Can I Retire in 2023 at age 55?
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Thread: Can I Retire in 2023 at age 55?

  1. #1
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    Can I Retire in 2023 at age 55?

    Hi all, I’m planning to retire in 2023 at age 55. For the final stretch I thought it would be useful for me to start a money diary so all of you wise folks can poke holes in my plan, and hopefully I can plug those holes before 55, and retire as planned!

    Sorry for the long initial post. I will try to update this thread with my progress once or twice a year, and respond to any feedback in between.

    General Info:
    • Goal: to retire at age 55, in 2023
    • I’m 48 years old, and my wife is 47
    • We have 2 kids, aged 16 and 13


    Annual Income
    • My salary: $104,000
    • My non-registered dividend income: $7,100
    • Wife’s non-registered dividend income: $18,100
    • Basement suite income: $10,400
    • Total Annual Income: $139,600


    Typical Annual Expenses
    • Taxes: $24,000
    • Non-Discretionary: $27,000
    • Discretionary: $22,000
    • Total Annual Expenses: $73,000


    Assets:
    • House: $810,000 (probably worth $1M currently, but using a conservative number due to the potential housing bubble)
    • My Non-Registered Account: $204,000
    • Wife’s Non-Registered Account: $480,000
    • My TFSA: $77,000
    • Wife’s TFSA: $77,000
    • My RRSP: $98,000
    • Wife’s RRSP: $66,000
    • Spousal RRSP: $191,000 (will be wife’s income in retirement)
    • RESP: $155,000 (for kids education only, not retirement)
    • Investments are generally invested in dividend paying large cap stocks, ETFs, and mutual funds. Canadian exposure is about 85%, US is 11%, International 4%.
    • Above investments currently generate a total of about $50,000/yr in dividends, of which only the portion in the non-registered accounts are taxable.
    • Total Assets: $2,158,000


    Liabilities:
    • HELOC @ 2.7% (non investing): $15,000
    • HELOC @ 1.85% (My investing): $37,000
    • HELOC @ 2.7% (Wife’s investing): $159,000
    • The non-investing HELOC is due to a new car purchase a couple months ago, and will be back to zero where it should be within the year.
    • The investing HELOCs are being gradually paid down over time, but we’re in no rush, as the interest is tax deductible, and the interest rate is lower than the overall yield on the investments (let alone the capital gains).
    • In the past, we’ve used the investing HELOCs to jump in and buy more equities on a price correction, but as we get closer to retirement, we’re more resistant (but not immune) to those temptations.
    • Total Liabilities: $211,000


    Current Net Worth: $1,947,000

    Planned sources of income in retirement:
    • Basement suite income of $10,400 will continue until 2028 when we plan to downsize
    • My DB pension from current employer: $14,600/yr starting at age 55, with a bridge of $3,200/yr from 55 to 65, indexed to inflation
    • My DB Pension from previous employer: $24,000/yr starting at age 65, indexed to inflation
    • My CPP: $12,600/yr starting at age 70, indexed to inflation
    • My OAS: $6,942/yr starting at age 65, indexed to inflation
    • Wife’s CPP: $3,000/yr starting at age 70, indexed to inflation
    • Wife’s OAS: $6,942/yr starting at age 65, indexed to inflation
    • Ongoing dividends from existing investments (currently around $50,000/yr, but will be more in retirement, partly tax sheltered)
    • RRSP withdrawals as needed
    • All of the above pensions could be started earlier or later for a trade-off of a bit more/less per year. The decision of when to actually take them will probably boil down to our overall health and expectations for longevity at the time.


    Expected expenses in retirement
    • I expect our expenses in retirement to be slightly lower than pre-retirement, mostly due to being in a lower tax bracket. Some work related expenses will drop off, but I expect those will be offset by additional spending on fun.


    The Plan:
    • Continue to max out the spousal RRSP between now and 2020, then switch to contributing to my RRSP for 2021-2023. This will allow my wife to start drawing down on the spousal RRSP in 2023.
    • My wife to start gradually withdrawing from her RRSP from 2017-2023, as her taxable income level is very low. In 2016 she paid zero taxes, despite rental and dividend income.
    • Continue to max out both TFSAs annually both before and after retirement
    • Use any remaining excess cashflow between now and 2023 on HELOC repayment, and/or additional investing
    • Retire in 2023 at age 55
    • Keep total taxable annual income as even as possible year over year from age 55 onwards, and keep taxable income as balanced as possible between me and my wife to be as tax-efficient overall as possible. This will be achieved by withdrawing more from RRSPs earlier in retirement, then withdrawing less from RRSPs as other pensions kick in.
    • Downsize from existing house in 2028, when value is expected to be $1,250,000. Use $800,000 for downsized home, and move $450,000 to dividend paying equities to further fund retirement.


    About 5 or 6 years ago, I created a massive spreadsheet to project all of the above out to age 85. I’m assuming an inflation rate of 2%, an average annual total return on investments of 5%, and an average annual total return on my primary residence of 4%. I’ve also padded my future expenses with $10,000 per year of “contingency” for any unforeseeable expenses.

