Just over a year ago, my wife and I were seriously contemplating retirement once the nest was finally free of the last child (we had supposed it would be 2015). But, fast forward to now, and both my wife and I are really enjoying our jobs - probably the best fits for us in our lifetimes. Above average income, below average stress, geographic benefits (incredibly short drive time for my wife, international travel for me) have all combined to a complete rethink.
If 2 companies are willing to pay us well for jobs we actually enjoy, it seems counterproductive to retire just because we can.
So, our new plan is to retire in 2019 (give or take a year) at which time the nest should definitely be long vacated. The strategy and assumptions would be:
- for the next 4 years, max our RRSP contributions by contributing $33k / year
- we have $27k of TFSA contribution limit which should grow to $71k assuming it stays at $5,500/yr per person. I.E. we will not be putting any money into the TFSA until we retire.
- project that non-registered and RRSPs will grow to $1M (in 2015 dollars) in total by the time we retire (3.8% return after inflation/costs).
- downsize the house and buy in a much more affordable neighborhood that we still anticipate will be close to at least some of our children, but also close to US border and major airports. This makes it easier and cheaper to travel whether it is to go to Florida for a month in winter or elsewhere.
- take the difference in the net gain for housing switch and put at least $200k aside for the first 3 year's of retirement expenses. As much as our TFSA contribution limit would allow, we would shelter this. 1/3 of $200k would be put in high interest savings, and 1/3 in a 1 year GIC and the remaining 1/3 in a 2 year GIC.
- now we would begin drawing down the RRSP first so as to minimize the impact of mandatory RRIF withdrawals. However, to rebuild the "cash wedge", we would need to convert some of the gains into cash-like instruments while siphoning off any non-registered dividends to this cash wedge.
- the first 3 years are taken care of; the 5th year would be when my wife could begin receiving CPP early. The 6th year would be when I could begin receiving CPP early. Six years after that, my wife would begin receiving OAS and the subsequent year I would begin receiving OAS. About 3/7ths of our expenses would be covered by CPP/OAS at this point.
- we assume we will get full OAS as it is today (adjusted for inflation) at 67, while CPP will be reduced by 36% for taking it early, and another 15-20% because even with the dropout provision, we would still have a few low earning years between 18 and 60.
- we would retire with no debt, our current vehicles are 10 and 13 years old so we would retire with one vehicle fully paid for not newer than 3 years, and the kids' university loans would be paid up. We have also assumed expenses 25% more than we anticipate in case there is something major we have overlooked or we end up living finer than we do now.
Is there something obvious I haven't considered or a different strategy to consider in how to drawdown our savings?