Job Loss Forces Toronto Couple to Consider Move to Vietnam

James, a 72-year-old retiree, and his wife Nguyen, 46, are contemplating a significant life change due to unexpected job loss and rising living costs in Toronto. Until recently, the couple felt financially secure, but Nguyen lost her position as a college lecturer, resulting in an annual income reduction of $60,000. With this change, they are now considering a move to Nguyen’s native Vietnam, where their retirement savings may allow for a more comfortable lifestyle.

James has saved approximately $400,000 through various investment accounts. This includes $200,000 in high-growth stocks and about $140,000 in tax-free savings accounts (TFSAs) and registered retirement income funds (RRIFs). Additionally, he has $60,000 in a trading account and $200,000 in an employer retirement fund linked to the performance of the S&P 500. Nguyen contributes around $40,000 in her savings account.

The couple believes they could purchase a two-bedroom condo in Ho Chi Minh City for between $160,000 and $180,000, significantly less than their current living expenses in Toronto. They currently spend about $4,291 a month, covering rent, insurance premiums, and other costs, while James receives a monthly income of approximately $4,470. This income includes $1,363 from the Canada Pension Plan (CPP), $647 from Old Age Security (OAS), $600 from an employer pension, and $1,860 from RRIFs.

Despite the financial allure of moving to Vietnam, the couple faces significant concerns regarding their long-term financial stability. James questions the impact of relocation on his CPP and OAS benefits, as well as potential non-resident withholding taxes. He is also worried about maintaining a comfortable lifestyle for Nguyen after his passing.

In discussing their options, financial planner Eliott Einarson from Exponent Investment Management emphasizes the importance of consulting a cross-border tax accountant. He advises that understanding tax implications and potential loss of benefits is crucial before making any permanent relocation decisions.

Einarson suggests that James explore retirement planning services offered by his financial institution to assess long-term care insurance and whether it applies if they move abroad. He cautions against the risks associated with a move, such as losing access to Canadian medical and social services, currency exchange risks, and the implications of depleting their savings on a new property purchase in Vietnam.

The financial planner raises critical questions about James’s long-term financial strategy, particularly given the age disparity between him and Nguyen. If James were to pass away, his remaining assets must sufficiently support Nguyen’s lifestyle for potentially several decades. He also notes that Nguyen would not contribute to CPP if she does not work in Canada, which could affect her future OAS payments.

Einarson concludes that staying in Toronto may be the more prudent choice for James and Nguyen. Maintaining their current living situation allows them to keep their investments active, covering any shortfall until Nguyen can secure employment. He warns that James’s expectation of achieving a 12 percent annual return while drawing a 6 percent income from his investments may not be realistic.

To address potential financial challenges, Einarson recommends James consider diversifying his investments to include more dividend-paying stocks and to keep TFSAs and non-registered accounts invested. This strategy could help mitigate the increasing minimum withdrawals required from his RRIF.

Ultimately, James and Nguyen have much to consider before making such a significant life decision. Their desire to remain in Toronto may be more feasible than they initially thought, allowing them to focus on stabilizing their finances and ensuring a secure future together.