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What would you do in my case???
Old 12-27-2012, 06:31 PM   #1
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What would you do in my case???

I've attached a pic of my retirement income spreadsheet. I'm curious as to when you would decide to retire based on my situation. I'm leaning somewhere between 58 and 60 years old (I'm currently 46). I have to admit I would love to retire earlier, but I'm not sure if I want to live on the edge with only $41,000 income for the first few years.

My 2012 expenses (which I assume will basically be what my expenses will be in retirement for the first decade) are $41,000 (not including income tax).

All future incomes is shown in today's dollars. My wife and I live in Canada, so the OAS and CPP are approximates ... but close to what the actuals would be. I should also add that I'm a bit conservative, which is why I have it running out to 100.

I would appreciate any feedback, or suggestions.
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File Type: jpg Retirement Worksheet.jpg (257.4 KB, 112 views)
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Old 12-27-2012, 08:06 PM   #2
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I really can't give an answer as there are so many other questions that come to mind. Do you have an RRSP? Is that the planned source of the interest income? What about required minimum withdrawals after age 71? Would it be better to draw down some of the RRSP early, thereby minimizing RMDs and OAS clawbacks later on? What will happen to CPP and OAS between now and your ER date? What is the volatility of your portfolio? When will you be psychologically ready?

If I were starting with those numbers I would want to do more research and would want to ensure a buffer, so I would not choose Door #1. YMMV.

If you haven't already, read these three (Canadian) books:

Your Retirement Income Blueprint

Pensionize Your Nest Egg | The QWeMA Group

Unveiling the Retirement Myth: Amazon.ca: Jim C. Otar: Books

And try the Otar Retirement Calculator.
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Old 12-27-2012, 08:25 PM   #3
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Meadbh, thanks for the reply. Here are some answers to your questions:

Quote:
Originally Posted by Meadbh View Post
Do you have an RRSP?
Yes

Quote:
Originally Posted by Meadbh View Post
Is that the planned source of the interest income?
Partly, the interest income row will be comprised of RRSP, TFSA, and non-registered investments. RRSP will likely be quite low compared to the non-registered amount.

Quote:
Originally Posted by Meadbh View Post
What about required minimum withdrawals after age 71? Would it be better to draw down some of the RRSP early, thereby minimizing RMDs and OAS clawbacks later on?
That is my plan.

Quote:
Originally Posted by Meadbh View Post
What will happen to CPP and OAS between now and York ER date?
For planning purposes, I am assuming no significant change from today's rules. If anything, I see the CPP increasing. I'm not of the camp that believes the OAS will be greatly diminished or eliminated. But if it is, yes this will affect my numbers.

Quote:
Originally Posted by Meadbh View Post
What is the volatility of your portfolio?
In my 20's and 30's it was way too volatile, to the point where I made some expensive, stupid mistakes ... thus the smaller RRSP. I smartened up in my 40's, and have a conservative portfolio, with a goal of returning 2% above CPI.

Quote:
Originally Posted by Meadbh View Post
When will you be psychologically ready?
This may be an issue for me, but I'm thinking it won't be too much of a hurdle. During retirement I will focus on volunteering in community activities. I've always enjoyed organizing, and growing organizations. The only psychological part of my decision, which will be a far more logical decision, is the math part. For the purposes of planning, lets assume I can retire at the drop of a hat
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Old 12-27-2012, 08:41 PM   #4
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Quote:
Originally Posted by CDN_47 View Post
Partly, the interest income row will be comprised of RRSP, TFSA, and non-registered investments. RRSP will likely be quite low compared to the non-registered amount.
CDN_47, thanks for your answers! The one above is important, because the composition and source of the income will determine your tax liability. Pension and RRSP will generate the greatest tax liability, as they are taxed as ordinary income. TFSA, none. Non-registered income, dividends and capital gains will be taxed variably, but independently of whether you draw down on them. One key goal is to minimize the tax burden. Another is risk management. A third is sustainability. You have a real advantage there with your DB pension!

If you are indeed ready to ER at the drop of a hat, the best time to do so is as soon as all those goals can be met. Based on all the info you have provided I would probably select 60. Having said that, I have just pulled the plug @ 55 without a pension!

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Old 12-27-2012, 09:13 PM   #5
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Congrats Meadbh on ER!!!

I will be focusing on Tax implications as I get a bit closer. Right now we're focused on max'ing out our savings. TFSA(s) are maxed. RRSP(s) are maxed (but were greatly affected by a couple of bad decisions, and contribution amounts limited by our Pension Adjustment). Now we're getting ready to switch our contributions over to non-registered investments.

I have to admit, we're getting a bit addicted to saving money. Between our investments, and pension valuation, our Net Worth grew by over $100,000 last year. For some, that's not a lot, but for us it's quite impressive.
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