Ontario-based Jason*, 41, and his wife Julia*, 38, have worked hard, built up significant wealth and are

ready to retire

, ideally within the next year or two but definitely by 2032, when Julia hits age 45. The plan is to make their money last as long as possible by moving to a lower-cost country such as Malaysia, Vietnam or Thailand.

Jason and Julia have two young children who are 11 and 4 years old. The couple are budgeting US$200,000, or about $282,000, for each of their children to complete four-year undergraduate degrees and expect they will also have to pay about $28,000 a year indexed to inflation for their youngest child to attend international middle-school and high school (grades 6 to 12), assuming they retire and move abroad as planned. Their current annual expenses in Canada are $65,000 and they expect that figure, indexed to inflation, will remain the same in retirement in one of the countries they have identified. However, they would also like to build in about an additional $42,000 for unexpected expenses every five years starting in 2026.

The couple are debt free and own a home valued at $1.27 million after selling costs. When they sell, they plan to invest the proceeds. They currently have $1.53 million across an investment portfolio that includes savings accounts with $19,000,

registered retirement savings plans

(RRSPs) with $472,656,

tax-free savings accounts

(TFSAs) with $302,480,

registered education savings plans

(RESPs) with $115,700, and investment accounts in Jason’s business, which is a Canadian Controlled Private Corporation, of $611,000. They are

fully invested in equities

, primarily in low-cost index funds such as the Vanguard FTSE Global All Cap ex Canada index ETF and the Purpose US Cash Fund ETF. Jason estimates that average blended returns are between seven and eight per cent.

Jason’s corporation earns $220,000 in annual revenue. After taxes, the corporation retains about $180,000. These retained earnings are invested largely in globally

diversified exchange-traded funds

(ETFs) in investment accounts held by the corporation.

Julia earns $65,000 after tax. Her income covers the family’s annual household expenses including RESP contributions. They maximize their RRSP and TFSA contributions with surplus cash or withdrawals from Jason’s corporation. Julia and Jason each have $500,000 20-year term life insurance policies in place for “extreme contingencies” and estate planning. They each have their wills and personal care directives in place.

Jason and Julia are wondering

if they are in a position to retire soon

, and if so, how soon? Is their budgeting for expected lifestyle and unexpected expenses in retirement reasonable and realistic? What personal and corporate tax implications do they need to consider if they retire in Malaysia, Vietnam or Thailand? What other unknowns should they be aware of?

What the expert says

“Jason and Julia are part of the growing FIRE movement: to be financially independent and retire early. They have been strong savers, invest effectively and plan to invest the entire proceeds of the sale of their home, which has put them on the right track to retire next year to a lower-cost country at their desired income,” said Ed Rempel, a fee-for-service financial planner, tax accountant and blogger. “But, given their young ages, they may want to continue saving and retire in two years, when Jason is 43 and Julia is 40, to give themselves a greater margin of safety.”

To retire on their lower-cost international lifestyle, they will need $86,000 a year before tax to provide them with $65,000 a year after tax plus an extra US$30,000, or about $42,000, every five years for unexpected expenses, Rempel said. With their current retirement portfolio of $1.4 million, saving more than $200,000 a year and investing 100 per cent in equities, plus investing all of their house proceeds when they retire, they are actually 26 per cent ahead of their goal of retiring next year, he said. “Saving one more year should put them 39 per cent ahead of their goal. While it is not necessary, given how many decades they will be retired, it may be a good idea.”

Rempel said their target combined retirement income of $86,000 a year before tax is reasonable for a comfortable retirement in any of the countries they have identified, although he noted the cost of living is generally a bit higher in Vietnam than in Malaysia or Thailand.

“This income level positions them in the upper-middle to affluent expat bracket, allowing for a high quality of life, including modern housing, dining out, travel and healthcare — far exceeding local living costs,” said Rempel. He noted that while Malaysia and Vietnam have tax treaties with Canada, Thailand does not. This means they would pay significantly higher tax in Thailand.

“If they leave their investments in Canada where there are good investment options, they would mainly pay the low 15 per cent withholding tax if they retire in Malaysia or Vietnam. If they choose to retire in Thailand, the withholding tax would be 25 per cent.”

There are many unknowns to consider, Rempel said, especially since they are retiring so young. “The biggest risk may be that their lifestyle creeps up or they decide to move to a more expensive country. They might decide to pay for more costs for their kids. Any country could have high inflation, which is more common in less developed countries. There is also currency risk in foreign countries and the risk of tax rules changing significantly.”

* Names have been changed to protect privacy

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

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