How a mistake cost a first-time homebuyer $5,000: Roseman + MORE May 7th

Most Baby Boomers intend to work after retirement age or never retire at all. But some are making backup plans just in case.

Photograph by Jenna Marie Wakani
 The problem
With a paid-for home and six-figure portfolio, the couple’s friends think they have little to worry about. But “I do worry,” says Denise, who at 53 makes a good income as a dental hygienist. However, she enjoys no major benefits or employer-sponsored pension plan. Neither does Mark, 55, who lost his job in April 2011 and has worked only in contract positions since. They were investing $1,200 a month in RRSPs but ceased adding to Mark’s portion in November. The bank “wrap” program they’re invested in charges 2.5%. They’d prefer the lower fees of a “Couch Potato” but “don’t know how to do it ourselves.”

Financial planner Tony de Thomasis, of De Thomas Financial Corp., says the couple are moderate-risk investors and should be comfortable with an asset allocation of 75% equities to 25% bonds and cash. As retirement approaches and if markets cooperate, portfolios would be gradually rebalanced to raise the fixed-income weight by 8% every five years or so…

David Blanchett, head of retirement research at Morningstar Investment Management, ran the numbers on the actual spending patterns of retired couples over 30 years. He tracked three annual spending levels: US $25,000, $50,000 and $100,000. He found that as couples aged, they withdrew less than anticipated, mainly because they had simpler lifestyles. As a result, many retirees may need 10% to 30% less in savings than planners suggest.

Source: Morningstar Investment Management
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You can withdraw money tax-free from your RRSP when buying a home. But you must tell the bank why you’re doing it or face unwanted taxes.

If you are on your second marriage or married late in life, keeping your finances separate seemed like the sensible thing to do. The basic costs, such as the mortgage, utilities, taxes and insurance were split 50/50. You took care of your own personal needs and lifestyle costs. You have your own savings and retirement accounts.
This seems to be working perfectly fine and you assume it will continue on even into retirement. You have your pension from your many years of service that will cover your entire half of the basic costs. You have also aggressively saved over the years. When the mortgage was paid off, your portion of the payments was redirected right into your RRSP. You did everything right with the help of the road map created several years ago with your financial advisor. Retirement planning has never been a worry for you because you took charge and looked after it.
However, it dawns on you one day that you and hubby have never actually discussed retirement and what possibilities lay ahead for you both…