Olivia is 57 years old, single, and earning about $70,000 a year with expenses of $40,000. She saves about $15,000 a year and has accumulated $350,000 in her RRSP and TFSA, as well as a rental property worth about $250,000. She has a defined benefit pension through her employer and she’s eligible to receive full Canada Pension Plan and Old Age Security benefits in retirement.

Before creating a portfolio for her, it was important to understand Olivia’s comfort with risk. Perhaps building a portfolio with 100% allocated in stocks would yield a greater growth in the long run, but with a tremendous amount of potential volatility. With the help of our risk assessment process with her new advisor, it was determined that Olivia would be best suited for a portfolio of 60% equites and 40% fixed income securities.

Olivia was geared towards retiring at 60 years old but wasn’t sure if that would be possible. Financial planning software was used to incorporate her portfolio’s expected returns, her savings rate, her projected expenses in retirement, inflation and her other income from employer and government pensions to see if this goal was reasonable.

When we looked at her situation more closely we noticed that retiring at 60 had a high likelihood of her running out of money down the road, since with each earlier year she retires at, she will need to pull money out of her portfolio as opposed to contributing. We determined that age 63 seemed like the earliest she would be able to stop working, even though there is still a 3% shortfall that needs some adjustment.

If Olivia feels that working until that age is unbearable, we can run the simulation with different variables such as a different portfolio allocation, saving more by decreasing certain expenses, selling the rental property in the future, etc.…

What is clear is that without sitting down with a financial advisor, Olivia’s retirement plan would not have been possible as she wouldn’t have realized the deficits until she was already retired.

Now she has a clear plan for her future, one that can be revaluated down the line to meet new and changing needs.