Early retirement not recommended

FINANCIAL MAKEOVER. Ending careers at age 55 would entail a major reduction in couple's lifestyle, experts say
PAUL DELEAN, The Gazette

A cancer scare got Ed and Chloe Kilgour thinking seriously about something they had kicked around casually over the years: early retirement.

"So far so good, there's no sign of a recurrence, but you're not considered cancer-free for five years," said Chloe, who underwent the cancer surgery last year, and like her husband of 20 years, is 48.

Since the operation, she's had 55 in her sights as a potential retirement date.
That would mean giving up some of her pension entitlement as a teacher, however, and she's not sure the numbers support doing that.

Because she started in the profession a little later than some of her colleagues, she would be entitled to 42.6 per cent of her five best years' salary at age 55, vs. 63 per cent at age 60 and 70 per cent at 63. ("But I don't want to work that long").

In 2007, she earned $68,973.

Ed, who works in management for a multinational company, made $87,000. His company provides generous benefits that include employer-only contributions to a defined-contribution pension plan and health and dental coverage for both partners that continues after retirement.

Through work, he pays $50 bi-weekly for supplemental coverage that includes long-term disability, three times his salary in life insurance and an extra $100,000 in coverage on his spouse, and up to 90 per cent coverage for dental and prescription costs. She pays for an extra $70,000 term life-insurance policy through her alumni association and long-term disability coverage through work.

The Kilgours (not their real name) have no children. They also have no wills.

"We're afraid of wills. We don't want to talk about death. Because we didn't have any children, it was never a priority," Chloe said. "Wouldn't it just automatically go to the other person anyway in case of death?"

Their bungalow, purchased on the West Island almost 20 years ago for $97,000, now is worth about $240,000, based on what others in the neighbourhood have sold for, Ed said. They would like to keep it as their retirement home.

The house is mortgage-free, but they still owe $46,000 on a lakefront cottage in the Eastern Townships they purchased four years ago. They figure it's worth $100,000 now, after several upgrades.

They own two vehicles, one paid for, the other a recent $22,000 purchase with four years of interest-free payments to go.

For an emergency fund, the Kilgours have about $5,000 cash in various bank accounts. They pay their Visa bill completely every month, but are carrying about $5,500 apiece on their individual lines of credit.

Both also have significant retirement savings, and have maximized RRSP contribution room.

Chloe's two RRSPs are worth about $90,000. She also has $11,000 in Canada Savings Bonds purchased by payroll deduction.

Ed has a locked-in retirement account (LIRA) from a previous job now worth about $130,500. His RRSP totals $164,000 and his pension plan is at $78,000.

In an unregistered account, he has two stocks and $50,000 in cash after selling shares of the company that employs him earlier this year. He figures about $20,000 of that is capital gain.