Case Study: Simplifying a Complex Situation to Determine Asset Base Longevity During Retirement 

FEBRUARY 28, 2019

Our client was managing several private company entities that were interrelated (one of which was an operating company), their personal investment portfolios (registered and non-registered accounts), a few personal use properties, business and personal loans.  Given the complexity of their financial circumstances, it made it difficult for our client to understand the bigger picture and have clarity on whether their asset base would be sustainable during retirement. 

Our first step was to have a clear understanding of our client’s personal and financial goals.  We discussed their lifestyle expenditure needs and important lifestyle events, including what their plans were for living arrangements and the succession of their operating business.  

Following our discussions and a comprehensive analysis of our client’s financial position, it was decided that it would be beneficial for our client to sell one of their rarely used personal properties, and move into another property that they owned as soon as possible.  By doing so, they would be able to pay off their personal debt and also reduce ongoing upkeep expenses.  It was also concluded that in 10 years’ time our client would likely be at an age where it’d be appropriate to sell their operating business and to downsize their home.  These conclusions were vital to us as it formed the foundation of our financial plan.

We prepared a plan using tax effective strategies and various assumptions.  Key assumptions included lifespan, rate of return, allocation of net sale proceeds, business income, and changes to expenditure level in conjunction with lifestyle events.  Our plan involved a comparison of two scenarios with regards to lifestyle expenses – actual expenses versus an additional 20% – to provide meaningful information about how a single change to the assumptions can impact the longevity of our client’s asset base.

The plan that we presented to our client included reporting that consolidated their business and personal assets and liabilities, which made it easier to review how their total asset base sustained over time in each scenario. 

This process allowed our client to have:  

§    Clarity around the benefits of selling one of their personal use properties immediately,

§    Comfort with the strength of their financial position during their retirement, and

§    An understanding of the most important variables in their financial future