Are they on track to retire at 50?

By Julie Cazzin on June 21, 2014
Estimated reading time: 3 minutes

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

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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