Solving the post-work puzzle: How Serge and Marie planned their way to a financially secure retirement

Here, we illustrate the complexity of retirement planning through the eyes of Serge and Marie, whose goals of financial stability, generational wealth, family harmony, and philanthropy are common retirement objectives. The spouses and business partners planned to retire from their successful furniture manufacturing business so they could move to their vacation home in Canmore and leave lasting family and philanthropic legacies.

The couple successfully navigated the transition with the guidance and support of MNP’s Family Office team. Here, we look at how they made informed decisions about their future and how they would provide for others in the coming years.

Their experience will help you explore the process, clarify your goals, and start your planning journey. It will also highlight why working with an experienced advisor is the best way to map out a fulfilling retirement.

“A big part of the discovery conversation involves helping families explore their beliefs around money. How do they define financial independence? What kind of lifestyle do they hope to have in retirement? These answers can vary drastically from person to person.”

Getting on the same page

Serge and Marie launched ABC Furniture 35 years ago, shortly after they married. While they love their work and are proud of what they’ve built, both have found that their passion for the business isn’t what it used to be. They’d long been talking about retiring to Canmore and spending their golden years hiking, skiing, and enjoying the fruits of all their hard work.

Like many couples, Serge and Marie often talked about what they’d do when they finally retired, but they had given little thought to their specific retirement objectives. To help them get their plans on track, they scheduled a meeting with Kerry Smith, the National Leader of MNP’s Family Office Services, to help clarify what they wanted personally and for the business.

“The first thing I typically ask an individual or couple contemplating retirement is whether they’ve given much thought to what they want for themselves and their loved ones,” says Kerry. “Usually they haven’t; retirement often feels like an abstract notion until they’re forced to grapple with the nuts and bolts of it.”

He usually follows that up with a series of conversation prompts as part of MNP’s financial planning discovery process, including basic questions like:

• How much money have you set aside for retirement?
• When do you want to retire?
• How would you define your values, goals, and objectives?
• Are there any potentially challenging family, interpersonal, or financial issues to be aware of?

“A big part of the discovery conversation involves helping families explore their beliefs around money. How do they define financial independence? What kind of lifestyle do they hope to have in retirement? These answers can vary drastically from person to person,” says Kerry.

He explained to Serge and Marie that this conversation would help to set realistic timelines for when they could begin to wind down their involvement in the business and when they could afford to retire completely. It would also help his team address any estate planning issues in terms of how they could and should allocate those funds.

For Serge and Marie, it was the first time they’d addressed many of those questions about their future. They identified a desire to travel with their children and grandchildren over the winter months and help with the costs of their granddaughter’s medical studies.

Also, their youngest child had separated from their spouse and was now renting, so they wanted to help them with the down payment on a new home.

Finally, the couple felt it especially important that they could continue donating to charities they had been actively involved with throughout their careers. They believed they had enough savings and investments to cover some of these financial goals. But didn’t know how to use the funds sustainably or the most tax-efficient way to access them.

“This is this point in the process where we typically see retirees come to terms with the journey ahead. They put so much work into their vision that they forget the practical steps required to make it a reality,” says Kerry.

With all those details on the table, Marie volunteered that she and Serge were stuck on the best way to exit their business and how transitioning ownership would affect their timeline and finances.

Planning a strategic business transition

Upon reviewing Serge and Marie’s financial situation, Kerry determined that the couple had a healthy investment portfolio, but their net worth was primarily wrapped up in their business. Since no family members had expressed interest in taking over, he suggested they consider transitioning out of ownership via a sale.

“There are several factors to consider when selling a business,” says Kerry. “Timing is important, and so are the processes and infrastructure the owner(s) has in place to maximize efficiency, productivity, and profitability.”

Kerry noted that while ABC Furniture had grown considerably over the previous 10 years, Serge and Marie’s accounting and other systems had not kept up.

He introduced the couple to several MNP advisors who helped the couple address the technology and performance gaps. Those efforts readied the company for sale over the following year. He then connected them with tax advisors who began laying the groundwork to ensure the appropriate structures were in place for them to maximize the value of the sale.

Kerry also encouraged the couple to sit down with MNP’s Corporate Finance team to discuss the options for selling their business. None of their children were actively involved in the business, so the most obvious choice was to find an external buyer. He also suggested they could explore whether a manager or group of managers were willing to buy in. Their advisor laid out the pros and cons of both options, and how the process would look.

