A Returning Canadian

[trolleydriver]

Hello everyone from Ontario, Canada. My previous posts on this forum were back in December of 2004. Since then I have lurked but have not posted.

Here is an excerpt from my first post in 2004 --- "Not sure I will ER since I am already 57, still working and still saving for retirement. I'm a self-employed consultant and have a current net worth around 1.1 million in Canadian funny money. That includes registered retirement plans and a mortgage free house. My wife does not work and the two kids are both married and doing OK. We have aging parents who so far have been managing for themselves."

My situation has changed since I made that post. Current net worth is about 1.5 million (including the house), no mortgage, no debts, two self-sufficient married children and two grandsons (18 months and 9 months). We do have some improvements/renovations (about 20 to 30K) to do on the house. Investments are about 60% fixed income and 40% equities. About 90% of all savings are in RRSPs with 10% in non-registered accounts.

As of the beginning of April of 2009 I have been out of work (no contracts for my consulting business). I will soon be 62 years old and am thinking I should just retire. Also trying to decide if I should start taking Canada Pension Plan early.

Any suggestions would be most welcome.

 

[kumquat]

Welcome from the frozen west.

I will soon be 62 years old and am thinking I should just retire.

Well, maybe, um, err
Sorry but I can't comment on that without knowing your expenses and what money is where. One ROT is that if you can live on 4% of investments, you should be OK. However, information is insufficient. If, for example, you have $1M in investmest and .5 in house, a lifestyle of $40 pretax would work. If you have $1.4M in investments and a $100K house then income would be higher. CPP and OAS would go on top.

Also trying to decide if I should start taking Canada Pension Plan early.

Once again, information underload. Things I have read suggest that all things being equal, the break even point for CPP at 60 vs. CPP at 65 is living to about 82. You are (or soon will be) 62. I haven't seen calculations for those numbers. As well, it depends on how many years you paid and whether you maxed the CPP contribution in those years. More info required, and even with it I'm not sure I can do the calculations. Max at 60 is about $6K/yr.

I might add that you are only 3 years from OAS and that you probably won't have a lot clawed back (based on $40K income from investments). OAS is about $6K/year.

So, if the above assumptions are correct, you could retire with a pre-tax income of ~$50K in 3 years (current woud be about $45K). Can you live on that?

My calculations are exceeding general and may not fit your situation. You might want to cough up a few bucks to a fee-only financial planner to to make a plan.

FWIW, I retired at 58 and will soon get my first CPP cheque at 60. A 'bird in the hand' and all that.

Welcome to the forum and good luck to you.

 

[trolleydriver]

Thanks for the reply. The investments are about 1.25 million and I allowed 250K for the house (this is low since houses in the neighbourhood are selling in the 300 to 350K range. I will get the max CPP. DW will get only a small amount of CPP (not worth considering). Tha's probably still not enough info for anyone to work with.

Have you tried the RRIFMETIC calculator? The demo version can be downloaded free of charge. Really good for Canadians.

 

[kumquat]

The key is not what you will get, but what do you want to spend. If what you get isn't what you will spend there will be a problem.

I haven't played with RRIFMETIC. I have found that calculators, in general, have problems. None, that I have seen, predicted today's meltdown.

Depending on your spending, you may be a great candidate to retire and live happily ever after. You may also be a candidate for living under a bridge. Being frugal is a good thing, but if you are not confident of your plan, cough up a grand or so to a 'fee only' FP.

You might want to follow a couple of other Canadian financial boards:

Canadian Money Forum - Powered by vBulletin

Financial Webring Forum :: Index

as Meadbh suggested in this thread: http://www.early-retirement.org/forums/f32/canadian-only-subgroup-or-topics-44671-2.html#post823605

 

[trolleydriver]

Thanks for the Canadian links.

Just for the record, we have done a retirement budget and it looks like we will be OK unless there is a black swan event (e.g., world financial collapse, WWIII, etc.). We got hit by the recent financial meltdown but our allocations have allowed us to claw our way back.

