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Could retirement really be just a year away? Arnold*, 56, and Heather, 60, are hoping the answer is yes.

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The Ottawa-based couple have been running the numbers and scenario planning. They anticipate they will need to generate $118,730 after tax annually in retirement, which includes about $15,000 for travel. The empty nesters would also like to help their three young-adult children save for down payments on their first homes.

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Arnold earns $125,000 a year before tax and Heather earns $100,000. They both have employer-based defined benefit pension plans that are indexed to inflation. If they retire next year, Arnold’s annual pension income will be about $48,000 (with a monthly bridge of $892 until age 65) and Heather’s will be about $40,000 (with a monthly bridge of $170 until 65) – not enough to meet their target retirement income. However, the couple wonders if their target income is an accurate reflection of the cash flow they will need to live comfortably for the next 30 years or more and if their budget calculations are accurate.

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Their primary residence is valued at about $1 million with a $245,000 mortgage. They also own a self-sustaining rental property valued at $420,000 with a mortgage of $250,000. The couple will receive an inheritance of $150,000 in spring 2026, at which point they plan to list the rental property for sale. They want to use the inheritance and the proceeds from the sale to pay off the mortgage on their forever home. Additional funds from the sale of the rental property would be invested.

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The couple is also concerned about how to best minimize tax. They plan to start withdrawing from their RRSPs before age 65 and defer Canada Pension Plan (CPP) and Old Age Security (OAS) benefits until age 70. “Is this a good strategy?” they wonder and, most importantly, are they on track to retire next year?

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What the expert says

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“Thanks to their large pensions, the good news is that if their desired lifestyle — $95,000 a year to spend in retirement — if correct (and that may be a big “if”), Arnold and Heather are on track to retire next year,” said Ed Rempel, a fee-for-service financial planner, tax accountant and blogger.

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“There are two reasons to question this. First, they question it themselves. Second, it sounds like that is what they are spending now. With their current salaries, after tax and after allowing for 10 per cent of their salaries to go to their pension contributions, they should be bringing home about $140,000 a year total. If they are only spending about $120,000 a year (including their mortgage payment), then they should have been able to save about $20,000 a year in the past several years (unless they had unusual expenses). Have they been able to save it? If not, then they might not be happy with $95,000 a year to pay for a retirement lifestyle. Many people assume their cash flow needs in retirement will match their current spending while forgetting unusual expenses, such as buying a car every few years or modest home improvements or large trips or gifts to their kids,” he said.