By Scott Ronalds

We first met Emmylou four years ago. She’s been a joy to deal with ever since. Must have something to do with the fact she’s from Winnipeg.

In our initial conversation, Emmylou laid out her two key financial goals that she wanted to reach by the time she turned 65: (1) pay off her mortgage and line of credit, and (2) grow her portfolio to $750K. She also mentioned that she wanted to transition to part-time work 4-5 years down the road.

Well, here we are. Emmylou is 61 now and eager to turn in the blazers and high heels for luon and Nikes. She feels it’s the right time to step down as a pharmaceutical sales rep and step up as a part-time yoga instructor. Her friend owns a studio and has been looking for help, so the timing is ideal.

As for her financial goals, Emmylou has checked off the first box. Recall that she paid off her mortgage and line of credit in late 2014. Her portfolio hasn’t grown to her target level yet, but she’s got another four years to hit it and is on track.

Because Emmylou had no debt to pay down last year, she managed to save a lot more and was able to invest $20,000 in her RSP and $10,000 in her TFSA. Her portfolio with Steadyhand has grown from $395,000 at the end of February 2012, to just over $615,000 at the end of last month. As a reminder, she holds the Founders Fund across all her accounts, which provided a return over the four year period of 7.3% per year (note: her personal return, also known as ‘money-weighted’ return, was slightly lower, at 6.8%, because of the timing of her contributions and withdrawals. For an explanation of money-weighted returns, click here.)

For her portfolio to grow to $750,000 in four years, she’ll need to achieve a return of about 5% a year, assuming she doesn’t make any further contributions. There are no guarantees, of course, but this is a reasonable expectation.

While Emmylou is looking forward to the transition, she’s also feeling some anxiety. This is understandable and common, as she’s making a major change in her life. A big contributing factor to her uneasiness is that her income will be cut back pretty significantly.

Emmylou doesn’t want to start tapping into her investments yet and wants to hold off on taking CPP until she’s 65 (in order to get a larger payment). Instead, she’s going to try living off her lower salary, supplemented by a modest pension she earned from her days as a nurse that she’s going to start taking. Since she doesn’t have any debt payments and will be able to cut back on some expenses related to her old job (e.g. business clothing, transportation, etc.), she figures she’ll be fine. She’ll give it a year and then re-assess. Plus, she has a healthy emergency fund from an inheritance if needed.

Given the major life change she’s making, Emmylou is wondering whether she should be making any adjustments to her portfolio. It’s a great question. Here’s how we look at it. Emmylou is still young, healthy and should plan on living another 30-35 years. She’s going to need, and want, reasonable growth from her investments to fund her retirement when she fully stops working. We feel that her strategic asset mix (60% stocks, 40% fixed income) still makes good sense for her situation.

Emmylou doesn’t plan on drawing from her portfolio for at least another year, and potentially won’t start for another five years. When the time comes, we’ll discuss a withdrawal strategy with her.

The first year of her transition to part-time work in a new field is sure to come with some nerves, learning, questions and adventure. It’s right up Emmylou’s alley.

If you’re in a situation similar to Emmylou, you might find the following resources helpful:

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.