Do they understand their own pension plans and some of the provisions for the future? What kinds of benefits can they expect and for how long? What possible health issues are covered by existing benefit programs?
• Jack and Sandra's retirement lifestyle goals. What do they expect to do in retirement? What kinds of new things do they look forward to? What are their real concerns about the future?