Lifestyle | Question of seniors: how to manage the sales capital of the family home?

The Hélène*spouses. However, 68, and François*, 76, prepare the sale of their family home before moving into quality rental housing where they wish to remain as long as they are able.

The situation – Lifestyle | question seniors: how

“For at least five years. Similarly, and perhaps more than we have the health and capacity for autonomous elders,” said Hélène during a discussion with The press.

This big change in lifestyle as a tenant resident could also serve them as an adaptation period to a possible move in residence for the elderly (RPA). However, with assistance and basic care lifestyle | question seniors: how services.

Meanwhile. Meanwhile, Hélène and François anticipate a net sum of about $ 500,000 from the resale of their free debt house.

In addition, their financial assets in registered savings accounts (RPER, FERR, CELI) total approximately $ 245,000. However, these assets are very concentrated in Hélène’s accounts (around $ 225,000), and very little in François’ accounts.

“Because my husband contributed to an employer pension plan. However, when I did not have a retirement plan for my job, we have always prioritized contributions to my RRSP account instead of his,” said Hélène.

This is also what explains the reverse distribution of their retirement annuities income.

This income total $ 49. Furthermore, 220 for François by combining his pension plan pension, his registered retirement income fund (FERR), lifestyle | question seniors: how the provincial RRQ and the Federal PSV. For example, But for Hélène. Moreover, these revenues of barely $ 16,150 a year arise from the federal PSV and a lower amount of the provincial RRQ.

As for their current lifestyle budget. Nevertheless, it amounts around $ 46,000 per year, including $ 8,000 in residential costs in their family home and $ 38,000 linked to the lifestyle.

But with their next move into quality housing. Consequently, with a rent of $ 2,700 per month, Hélène and François predict that their residential costs will be tripled around $ 3,000 per month, or $ 36,000 per year. Moreover, This will raise their next lifestyle budget around $ 74,000 per year, compared to $ 46,000 today.

In this context. However, Hélène and François seek advice on two main concerns of lifestyle | question seniors: how their financial planning for the coming years until the end of life.

First of all. how to properly manage the entry of funds of around $ 500,000 which is expected from the upcoming resale of their house? What distribution among their registered savings accounts, in RRSP and Celi for Hélène, in Celi for François? Taking into account their respective amount of unused contributions?

Secondly. Hélène and François seek advice on the adequate reorganization of their sources of retirement income in anticipation of the significant increase in their housing costs in their lifestyle budget.

Between the disbursements of their retirement savings accounts and public annuities (provincial RRQ, Federal PSV)? Also, taking into account the tax optimization of these retirement income.

The situation. the questions of Hélène and François were submitted for lifestyle | question seniors: how advisory analysis to David Paré, who is a financial planner and investment advisor at Desjardins Management de Patrimoine, in Quebec.

Lifestyle | question seniors: how

The advice

From the outset, the financial planner David Paré notes that with the expected capital of the resale of their house, their assets in registered savings accounts and their rent income already underway, the elders François and Hélène are in “a beautiful financial situation” to ensure their budgetary needs until a very advanced age.

That said. David Paré also lifestyle | question seniors: how notes that adjustments would be required in their savings and management priorities for their rentier income sources.

First, in preparation for this capital intake of around $ 500,000 (or $ 250,000 each) for the sale of their house, David Paré suggests François and Hélène to optimize their tax situation by rebalancing their taxable income income.

“For the moment. François has $ 49,200 in revenues at a tax rate of approximately 31 %, while Hélène has only $ 16,150 in revenues, under the threshold lifestyle | question seniors: how of the start of taxation,” notes David Paré.

“But by splitting François’ retirement regime with his wife Hélène. and asking Retraite Québec to share in equal shares their combined amount of provincial RRQ, François and Hélène would each end up with a balanced taxable income around $ 32,000 per year. And a tax rate reduced around 26 %, five points less than the current tax rate of François income. »»

Fill ROI. CELI

In a second step, to properly use their respective share of $ 250,000 of the expected capital of the resale of their house, David Paré recommends to François and Hélène to prioritize the filling of their important amounts of “unused contributions” in their registered savings accounts.

Starting with the RRSP of Hélène. when she still has four years lifestyle | question seniors: how of tax deductible contributions at her disposal before the end of the fiscal year of her 72^e birthday. At this age. it should be remembered, she will have to transform her RRSP into an REB (registered retirement income fund) and start compulsory minimum withdrawals.

“Hélène could suddenly fill the $ 70. 000 in unused contributions in her RRSP, but taking care then to stagger her complaints of tax credits in four annual amounts in order to avoid” waste “due to the very low tax rate of her income from annuities,” said David Paré.

In parallel. the financial planner recommends the couple of seniors to fully fill the amounts of contributions available in their respective CELI accounts. These are $ 99,500 for François and $ 79,650 for Hélène.

“The advantage of Celi accounts is double,” recalls lifestyle | question seniors: how David Paré. On the one hand. quickly grow the capital to the maximum eligible so that it is more safe from the tax. On the other hand. later having a larger having in Celi in which François and Hélène will be able to make withdrawals as non -taxable extra income. »»

Non -registered accounts

In a third step. after having filled their respective CELLI accounts and Hélène’s RRSP with the $ 500,000 expected from the resale of their house, David Paré advises the couple of seniors to direct the excess capital in unregistered-registered savings accounts.

In the case of François, this excess capital is predictable around $ 150,000; and $ 100,000 in the case of Hélène.

“With these amounts in their new unregistered accounts. François and Hélène will have the opportunity lifestyle | question seniors: how to make them grow while retaining a means of withdrawing liquidity according to the evolution of their budgetary needs, but without affecting their taxable income levels,” said financial planner David Paré.

Among other things. he suggests, François and Hélène will be able to use this non-taxable flexibility in their non-registered savings accounts to continue their maximum contributions to their CELI accounts during the subsequent years. And this. as long as they will have its budgetary capacity according to the evolution of their housing costs, with the gradual addition of assistance services.

Finally. when their assets in unregistered savings savings accounts have been exhausted, François and Hélène will then be able to turn to their CELLI accounts as a new non-taxable source of income, adding to their retirement annuities and minimum withdrawals of their FERR accounts.

* Although the case highlighted in this section is real, the first names used are fictitious.