Hi - Are we ready?

[ABTraveler]

Thanks in advance for everyone's help. All info in Canadian $. I think we are FI but can we Retire?

I'm 49, DW 48, no children. I work as an independent consultant, DW has a part-time job in the medical field. On an average, we bring in $80k/year between us.

Assets:
Paid off house
Registered/Retirement (RRSP/TFSA) - $900k (60% Stocks, 30% Bonds, 10% Cash)
Open/Non Registered - $800k (75% Stocks, 15% Bonds, 10% Cash)
US Real Estate - US$170k (brings in approx. US$800/mo in net revenue)
Two paid off vehicles - 7 & 8 years old and in pretty good condition. Planning to keep them till they don't work anymore!

Current expenses of $54k/year. We have universal health care living in Alberta, Canada so no need to worry about health care premiums. Expenses include disability premium payment for both of us.

What do you think?

 

[tmm99]

Any pensions?


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[ABTraveler]

Any pensions?


Thanks Tmm99. No pensions for both. CPP (similar to SS in Canada) starts at 65 (can start as early as 60 with penalty). There are other programs such as OAS (Old Age Security) which start at 65 but rather not include that in the calcs

 

[Meadbh]

Welcome AB. At first glance your numbers look good, with a withdrawal rate of 2.8%, ignoring the US rental income, or ~2.3% if that is included. However, you didn't state whether the $54K includes income taxes payable. If not, then the picture might not be so rosy.

Another question is how your expenses break down. As an independent consultant, I bet you have expenses that will disappear after retirement. Your DW will have licensing and other expenses that should disappear too. On the other hand, you may travel more or spend more money on skiing! So it is important to analyse your current and projected expenses in detail. There are lots of threads in this forum about that.

As you know, CPP is significantly less generous than American Social Security (the premiums are lower too), and your portfolio will have to sustain you completely until you start it sometime between 60 and 70. If you are unsure about the best time to start CPP, Doug Runchey (dogger1953) at the Canadian Money Forum has a great thread going on this, called "Hello, I'm a CPP expert".

You didn't say how the money is distributed between your RRSP and TFSA. I presume most of the $900K is in the RRSP. You have a heavy weighting in equities there. If you leave that to grow till you are 71, you may be faced with some large RMDs, and you may be catapulted into a high tax bracket, as well as facing 100% clawback of OAS. You may wish to consider judiciously withdrawing money from your RRSP during the next 12 years to prevent this. You could create an RRIF with part of the RRSP funds, taking out only enough to stay in a lower tax bracket. When you reach 65, you can get a $2000 tax deduction for this "pension". This is another question that has been debated ad nauseam at the CMF.

 

[ABTraveler]

Thanks Meadbh.

The $54k does not include taxes. And yes, the majority of $900k is in RRSP ($700k).

Thanks for the info on other threads, will look into it.