This woman needs to adjust retirement plan as AI takes over her job

Lisa dreams of a simple retirement starting at age 55

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Companies are reimagining their business models and workflows to integrate generative artificial intelligence to both automate routine tasks to improve productivity and to transform the way content is created.

What this means for the future of writing is a question that is causing Lisa*, who owns and operates a successful freelance-writing business, to reassess her financial and retirement planning. She has built her business over the past seven years and is on track to boost gross revenues to $100,000 this year, up from about $80,000 in 2022. But one of her larger clients recently informed her that it is moving to AI-generated content to save money.

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“It left me wondering if this is a sign of things to come,” she said.

Lisa is a 49-year-old single mother of three teenagers. Her twins will both start university in the fall of 2024 and her youngest will follow in 2026. She bought her ex-husband’s share of the family home, which they purchased for $590,000 and is currently valued between $1.1 million and $1.2 million, when their marriage ended nine years ago. Her fixed-rate mortgage has a balance of $259,484 at 4.59 per cent and matures in five years.

One of her stretch goals is to retire at 55 when her children will have graduated university. Another option would be to partially retire and continue working on a more selective basis. In that case, she wants to know how much money she would need to maintain a comfortable lifestyle.

Her vision for retirement is modest in terms of cost: going to the gym every day, some travel — essentially, she wants her time to be her own.

“I’m good with a simple retirement,” she said.

She would also like to stay in her current city, but if downsizing and moving to a less expensive small town made the difference between retiring at 60 versus retiring at 70, she would prefer the former.

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About two years ago, Lisa decided to take control of her investments to avoid paying $600 in monthly management fees that her bank mutual funds charged. Her registered retirement savings plan ($300,895), locked-in retirement account ($128,354) and tax-free savings account ($18,982) are all invested in dividend-paying utilities, banks, consumer goods and technology companies based largely in Canada with some in the United States. The dividends are automatically reinvested.

She also has $227,684 in a registered education savings plan and a term life insurance policy worth $500,000. She invests $10,000 a year in her RRSP. Lisa is also expecting an inheritance of about $100,000 from her mother’s estate, but she’s not sure when that will settle.

“I would love to have an unbiased expert look at my numbers, and provide some guidance on what my options are should I start losing more work to AI,” she said.

Specifically, she would like to know: If she chooses to downsize her home in the next few years, what purchase price for her next home would allow her to retire early? Should she direct her $100,000 inheritance to making a lump-sum payment on her mortgage or is she better off investing it? How does her potential retirement scenario change if she doesn’t receive the inheritance for another 10 to 15 years? Should she be focusing on putting savings into her TFSA or RRSP?

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What the experts say

Lisa has positioned herself well to navigate the potential negative impact of AI on her industry, said Eliott Einarson, a retirement planner at Ottawa-based Exponent Investment Management.

“Her lack of debt, modest income needs, RESP savings, flexible approach to work and retirement and willingness to downsize are all keys that will help put her on a path to a successful future,” he said.

Both Einarson and Ed Rempel, a fee-for-service financial planner, tax accountant and blogger, agree that retiring in six years at age 55 is an option if she sells her home and downsizes.

“If she sells and buys a new home for $1 million or less, ideally below $900,000, paying cash (no mortgage), she’ll be able to retire fully,” Rempel said.  “If she does have a mortgage, she will have to work until age 62. Lisa has a lot of home equity, but it produces nothing for her retirement other than low-cost accommodation, so living in a less expensive home is helpful for her.”

Assuming Lisa is mortgage-free at age 55, Rempel said she will need about $51,000 per year before tax to maintain her current lifestyle in retirement. This equates to about $600,000 in investments. She is projected to have about $740,000 by the time she turns 55.

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Her lack of debt, modest income needs, RESP savings, flexible approach to work and retirement and willingness to downsize are all keys that will help put her on a path to a successful future

Eliott Einarson

To semi-retire at 55 and maintain her current lifestyle without selling her home, Rempel estimates she would need to make about $50,000 per year from age 55 to age 65.

“If her business income reduces because of AI, she can earn less from age 55 to 65 and fully retire at age 65 instead of 62,” he said.

If Lisa plans to keep her current home for the term of the mortgage, Einarson recommends using her inheritance to make a lump-sum payment on the mortgage and invest the rest.

“If she decides to sell the home soon, she can direct the inheritance to unused contribution room in her RRSP and TFSA,” he said.

Rempel believes Lisa should invest the inheritance in a TFSA and let the investments grow until she retires, since it will put her further ahead than just paying down the mortgage.

He also suggested investing in global or U.S. growth stocks, which should provide a higher return of at least one per cent a year than her Canadian dividend stocks.

Whether she gets the inheritance now or in 15 years won’t make a significant difference to her retirement plans, other than providing more wiggle room in her budget and lowering her retirement age from 62 to 60, assuming she doesn’t downsize.

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The decision on where to focus her savings — RRSP or TFSA — should be based on her marginal tax bracket today versus after she retires.

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“If taxable income stays above where it will be in retirement, it pays to add to the RRSP for the deduction, deferral and future tax differential,” Einarson said. “If her current taxable income drops to below $53,000 (the starting point for the almost 30-per-cent marginal tax bracket in Ontario), she should invest in her TFSA. A detailed retirement income plan will determine the exact numbers.”

* Name changed to protect privacy.

Editor’s note: Worried about having enough for retirement? Need to adjust your portfolio? Wondering how to make ends meet? Drop us a line at with your contact info and the general gist of your problem and we’ll try to find some experts to help you out while writing a story about it (we’ll keep your name out of it, of course).

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