# Covid pushing me to retire



## Oshawa boy (Aug 21, 2020)

So.. I was laid off in March, been on CERB til now. Going back to work Sept til Dec then permanently laid off. I'll be 63 in Feb. I've actually been doing well on CERB. Helps that my son pays $500 rent (buys his own food). I don't have much. Small bungalow no mortgage, approx $430k in RRSP/pension fund, $30k cash. CPP would be approx $1000 at 63. Wife works part time but has no real pension to speak of to look forward to..maybe $100 a month. Wondering what a reasonable withdrawal from my small pension fund would be. At 65 I'm thinking..CPP $1000, OAS $900, pension $1000-2000, sons rent $500. When wife hits 65 some CPP, OAS, pension. Should be $3500 to $5000 in total. If I collect CPP at 63 maybe pull pension money or work a couple of years somewhere.. warehouse temp or something. Can't decide what to do lol. Work full-time, part time and CPP or pension fund or just say to hell with it and do CPP/pension fund ! Probably not enough information but just posting to see what others think.


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## sags (May 15, 2010)

It sounds like a part time job would suit you for a bit, so that you would draw down less from your RRSP for awhile.

An older guy just took a job at the retirement home where my wife works. He only wanted part time hours and took the 7 pm to 11 pm laundry shift.

Put into the washing machines and sit and wait. Put in dryer and sit and wait. Then fold and that's it. Not too strenuous.

I would look around and think about what you would like to do.


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## agent99 (Sep 11, 2013)

At 63, you will probably get bored being fully retired. I would definitely look for some other type of employment that you think you might enjoy or at least not find a chore. This probably won't help your overall financial situation too much, but will delay when you have to start drawing your savings down,

Have you looked at how the child rearing provision will help your wife get a better CPP? Child-rearing provisions - Canada.ca

You might consider converting at least part of your RRSP to a RRIF. When you draw from a RRSP, there is a withholding tax (recoverable at least in part when you do your taxes), but no withholding with RRIFs. At 65, a RRIF (or a pension) will also entitle you to the Pension deduction when you do your taxes. This reduces your taxes a bit.

You said the $450k was a RRSP/Pension. Is there a company pension that you will receive?

The other thing to consider, is that you can use income splitting once you are 65. This will again reduce your taxes, especially if one of you has a much greater income than the other. Overall your taxes should be very low.

I am sure you know that your son's rent may not always be there.

How much you can draw, will depend a lot on how your RRSP/RRIF/(Pension)? is invested. I am sure you can appreciate that if you invest in GICs at 1.5% and then draw 5%, your savings won't last too long. You should likely get some advice on best way to invest and draw your savings. But be careful of any advice you may get. You need something safe. If not comfortable with investments, maybe look at life annuities, maybe with a survivor benefit? This for at least part of your savings to supplement CPP/OAS. With an annuity, you get nothing back at end, but at least they keep paying for life. There are several kinds including indexed that pay less but keep up with inflation.

Be aware of inflation. CPP/OAS are indexed to the inflation rate, but your other income may not be. Even at a low inflation rate of 2%, you will need $150 in 20 years to buy what $100 buys today.

Probably more info than you need! Just thinking aloud of what someone in your situation should do (I have family members in similar situations)


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## Eder (Feb 16, 2011)

5k/month is fine unless you have a boat problem, start your RIFF maybe do the math to defer CPP till 70 if you're healthy. You'll never be bored unless you love your job.


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## Longtimeago (Aug 8, 2018)

agent99 said:


> At 63, you will probably get bored being fully retired. I would definitely look for some other type of employment that you think you might enjoy or at least not find a chore. This probably won't help your overall financial situation too much, but will delay when you have to start drawing your savings down,
> 
> Have you looked at how the child rearing provision will help your wife get a better CPP? Child-rearing provisions - Canada.ca
> 
> ...


Most of that is fine but I really wish people would stop making the common assumption, "_At 63, you will probably get bored being fully retired." _There are plenty of people who retire long before their 60s and never become bored. When I retired in my 40s, I didn't do so just to rush out and find a part time job because otherwise I would be bored. It's ridiculous to assume that would be the case for the OP.