 

[jambo101]

I believe that the more income you have the less pension you get, my Father inlaw had over a million in in investments and his income was such that he recieved no Canada pension due to the claw back system.

 

[kumquat]

I believe that the more income you have the less pension you get, my Father inlaw had over a million in in investments and his income was such that he recieved no Canada pension due to the claw back system.

The claw back affects OAP, not CPP and it depends on income not assets. Essentially, OAP is clawed back via the income tax system.

 

[robcanuck]

Welcome to a fellow Canuck.

Canada Pension Plan benefits aren't subject to a clawback. It's Old Age Security (payable at 65) that may be clawed back depending on income. For 2009, net income of $66335 is the point where OAS begins to be clawed back. 15% of net income above $66335 is clawed back from OAS. OAS payments completely disappear if your net income is $107,692. The net income levels are indexed (to CPI I believe) and so the threshold amount changes each taxation year.

Rob

 

[trolleydriver]

I realize everyone's situation is different but I sometimes wonder what the pre-tax income is for Canadian retirees in their 60s. If I have 50K pre-tax is that above or below the median or the average?

My parents who are in their 80s are getting by quite nicely on about 27k pre-tax. They have a nice attached bungalow in a retirement community, a car that does not get driven very much and they take one or two vacations (one month duration) in Myrtle Beach and/or Florida each year.

 

[Meadbh]

Welcome trolleydriver.....do you actually drive a trolley?

Good question about actual incomes in retirement. I took a look at the trusty Statscan website and found this table:

Average income after tax by economic family types

which suggests that the average income for "elderly families" in 2007 was $54,200. For "unattached individuals" who were "nonearners" the average income was $27,600 for men and $24,700 for women.

Your tax dollars at work!

Did I mention that I like DATA?

 

[trolleydriver]

Thanks Meadbh. I don't drive a trolley but I like the old time trolleys.

That's an interesting income table. If the average seniors AFTER tax is 54K then the before tax is quite a bit higher than my own estimated 50K pretax income. The stats in the table are also averages which could be distorted to the high side by a small number of very high incomes. I'd like to see the median figure as well. I could not find such a table on the Statscan website.

 

[trolleydriver]

Correct me if I am wrong, but it seems to me that the majority of people on this forum who are FI or FIREd, have at least one person in the family who has a nice pension (e.g., government, teachers, mility, etc.). I'm not so lucky. My wife did not work (except for a very few years) and I do not have a pension other than the standard Canada Pension Plan and Old Age Security. Since my wife did not work much her CPP will be quite small. So we will essentially have to survive on what we have been able to save.

Are there any others here who are in this same or a similar situation?

I think we are going to be looking at a somewhat frugal retirement compared to most people who post on the forum. I find it difficult to relate to the majoirty of posters who seem to be so well set up for retirement compared to us.

 

[REWahoo]

Trolleydriver, there are many of us here who are retired without pensions, living entirely on our savings and investments. There are many roads to (and in) retirement.

 

[Meadbh]

Correct me if I am wrong, but it seems to me that the majority of people on this forum who are FI or FIREd, have at least one person in the family who has a nice pension (e.g., government, teachers, mility, etc.). I'm not so lucky. My wife did not work (except for a very few years) and I do not have a pension other than the standard Canada Pension Plan and Old Age Security. Since my wife did not work much her CPP will be quite small. So we will essentially have to survive on what we have been able to save.

Are there any others here who are in this same or a similar situation?

Me.

 

[kumquat]

And another

 

[Maurice]

Welcome back, Trolleydriver.

... and two grandsons (18 months and 9 months).

Please tell us these are from two different children!

 

[trolleydriver]

Maurice ... The oldest grandson is my son's child and the youngest grandson is my daughter's child.

REWahoo, Meadbh and Kumquat ... It's comforting to know that I am not alone.