The discovery process helped Serge and Marie contemplate their retirement needs and which assets they would like to (and could reasonably) pass on to the next generation. It also revealed that the likely sale price of their business would provide sufficient capital to achieve their goals.

Based on those projections, the couple established their sustainable spending levels and how much to invest, given their desire to support their family and philanthropic projects.

Serge and Marie also gained a better understanding of how their wealth would evolve over the years to come.

“Once a family understands how they will exit their business, the expected timeline and how much they can reasonably expect to receive from it, they can start answering other questions — like which assets are best suited for their use and which they should pass down to future generations,” says Kerry.

Kerry’s assessment helped Serge and Marie identify assets they should consume during their lifetime and those that should remain for their estate. He also helped them determine the appropriate amount of insurance to equalize their estate and ensure that no beneficiary would feel financially disadvantaged.

By integrating all these considerations into their cash flow planning, Serge and Marie gained the clarity and confidence they needed to move forward.

Helping their child purchase a home

Perhaps the biggest hurdle in Serge and Marie’s plan was the desire to help one of their children purchase a home. This had only come up in their conversations more recently, and they didn’t know if or how it would fit into their plan.

Kerry helped the couple refine their questions surrounding the potential gift, such as:

• When did they hope to provide the funds?
• Would it be a gift, a loan, or elements of both?
• Could they give enough to accommodate their child’s mortgage eligibility, the value of real estate, and the timing of the desired purchase?

Most of Serge and Marie’s investable assets were still in the corporation and registered accounts such as RRSPs. In addition, the large sum of funds required could result in a significant income tax impact.

After drilling down on the details with Kerry, Serge and Marie identified several issues for family discussion, including how much money their child needed and when.

Then, they explored various strategies to make the gift of a home possible. These included tax-efficient options to use assets or extract funds from the corporation, whether the couple should sign as guarantors, and/or help with mortgage payments.

Shaping a legacy through philanthropy

Serge and Marie had always been active members of their community. Continuing to support their favourite charities was always a core priority in their retirement and estate planning. Still, they weren’t sure the best way to go about it. Should they make smaller donations consistently, lump-sum contributions, or opt for a larger charitable gift via their estate?

“Maximizing charitable impact is a common goal as families gear up for retirement. Like everything else, there isn’t a one-size-fits-all answer,” says Kerry. “There are several factors to consider, including how much of their wealth they plan to share, whether they wish to witness the impacts of their donation — even their overall health and expected longevity.”

In exploring the potential strategies, Serge and Marie liked that a donor-advised fund would allow them to make charitable gifts at their own pace while utilizing available tax incentives on donations with each contribution.

Kerry also explained that the couple could use several life insurance strategies to support a registered charity of their choosing.

“We typically advise that families evaluate their charitable means alongside their retirement trajectory. That way, they know precisely how much they can afford to give or allocate to insurance premiums without compromising other financial goals,” says Kerry.

With Kerry’s help and the support of advisors across MNP’s breadth of services, Serge and Marie are now on a path where they have a clear plan to exit their business. Generosity and purpose will shape their golden years without overwhelming them, which was precisely their goal.

Questions to initiate your retirement discovery process:

• When will you be able to say you don’t have to keep working anymore?
• What is most important to you about money? What does it mean to you and your family’s future?
• What does independence or retirement mean to you? Where will you live, and how much money will you need to do the things you aspire to?
• What are your top financial concerns? How protected do you feel about your investments, and what is your risk tolerance?
• What would you like your legacy to be? Does it involve philanthropy?
• Have you dealt with estate issues such as your will, powers of attorney, family trusts, and guardianship?
• If you have a business, what are your objectives for it, and what is your personal exit plan?
• Have you considered issues around your health and how these might impact your retirement?
• Have you considered the non-financial issues relating to retirement — how will you occupy your time?

Other articles

Nurturing a legacy: Empowering your children through planning and education

Succession: Navigating the transition of a family business to the next generation

Smooth transitions: Making the most tax efficient exit through advanced business planning

The power of giving: Creating a philanthropic family legacy

Family ties: Sustaining legacy in family business through clear governance

Maximizing the multiple: How savvy business owners get top dollar for their business

Solving the post-work puzzle: How Serge and Marie planned their way to a financially secure
retirement