At age 70, Yvonne believes she is at a fork in the road and needing “an expert, disinterested perspective.”

She’s single again with three grown kids and a clutch of grandchildren, none of whom is looking for her for an inheritance. At exactly the exact same time, she doesn’t need to be a burden on them.

“That is my overriding concern,” Yvonne writes in an email, “how to care for myself financially so that I reduce the odds of having to turn to family for financial aid in the long run.” She’s some savings and a waterfront lot back home. She collects Canada Pension Plan and Old Age Security benefits. But her primary income comes from the leasing of billboard signs along a highway in New York State.

Last year “was a fantastic year,” Yvonne writes. “I had all seven signs rented.” Gross rental income translated into $65,510 (Canadian). “After taxation and billboard-related expenditures, I live well on what is left,” she adds.

Then one morning “from the blue” a former pupil called and asked if she would sell only one of the indications. She suggested that the company buy all seven because she did not wish to sell piece by piece. “They’re thinking and I’m thinking,” Yvonne writes. However it ends up, she would like to know what the income flow from the billboard business is worth. “what’s the least I can reasonably take for this particular enterprise?” she asks.

“I want to sell but I don’t know if I could afford to. What degree of frugality could I be embracing over the next 20 years when I sold today?” If she sells, Yvonne wonders if it would be a fantastic idea to use part of the sale proceeds to top up her registered retirement savings plan.

We asked Ian Black, a registered financial planner (RFP) in Macdonald Shymko amp; Co. Ltd. in Vancouver, to look at Yvonne’s situation. Macdonald Shymko is a fee-only financial planning and portfolio management company.

What the expert says

Due to Yvonne’s era, it might make sense to market her billboards and simplify — and stabilize — her earnings, Mr. Black says. Holding on presents some risks, including fluctuations in the Canadian-U.S. dollar exchange rate, empty boards (hence lower rental income) and maintenance costs over time.

If she’s serious about selling, Yvonne should seek the help of a knowledgeable agent in the region where the billboards are located, the planner says.

In drawing up his plan, Mr. Black supposes Yvonne lives to be 100, makes an average yearly rate of return on her investments of 5 percent and the inflation rate is 2 percent.

As to how much income Yvonne wants, she lives frugally, spending about $30,000 annually, the planner notes. Her CPP and OAS combined earn $12,300 a year and of her dividends are reinvested.

To make the $17,700 shortfall from sale proceeds, Yvonne would have to receive an “absolute minimum” of $350,000 from the sale, net of fees and taxes, Mr. Black says. The taxes are estimated to be approximately 20 percent of the profits, although this may be somewhat low. Such a low price would not allow any margin of error. There’d be no excess cash for an emergency finance or health or long-term care costs in future, he adds. At the same time, the $17,700 annually involves some ingestion of her main investment.

In 2019, she’ll start withdrawing $5,500 annually from her RRSP/registered retirement income fund (RRIF), and she has some cash in her tax-free savings account (TFSA).

But if Yvonne were to appreciate the billboards based on present net income, they would be worth a whole lot more, Mr. Black says — anywhere from $500,000 to $750,000, based on the assumptions.

If she sells and carries a large bulge to earnings, “optimizing the RRSP contribution is a simple choice,” the planner says. The contribution would save 47 percent of every dollar contributed. Her RRIF wouldn’t be so big as to induce her Old Age Security to be clawed back, except in the year she sells, which will also influence her cash flow for the next year.

“The RRIF can then be gradually withdrawn over time during her retirement{}” In terms of investing the profits, Mr. Black advocates a balanced portfolio of exchange-traded funds to gain exposure to all asset classes. “She should keep at least one year’s expenses in money in a high-interest savings account to decrease income fluctuations during market downturns,” the planner says.

The individual: Yvonne, age 70

The problem: If she sell her billboard rental company, and what’s the lowest cost she can accept?

The strategy: Obtain an expert evaluation of the billboards, bearing in mind that too low a price will leave her with little in the way of emergency funds.

The payoff: The tools necessary to make a prudent choice.

Monthly net income: $4,535

Assets: Money $2,375; investments $71,590; TFSA $66,235; waterfront lot $150,000; RRSP $103,315; quote of billboard company $500,000. Total: $893,515

Monthly outlays: Rent $775; hydro $20; maintenance, garden $65; transit $25; groceries $500; clothes $50; line of credit $1,000; gifts, charitable $50; holidays, travel $200; dining, drinks, entertainment $170; dressing $85; nightclubs $60; vouchers, other $110; doctors, dentists $70; health, life insurance $150; telephone 45; TFSA $460. Total: $3,835

Liabilities: Line of credit $8,300

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Some details might be altered to protect the privacy of the persons profiled.

Courtesy: The Globe And Mail