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James,* 72, and Nguyen,* 46, have been married seven years and, until recently, were worry-free with respect to finances, even with the high cost of living in Toronto.

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That changed when the federal government made steep cuts in the number of foreign study permits. Nguyen, a college lecturer, lost her job and $60,000 annual income.

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Now, the couple is contemplating whether they should move to Nguyen’s native Vietnam, where they first met and where they believe they can comfortably live on James’ retirement savings and pensions.

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A do-it-yourself investor, James has saved $400,000, including $200,000 in high growth stocks, $140,000 of which is equally held in tax-free savings accounts (TFSAs) and registered retirement income funds (RRIFs). He also holds $60,000 in an investment trading account and $200,000 in an employer retirement fund managed by the defined contribution pension plan administrators, which generally follows the S&P 500. Nguyen has about $40,000 in a savings account.

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“We could buy a lovely two-bedroom condo in Ho Chi Minh City for $160,000 to $180,000,” said James. Still, their preference is to stay in Toronto – but only if their savings will continue to grow and provide Nguyen a comfortable lifestyle after James dies.

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Can James and Nguyen afford to stay in Toronto, where James has lived and worked for 51 years? If not, and they do move to Vietnam, what will happen to James’ Canada Pension Plan (CPP) and Old Age Security (OAS) benefits and employer pension? Will he face non-resident withholding taxes on CPP and OAS? And what could this cost? Will he have to pay any Canadian income tax in Vietnam?

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James’ current monthly income is about $4,470. This includes $1,363 in CPP payments, $647 in OAS payments, $600 from an employer pension, and $1,860 from RRIFs. The couple’s current monthly expenses are $4,291, including $2,000 in rent and $741 in life, long-term care and critical care insurance premiums. “Will these plans be valid in Vietnam?” James asked.

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As well, given his age, he wonders if he should shift away from growth stocks to dividend-paying stocks. “I want to make sure my holdings do not depreciate. I withdraw about six per cent from my RRIFs and want to grow my capital by at least that same amount so that in 10 or 20 years when I die, that will still be there for my wife.”

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What the expert says

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Eliott Einarson, a retirement planner at Ottawa-based Exponent Investment Management, understands the appeal of moving to Nguyen’s lower-cost home country, but it may not be the solution to their financial concerns, he said.

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“The first step is to consult a cross-border tax accountant specializing in this area of tax to confirm tax rates on income and potential loss of benefits like the OAS if they make a permanent move,” said Einarson. “Once they have this information, a retirement plan will help them understand the financial impact of different scenarios.”