Maureen is retiring soon, and she'd like her husband, Joe, to do the same.
But he's reluctant.
"I just changed jobs and am now on a defined benefit plan, so I'd like to work until age 65 to build up the pension payment," says Joe, 57.
He would retire at 60 if he thought he could, but he worries they haven't saved enough, despite their best efforts.
The couple live within their means. They have paid their debts and saved a lot. But how they've saved has been a bit of a sore spot recently. Joe and Maureen have accumulated more than $600,000 for retirement. Most of their money is in mutual funds but in the last couple of years they've started putting money into high-interest savings instead.
The strategy wasn't spurred by a need for more security nearing retirement. Instead, they figured earning between two and three per cent on their money is as good as they've got from their $450,000-portfolio managed by one of Canada's leading mutual fund companies.
"It's up a total of 22 per cent over 10 years, or 2.2 per cent a year -- basically simple interest," Joe says. Maureen is so disappointed with the performance she won't invest with the firm anymore, but she's also upset with the lack of service they get from their adviser.
"I hear a lot of people say their adviser calls them to review their situation," she says. "We have to call ours."
The last time they talked with their adviser the only recommendation was for more life insurance.
What they want is a real financial plan; one that would allow Joe to retire comfortably at 65 or maybe even 60.
Uri Kraut, senior wealth consultant with Assiniboine Credit Union, says Joe and Maureen are in fairly good overall shape because they have substantial savings, no debt and live within their means.
Still, they could do better.
A good start would be seeking better advice than they've been getting for the dollars they're paying.
The couple has almost $450,000 invested in 28 funds with one mutual-fund firm, paying an average annual management cost of 2.7 per cent of their assets.
"This is equal to about $12,500 per year," Kraut says. "This advice pays for the establishment and monitoring of their goals and objectives, the portfolio management, retirement planning and other types of financial planning -- all part of the overall process of managing wealth."
Yet, it's clear they have not got their money's worth. The portfolio is a jumble of overlapping investments that is overly concentrated in Canada, and it has too much exposure to the stock market.
This isn't diversification. It's what is referred to by industry insiders as 'diworsification.'
"I simply call it a mess," Kraut says, adding their portfolio contains more than a dozen different Canadian equity funds that mostly own the same companies.
"In effect, when too many funds are purchased, the adviser inadvertently creates an extremely expensive index fund or exchange traded fund (ETF)."
Except instead of paying less than one per cent in management costs for an ETF to get those results, Joe and Maureen are paying 2.7 per cent.
In addition, the mutual-fund portfolio has almost 80 per cent exposure to the stock market, likely too much prior to retirement given Maureen is a conservative investor and Joe is middle-of-the-road.
Kraut says they need more fixed income but this strategy is problematic too because they face losing money in bond funds if interest rates rise in the near future. What they need is to sit down with an adviser to discuss how best to preserve their wealth for retirement.
Yet, not all is lost.
They likely have enough assets for Joe to retire at age 65. It's actually more than likely, but Kraut says the couple provided him with a list of their financials that was obviously prepared for their adviser with the goal of selling them life insurance. As a result, he had no firm numbers on their monthly expenses and cash flow.
Kraut says he estimated their retirement expenses to be 80 to 90 per cent of their current net income, excluding expenses such as retirement savings.
"Most plans aim to replace 70 per cent of work income, but it's better to be conservative in this case," he says. "Many costs may actually rise in retirement, like health insurance to travel, so it is important to recognize that the closer to this number they can get, the more likely they will enjoy their retirement."
Based on a four per cent annual return, they could draw an after-tax, retirement income that is indexed to inflation between about $37,900 and $46,200 a year from their portfolio. With CPP and OAS, these numbers would build them a retirement income that is about 80 to 90 per cent of their current cash flow.
Withdrawing $46,200 a year, their investments would last until their early 90s. At about $37,900 a year, their portfolio would fund retirement to age 99 and beyond.
Joe can also likely retire at 60, but their after-tax income from investments would be substantially less -- between about $30,800 and about $37,500 a year depending on how long they want the money to last.
"This is a more challenging outcome, because the higher income stream will last until Joe is 87 and Maureen is 90," Kraut says.
The retirement picture may well be rosier than outlined here, but they won't know that for certain until they sit down with a financial planner who can build them a real retirement plan instead of trying to sell them life insurance.
Kraut says the fact they are even contemplating buying more insurance, which would be costly and probably unnecessary because Joe already has a few hundred thousand dollars worth of coverage, likely indicates they have a lot of wiggle room in their budget.
What they need is a retirement plan that incorporates more detailed financial numbers and a better investment strategy aimed at preserving wealth while providing a steady long-term income.
With proper advice, for instance, they could likely achieve right off the hop a long-term annual return of five per cent, instead of four per cent, simply by reducing their portfolio costs by one per cent a year through investing in lower-cost funds or hiring personalized portfolio management.
And that additional percentage point will add up to a substantial increase in wealth over time.
If Joe retires at 65 drawing a $37,900 after-tax income annually from investments, they would have $700,000 more left their portfolio by their mid-90s.
"The power of not paying those additional fees cannot be ignored," Kraut says. "But most importantly, is the current advice they are paying for worth giving up hundreds of thousands of dollars worth of inheritance for their children and future grandchildren?"
It's a question they likely need to answer with the help of an adviser, and probably a new adviser at that.