# Income Vs Net Worth



## Penbrook (Mar 11, 2019)

New here, but I’d be interested if anyone has an opinion on our situation.

Retired 2 years ago at age 60...no interest in working again. Wife no longer works.

Spend since retirement has been 200k annually of which 100k is discretionary travel.

I’ve been ignoring income...just found out my taxable income in 2018 was 70k on filing.

My focus is entirely on net worth which has ranged between 6m and 6.5m since retirement.

Currently my net worth is:
3m in a Toronto residence 
3m cash and securities in taxable accounts 
500k in registered accounts 

Obviously, there’s lots of exposure to the real estate and financial markets
The financial asset mix is 10:20:70 cash:bonds:stocks

Probably should be more conservative, but I like the risk.

The plan is to deplete the taxable accounts first, then the registered accounts.
CPP/OAS will be deferred to age 71 unless there are serious health issues.

No intention of selling the residence, and there’s a line of credit in place just in case.

Is there any cause for concern that we’re living beyond our income?


----------



## moderator2 (Sep 20, 2017)

This post had been held in a moderation queue and was not visible until now. Posting to bump its visibility.


----------



## My Own Advisor (Sep 24, 2012)

OK, I'll fall for this one: 

"Is there any cause for concern that we’re living beyond our income?"

If you got it, spend it and enjoy it


----------



## Mookie (Feb 29, 2012)

According to the VPW (Variable Percentage Withdrawal) strategy, based on your age and asset allocation, your $3.5M should support a spend rate of roughly $170k per year from now until age 100. 

This assumes you never touch the equity in your primary residence, and excludes any other income sources such as pensions. 

Of course, if you understand VPW, you will also know that the spend rate from year to year will vary based on market returns.


----------



## james4beach (Nov 15, 2012)

As a rough rule of thumb, I would use the 3.5% threshold. You've got 3500 K investable assets, so you can spend approx 3.5% x 3500 K = 122k annually plus inflation adjustment. The variable methods get you more wiggle room on that by reducing withdrawals when performance is poor. One thing you might want to think about is your expectations, especially when stock markets turn bad.

Which appeals to you more: consistently spending a similar amount each year, or being willing to (perhaps sharply) cut back on your spending when stocks are down? It's possible stocks could do badly for a long stretch such as 5 to 10 years at some point. Would you be willing to cut back spending for such a long time, and are you comfortable having your lifestyle dictated by the wild and irrational stock market?

I think you're spending too much to be sustainable. You're spending like someone who has $5 M investable assets, but you have 3.5 M.


----------



## lonewolf :) (Sep 13, 2016)

Would consider taking OAS sooner. By the time your 70 interest rates should be a lot higher & you might have more interest income that could produce a claw back. Governments need more tax money in US a lot of the democrats want to tax capital gain as ordinary income as well pay tax each year based on paper gains & losses. Tax paid would not be just based on profit or loss when sold but also yearly gains & losses. I knew its crazy though I could see it happening in both US & Canada as governments need money to pay for all the pensions. The BS political correct thing to do is tax the rich if you own stock your rich could become the thinking.


----------



## Retiredguy (Jul 24, 2013)

Max CPP & OAS is reached at age 70 not 71. If you wait to 71 you will have forgone a full year of each. When modeling expected income from these future sources you need to consider what the impact is to the other when either of you dies. Potentially because of income shifting to the survivor they could lose both OAS incomes and one full CPP.

My opinion and "concern" is that your 3M in taxable accounts is not generating much income, if your taxable income was only 70K, considering your comment "but I like the risk". A 2.33% return is hardly risky.


----------