With a house paid for and an income from the various sources, the question I would have first is what are your fixed expenses and what do you want to do that would required discretionary spending? You need to determine that in order to know how much income you would need if you went fully retired vs. part time working. 

If your income was $5k for example and your monthly budget was $3k, then you would have $2k left for discretionary spending or savings. No NEED to work part time unless you chose to do so.


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## livewell (Dec 1, 2013)

agent99 said:


> You might consider converting at least part of your RRSP to a RRIF. When you draw from a RRSP, there is a withholding tax (recoverable at least in part when you do your taxes), but no withholding with RRIFs. At 65, a RRIF (or a pension) will also entitle you to the Pension deduction when you do your taxes. This reduces your taxes a bit.


That is not correct, there is a 20% withholding tax on RIF withdrawals above minimum withdrawals. As you say It is reconciled/recovered at tax time anyway so whether you withdraw from RRSP or RRIF the tax consequence is the same. There is one good reason for converting part of the RSP to RIF is that most brokers charge ~$25 for RSP withdrawal, where to my knowledge none charge for RIF withdrawals (For that reason I move a set amount from RSP to RIF each year and make withdrawal from RIF which is why I know the witholding tax is applied.)


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## Oshawa boy (Aug 21, 2020)

Thanks for your input. Yep I need to sit down and really come up with a solid expense figure. The $430k is a lump sump pension that I was paid out including RRSP money. Currently in a RBC mixed fund. As for being bored. This was the best summer ever. Fishing, dirtbike riding, loads of house repairs. Very busy. I'd love to get back to the gym but going to wait a little for that. Winter could be boring.


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## ian (Jun 18, 2016)

Go back two or three years. Start with you bank statements and your credit cards. Do a tape on your total annual spending over each the past three years. That should give you a start. It should not take more than an hour once you have the raw data. That should tell you where you have been and will be a good starting point. . We were only interested in the total spend. Breaking it down by spend category was not part of our exercise. Add in some factor for inflation, and for additional spend in retirement. Then add a fudge factor on top of that.

We used this conservative approach and it has proved out for the past nine years. We do a tape every year to compare. So far every year we have been on or under our estimated numbers. Our number was fairly generous because we have typically traveled four months of the year, sometimes more. But....this back of the envelope method did work for us.

Also consider any large capital spends on the horizon..health, vehicles, healthcare, home etc. and some just in case emergency money.

The only number that was off was our estimate of investment returns. We were far too conservative but this is a function of our mix and the market. Sequence of returns was exceptionally good to us. We would much rather err on the side of caution when it comes to a retirement budget. Besides investments can crater just as well as they can surge.

One other thing that we now do is to periodically review some of the recurring monthly charges that we have to ensure that our rates our competitive with current market. Internet, cell, insurances. Just last month we dodged a 23 percent increase in our home insurance by shopping and by questioning. Have had similar with cell phone and internet costs. I believe we are up about $50-75 per month simply by testing these recurring charges on an occasional basis. It does not sound like much but our view is that a saving $600 or so each year going forward is well worth the hour or two of work to get it.

I walked at 58/59. Never regretted it for a second.


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## agent99 (Sep 11, 2013)

livewell said:


> That is not correct, there is a 20% withholding tax on RIF withdrawals above minimum withdrawals.


Actually, that is not correct either!
0-$5k withdrawal in excess of the minimum required incurs a withholding tax of 10%;
5k-15k is 20%,
15+k is 30%.

I was inaccurate in saying there was no tax on RRIF withdrawals because we never draw more than the minimum that is required. Perhaps the OP shouldn't either. At 65, the required withdrawal is 4%. Even that is a bit high a withdrawal rate at his age and savings, so hopefully, some of the withdrawal would be re-invested.
If a smaller amount is converted to a RRIF, then it is true that he might want to draw more than the minimum required. That will incur withholding. But that may or may not make sense.
RRIF withdrawals are taxed as income, so hopefully OP will be in a low enough tax bracket that that will not matter.

Oshawaboy said: "The $430k is a lump sump pension that I was paid out including RRSP money. Currently in a RBC mixed fund." So all of that presumably in a registered (RRSP) account and will be taxed as regular income on withdrawal.


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## ian (Jun 18, 2016)

All of our calculations were/are based on after tax dollars.


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