Are they on track to retire at 50?

Adam Danyleko, 28, and Justine Oshust, 25, have a big mortgage but want to retire early with $100,000 in net income annually

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From the Summer 2014 issue of the magazine.

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(Photograph by Ania and Tyler Stalman)

(Photograph by Ania and Tyler Stalman)

The current situation

Adam Danyleko, 28, and Justine Oshust, 25, recently purchased a new home in Calgary for $822,000. The couple, who make $200,000, are looking forward to building a life together, but would like to retire when Adam turns 50, with about $100,000 in net income annually. Another ripple of that plan would involve Adam, who is employed as a regional sales leader, semi-retiring at 45. “I work on commissions and it’s a very stressful job,” he says.

Besides their house, which carries a $650,000 mortgage, the couple’s assets are mainly held by Adam, the household’s main breadwinner: $50,000 in RRSPs, $11,000 in TFSAs, $10,000 in a defined contribution pension and $30,000 in an employee stock matching plan. Justine, a dental assistant, has $30,000 in a TFSA. So far, Adam is pleased with his work’s stock plan. “I started buying the company stock at $14 a share and it’s now worth $54.” But the same can’t be said for his RRSP. “I haven’t been happy with my returns and given my age, am leaning towards an 80% equity and 20% fixed income split.” Adam hopes that by maxing out both of their RRSPs and TFSAs, plus his stock plan, he and Justine will meet their goal.

The verdict

Thanks to their large income, Adam and Justine will be able to retire at age 50, says Money Coaches Canada’s Tom Feigs. The power of compounding over the next two decades will work in their favour while they’re building up their portfolio. Feigs estimates the couple should accumulate $2.1 million in investible assets­­ if they max out their registered accounts and an additional $400,000 through Adam’s employee plans. That translates to $77,000 average annual net income in today’s dollars, more than enough for an upper middle-class lifestyle. This income is sustainable to age 95, and includes CPP and OAS.

Adam, however, will encounter some investment volatility given his high risk tolerance and should make it a point to avoid unwise reactions to market movements. He should also watch out for fees, paying no more than 1.25%. Tempering his enthusiasm about the growth potential of his company’s stock, and cashing in and diversifying at least 50% of his gains into other industry sectors, will also improve his portfolio’s exposure.

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Do you want MoneySense to see if you’re on track to meet your own financial goal? If so, drop us a line at letters@moneysense.ca.

6 comments on “Are they on track to retire at 50?

  1. I’m surprised Tom could respond with absolute certainty. What were the underlying assumptions he made about the ROI on their investments, real estate, and stock plan. And what were the assumptions re their income? Did he assume continued employment for Justine? Did he consider children, taking care of aging parents, consumption patterns etc?

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  2. Many things other than market volitility could change their outcome as they are pretty young. There was no mention of children in their future, as an example.

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  3. Sorry but this article/ analysis of the couples finances is bordering on ridiculous. There is no way that a $2 million dollar portfolio will sustainably produce a $100k of income over such long period of time. Once you factor taxes, fees, etc. things would look much uglier. My wife and I retired in our mid 40’s and it was very tough going and required absolute dedication to the financial plan. I wish this couple all the best but the numbers laid out here just don’t work unless market returns remain on a tear which is wish thinking.

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    • 2.1 million, returning 6% would actually increase in value by 126k in the first yr. Add in CPP, OAS, and it certainly could be sustainable as they wouldn’t be reducing the balance of the investments, or not much at all for the first few years.

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      • Except you don’t get (significantly reduced) CPP until 60 and OAS until 67 (or later – who knows what can happen in the future), a good 10 and 17 years after they hope to retire.

        Reply

  4. My cousin and his wife are in a similar situation.

    Reply

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