Trying for Freedom 55 ... in 10 years

[mind_business]

Not sure if it's going to be possible, however below is our current situation, and plans to get us to Freedom 55. Comments welcome ... even brutal ones

Assets:
- $ 280,000 House
- $ 31,615 RRSP(s)
- $ 1,162 TSFA (mine)
- $ 1,162 TSFA (Wife’s)
- $ 4,603 Cash
- $ 212,220 DB Pension (current cash value – based on 21 years of service)
$ 530,761 Total

Liabilities:
- None

Monthly net Income: $ 5,842 *

* I have automatic withdrawals of $515 per month for a company RRSP above my net income above. The company matches 50% into a non-RRSP investment account (or $263 per month – taxable income).

Annual Bonus: $ 7,000 after taxes (based on average amount over last 5 years).

Monthly Expenses: $ 5,842 **

** Monthly Expenses include $ 2,500 TSFA contribution.

Our situation: Wife and I are both 45 years old. No kids. Single income household. We just finished paying off our house last month, so now we’re focused on building our investment portfolio. Currently saving / investing $ 3,278 per month (TSFA, Co. RRSP + 50% Co. matching). We are resolved to maintain, or increase this saving plan. At 55 my pension will be worth $ 752,000 cash value, or $3,300 per month income (calculated on current income, not future earning potential). Pension formula = 1.25% x Average Final Compensation x Pensionable Service

Goal #1: Build assets for retirement, while still maintaining a comfortable budget (plenty of room to enjoy life).

Goal #2: Be in a position to retire by 55 with min of $ 70,000 per year income (in today’s dollars). Note – my Co. Pension is not indexed.

Risks to financial goals: The usual: single income household / loss of job, health, divorce (not likely – 21 years and going strong  ), poor investing decisions, market volatility, DB Pension stability, etc, etc, etc.

Any comments or advice would be appreciated. Although I tend to plan things out carefully, I’m not fully confident I’ve thought this through well enough. It’s exciting but scary thinking that my pension + savings would have to carry us through 30+ years.

[the-royal-mail]

That's pretty impressive. You are correct in that you don't know how long you will live. If you eat well, exercise and stay active and don't have a history of severe illness in your family, you may well live to be 90. Hopefully you will have enough saved to be able to carry you through. In this case I am not really sure what else you can do other than simply continue to save more cash as you have been planning. I personally think you've done exceptionally well for yourselves.

[MoneyGal]

A retired couple, in good health, has a better than 25% chance of at least one member of the couple living to age 95.

[CanadianCapitalist]

Have you given much thought to why you want a retirement income of $70K p.a.? Your current expenses include money you are setting aside for savings. But your retirement income you want is the same as today's expenses. Even accounting for taxes that seems a bit on the high side. Do you have a reason why this is so?

Also, does your company pension kick in if you retire at 55?

[Guigz]

I am guessing that the 70,000$ goal is to cover inflation issues seing as the pension is not indexed.

[mind_business]

Have you given much thought to why you want a retirement income of $70K p.a.? Your current expenses include money you are setting aside for savings. But your retirement income you want is the same as today's expenses. Even accounting for taxes that seems a bit on the high side. Do you have a reason why this is so?

Also, does your company pension kick in if you retire at 55?

CC, those are good questions. First, yes my company pension kicks in at 55. As to your question about how much thought went into my $70K number ... well, I have to admit I haven't fully thought it through yet. That doesn't mean I haven't done some basic analysis though.

I have a relatively good handle on my current expenses, and have estimated what our expenses will be at 55 and beyond. Mainly I need to bridge my income from 55 to 60 when CPP kicks in. This will be my main hurdle to overcome ... without digging too deeply into our savings. I have also run some very basic scenarios at various age ranges which includes level of activity / travel / hobbies, etc, and of course increasing medical costs. I see our income requirements being a bit higher during the first 15 years of retirement.

When I have some more time to work on it in more detail I'll posts some of my analysis.

[mind_business]

That's pretty impressive. You are correct in that you don't know how long you will live. If you eat well, exercise and stay active and don't have a history of severe illness in your family, you may well live to be 90. Hopefully you will have enough saved to be able to carry you through. In this case I am not really sure what else you can do other than simply continue to save more cash as you have been planning. I personally think you've done exceptionally well for yourselves.

Thanks. However personally I don't believe we've done exceptionally well. We haven't really focused on retirement until the last few years. If I could turn back the clock, we'd be in a much better financial position at this time. Then again, I wouldn't have a room full of woodworking tools in my basement collecting dust (LOL).

A retired couple, in good health, has a better than 25% chance of at least one member of the couple living to age 95.

MG, ýou're scaring me. I somehow can't picture myself at 95 when I'm already waking up in the morning with aches and pains (LOL). Going from the bedroom to the bathroom in the mornings I sort of look like that picture of evolution starting with the bent over early human and ending up as an upright homosapien.

I am guessing that the 70,000$ goal is to cover inflation issues seing as the pension is not indexed.

You're partially correct. I'm very aware of my pension not being indexed. This is one of the other issues I'm going to have to plan for in detail. My guess is that we'll likely live on considerably less than $70K, however I tend to be a conservative planner. Just out of curiousity, I ran an emergency, bare-bones budget if I lost my job today. With our house now paid off, we could live on $18,000 per year. This however means: no cable TV, no cell phones, reduced food (no dining out), house better not need any repairing (LOL), etc . A no-frills/no-fun budget. From this, if we were 55 and retiring today, my guess is that we'd be living on 3 times that amount. I'll confirm this with analysis later, and post for comments.

[steve41]

OK.... to make it easier for me, could you break salaries out as gross per each spouse? as well, break out savings rsp/tfsa/nonreg per each spouse.

[mind_business]

OK.... to make it easier for me, could you break salaries out as gross per each spouse? as well, break out savings rsp/tfsa/nonreg per each spouse.

I think you'll get most of your answers from my original post:

Single income family (my wife doesn't work currently ... and not for the forseeable future).

We do not split up our non-registered savings.

TFSA's are split up per my original post.

RRSP's are all under my name. This is one of the biggest weaknesses in our plan currently. Glad you're asking about it. I wouldn't mind getting some advice on income splitting during retirement. My wife has some contribution room ~ $20,000.

[mind_business]

Sorry Steve, I just re-read your first question. My gross salary is $104,000 per year.