The case of Lisanne and Stéphane
THE SITUATION
Lisanne is 57 years old, she is a neurosurgeon and Stéphane, 55 years old, is an otolaryngologist. As medical specialists, they each earn significant annual incomes, exceeding $350,000. The house, the chalet and the studies of the four adult children are paid for. They also have savings of more than $6 million in their management companies and their various retirement and investment accounts.
As for most of us, the pandemic has made many people think and reprioritized many things. They therefore wanted to check if they could afford to stop working in 5 years and wanted to know more about the possible options. They expressed concerns about the particularly high taxes generated by the bank’s mutual fund investments held in their management companies. They also expressed a desire to validate the basic financial projections that the local bank employee had designed around ten years ago. They therefore contacted a financial planner* from our team referred by a friend of the couple. The process was much more complex than they imagined.
Objectives
Review the relevance of their investments and their tax efficiency. And, check if they can fully retire within 5 years with a net cost of living of 200,000 net.
The key figures
- House: $1,100,000
- Cottage: $500,000
- RRSP Lisanne: $676,000
- TFSA Lisanne: $83,000
- RRSP Stéphane: $623,000
- TFSA Stéphane: $77,000
- Cie Gestion St: $1,375,000
- Cie Gestion Lis: $1,566,000
Our solutions and results
Investment analysis demonstrated very low tax efficiency of GICs and balanced trust funds offered by the bank and held by their management companies. They were recommended private management investments offering rigorous distribution like a retirement fund with tax efficiency. Portfolios that specifically generate deferred capital gains and a small amount of eligible dividends. Once they became clients, we immediately began the integrated financial planning* process.
The financial* and estate planning delivered took into account an investment growth rate of 4.2% (prudent assumption according to IQPF standards) annually and an average inflation rate of 2%. Taking into account their situation and the data provided, we assessed the probability of success of their plan at 94%. Even with zero investment returns, i.e. 0%, they will not lack capital. They have the possibility of increasing their annual target by $83,000 per year or of bringing forward their retirement by 2 years. At age 95, we estimate that despite withdrawals to finance their cost of living, they will have assets greater than $10 million.
This good news changed their outlook. After careful consideration, they have chosen to donate $150,000 to each of their children while they are healthy.
Here is Lisanne’s explanation: “With this money, they will be able to pay off their debts, have enough for a down payment on a house, or the oldest will be able to reduce their mortgage balance and provide support for our future grandchildren. We want to witness the help we give them and share more beautiful moments with them. While we are alive. “.
