Take a look at John and Maria’s Details:
John married Maria later in life and came into the marriage with considerable assets. Both were career oriented before the birth of their children and continued to be afterwards with after tax income of $15,000 per month. Combined they have $650,000 of RRSP’s, $690,000 of non-registered assets, and no debt. This couple was thinking of re-directing $1,000 per month of net income to save for a cottage. They visited their former advisor and asked if their money would last throughout retirement. The advisor used 70% of pre-retirement income as their necessary income and said they’d be fine, but didn’t do any calculations or say how! That wasn’t enough for this couple as they prepared to retire from lucrative jobs in 8 years. They are willing to stay at a little while longer in the workforce if need be.
Next Steps For John & Maria
The Behavioral Cash Flow Strategy allowed the advisor to quickly determine that John and Maria’s true post-retirement income need was actually $9,500, which wasn’t sustainable by their portfolio. This strategy showed the guaranteed base income they needed was $6,500, to allow for the musts in life. Also, that 43% of post-retirement income would ensure they were warm, safe and fed. This is the level of income their advisor had to ensure was absolutely NOT impacted by the market.
The base income of $6,500/month (after tax) only takes care of the basic needs for retirement: utilities, property taxes, food, fuel, replacing the car every 10 years etc.
What about travel? What about fun stuff or unexpected costs? Their goal was to provide themselves an additional $3,000/ month in income for things such as travel, home repairs or minor renovations. We call that ‘Lifestyle Income’.
Remember their advisor said they were fine, but when we apply Behavioral Cash Flow Management to their situation, we see a much different story. Yes, indeed they have well over $1mi investable assets and they still have 10 years to go to retirement, but they are hoping to do it in 8. They’ve worked hard, saved a
lot and, paid off all of their debt. How can they not be “just fine”? In 8 years based on their current situation, if they redirect their $1000/mo contribution to their cottage, they’ll meet their guaranteed base income need, but there will likely be very little left over to create any lifestyle income.
Desired Total Retirement Income
Base Guaranteed Retirement Income
They need to save an additional $1700/mo to confidently fund their retirement in 8 years and they are still dreaming of that cottage. What if their advisor could help them do both?
This couple can have the best of both worlds with a Behavioral Cash Flow Strategy™. Their advisor was able to find $5,400/mo to work with. As a result of working with an advisor who offers Behavioral Cash Flow Management they’ll fully fund their retirement, create a healthy cottage down payment over the next 12-18 months and have $800/month left over to ensure they are not affected by income and other risks that could take their Behavioral Cash Flow Strategy off track.