    I have been comparing estimates to actual amounts on a yearly basis. So far, my actuals have been better overall than my estimates in every year except one where my investments underperformed my estimate, however my trailing 5 year total return for investments is currently at 8.3%, which is comfortably above my 5% assumption.

    According to current projections, my net worth will just keep growing exponentially after retirement, and we’ll end up with about $8M at age 85, including primary residence.

    So what do you think? Am I set to retire at 55? Should I wait longer? Should I retire tomorrow?

    If you fail to plan, you are planning to fail.

  2. #2
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    Continue to max out the spousal RRSP between now and 2020, then switch to contributing to my RRSP for 2021-2023. This will allow my wife to start drawing down on the spousal RRSP in 2023.
    If your wife is planning to get only RRIF minimum, you can continue to contribute until last day, SRRIF minimum withdrawals will be attrubuted to your wife's income, not yours (unless she withdraw more than RRIF minimum).

    We have 2 kids, aged 16 and 13
    Do you have RESPs? imho, kids education would be the most unpredictable expense . Another "unknown" expense is medical/dentist as if you retire , you won't have any coverage....
    Otherwise,again, imho, you may retire tomorrow.

    and we’ll end up with about $8M at age 85
    Do you really need then 8M?! Not better to retire earlier and enjoy the life?!

  3. #3
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    looks really good, not sure how much we could help as it looks like you are pretty set! near $2 mill networth and a good plan for the future.

    Envious of your TFSA balances!!!

    My take, you have 2 kids set to hit post secondary 2 yrs and 5yrs which is still within the time you will be working. Those years will most likely be big expense years but it looks like you are covered with your RESP balance of 155k.
    Assuming per kid, tuition + living ends up nearly at a estimate of 20k (on the higher end) depending if they are close to home or not. This means 80k per child 160k altogether, if you continue with your contributions you will be over that. Most likely you will be ok here, jsut remember your 2nd child will be in university while you plan to retire.

    The only thing really to keep in mind is if they plan on doing graduate studies etc. Do they work? Do you know what they plan on studying?
    Are you in a position to help them with a job??

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  5. #4
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    The only thing really to keep in mind is if they plan on doing graduate studies etc. Do they work? Do you know what they plan on studying?
    Are you in a position to help them with a job??
    Oh, I missed that you have plenty of cash in RESP , thus I'm not sure if you need to wait another 7 years for retirement

    Ongoing dividends from existing investments (currently around $50,000/yr
    Very nice! We have combined on all accounts (reg and non-reg) about 1.3M (split 55/45 - equities/FI) and our dividend/interest income just above 30K+

  6. #5
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    You look in pretty good shape to me,, particularly with the DB plans. You may be surprised at the reduced payouts for retiring early. You may wish to watch your incomes and income splitting to avoid OAP clawback. Also, asset allocation could effect income. You didn't mention your plans post retirement which will of course affect your disposable income. I retired at 55 yrs (now 71) and live an active lifestyle. Inflation, low interest rates, and activities (travel, sports, hobbies, etc) do take their toll. I guesstimate my annual expenditures are about $60,000. PA plus extraordinary expenses such as new vehicles, condo special assessment of 15,000., major home updates or repairs eg roof, special gifts to children (family vacation 15,000.) etc. Good job.

  7. #6
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    You may wish to watch your incomes and income splitting to avoid OAP clawback
    Just curious.... won't be better if OP wife will already convert SRRSP to SRRIF and withdraw minimum payment and OP can open 2nd SRRSP for new contributions?

  8. #7
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    I think you are looking pretty good for 55.

    Just learn to live as frugal as you can and see how much you like it.

  9. #8
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    Just a few comments:

    - when you downsize, fees and taxes will eat into that $450k.
    - 5% return with 2% inflation(3% real) is aggressive. Real return of 1.5-2% might be more realistic. Remember you won't be reinvesting income from investments
    - The dividends and interest in the RRSPs will be taxed same as interest income when withdrawn.
    - Markets go up and down so there can be bumps in the road. We had more than you have now when we retired 14 yrs ago. It grew. Then went back almost to where it was before starting to grow again. Several bumps since then. Shorter time horizon, but we will never see $8million!

    If you take the home equity and RESP out of it you realistically have about $1million. Not bad, but I would keep working and try to get that up in the $1.5Million in 2017 $$ (~$1.7Million in 2023) by time you retire.

  10. #9
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    Looks like you are a good planner and have been focused on your future for a long time - congrats! Nice job on the TFSA's and RESP. Good use of HELOC for investing. I think if you hated your job you could retire now or find something part time until kids are off to University then downsize. Otherwise stick to the plan and still be retired before 99% of Canadians will.
    XIC, VTI, XEF, XSB/VAB/GIC LADDER (+ HISA for cash)

  11. #10
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    Quote Originally Posted by Steve Divi View Post
    I think you are looking pretty good for 55.

    Just learn to live as frugal as you can and see how much you like it.
    tbh i dont think he needs to learn how to live frugally considering what they have built on single income


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