# Drawdown Strategy RRSP and Retirement Investment Plan



## gkInvestor (Dec 29, 2020)

Hi All,

I will be 55 years old next year and wish to retire at the end of 2021. My wife who is 5 years older than me will retire in 2021 with an annual partially indexed pension of about $60000 per year, I do not have a work pension. 

Based on conservative calculations we will have $320000.00 in RRSP savings and $200000.00 within our TFSA. My plan is, starting at the beginning of 2022 is to completely drawdown on my RRSP for 10 years until I'm 65 years old and leave the $200000.00 within a conservative portfolio for the next 10 years.

I would like to know if this is a viable long term strategy? My thoughts on this is that I would like to pay as little tax as possible, so by completely drawing down on my RRSP over the next 10 years and waiting until I'm 65 to collect CPP and OAS I can lower my tax bill when I start collecting CPP and OAS.

I am not adverse to a little risk so I would like to invest my RRSP within a conservative portfolio that would provide an average annual return between 4.0 - 4.5%. Based on my needs and wants I would like an after tax income of about $80000.00 per year (this includes my wife's pension). 

In terms of a portfolio that produces an annual return of between 4-4.5%, this is where I would need some advice. I have been investing on my own since 2013 and I've been using the Couch Potato model portfolio (70% Equity 30% Bonds). Since 2013 my average annual return has been about 7.5%. When doing some on line research I notice that there are portfolios that are weighted heavily with energy and bank stocks for example that give out annual dividends between 4%-5%. I do realize that dividends are never guaranteed however it seems reasonable to me that there are model portfolios out there that contain a mix of dividend stocks, equity and bonds that can potentially provide an annual return on average of just under 5%.

My questions are, is this be a viable strategy for the next 30 years and does any one have a model portfolio that I can use for RRSP investment that could provide an avearge annual return between 4.0 - 4.5%.

We own our homes (mortgage free) and we have no debt.

Thank you


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## fireseeker (Jul 24, 2017)

gkInvestor said:


> I will be 55 years old next year and wish to retire at the end of 2021. My wife who is 5 years older than me will retire in 2021 with an annual partially indexed pension of about $60000 per year, I do not have a work pension.


Key question for you: What happens if your wife dies? Are you entitled to a survivor benefit and, if so, at what percentage?


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## fireseeker (Jul 24, 2017)

I am in a similar position to you. Your strategy seems sound, but there are details not described that could affect your choices.

--When will your wife start CPP/OAS? She will be 65 in five years. I'm guessing that starting then would add nearly $20,000 in pre-tax income.
--If you have no other income, you definitely should take money from the RSP to absorb the credits. Basic personal amount and pension credit (transferred from your wife) means no tax for the first $15,000 (roughly). The first bracket in Ontario goes up to $45,000, so you could continue to withdraw up to that amount.
--You're asking about dividends and bank shares. Eligible dividends can minimize taxes at your projected income level, but they do no good if the money is in your RRSP. Given that, perhaps sticking with your tried-and-true investing strategy is better. There is no magic to higher dividends. You can always sell ETF units to create cash.
--You will want to consider pension splitting at some point. I think you can't start that till 65, but you should confirm that. ADDED: Ian is bang on. You can split registered pensions before age 65. So, as he suggested, the heart of your strategy will be organizing and splitting income around tax brackets.


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## ian (Jun 18, 2016)

I think you should take a look at your current and at your estimated future incremental tax brackets. Keep in mind that your spouses pension can be split between you for tax purposes. If you are concerned about OAS claw backs take a look at the threshold levels. Last years rate was about $78K of NET income. Our taxes are such that I take the OAS but my spouse does not. It would all be clawed back so she deferred it until age 70. We will decide what to do then.

If you consider a pension deduction for both of you after splitting the 60K pension you will each have a fair bit of room for other income before any claw point. Then you would want to look at the various incremental tax rates and their net impact on your net of tax income.


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## ddivadius (Apr 28, 2017)

If your plan is to use your RRSP fully over next 10 years, you will want to ensure it is safe and available for you. Based in history, a 25%+ drop in a 60/40 portfolio would be expected over next 10 years and it would be impactful. I am in similar boat and have moved to almost 75% short term cash/ZAG and 25% VEQT just to ensure the money is there for next 10 years. I do expect to get >4% on this type of conservative portfolio.


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## Manestream (Dec 3, 2020)

As far as cash flow planning goes...you mention that your wife will receive about $60,000 of partially indexed pension income...this sounds like a defined benefit pension...and likely includes a bridge benefit until age 65. Note that once your wife turns 65 you should confirm if the pension is reduced and then she is eligible to claim CPP and OAS. I know several people that were caught offside with the reduction for the bridge benefit in determining cash flow.


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## bergerj (Jan 26, 2021)

Sounds like a viable approach. You didn't mention how much you needed to withdraw each year (i.e., your expenses?). I'm looking at doing something very close to what you are considering although I'm a bit older @ 61. We don't have a DB plan but have registered plans that we can use to bridge the gap to allow us to delay taking CPP. We are looking to delay CPP till 70 assuming our good health continues and our investments/expenses remain in good balance and we don't need CPP $$s now. 

One thing you could look at is modeling your options. I've very recently started using this financial planning tool and highly recommend giving it a try!

The MoneyReady App

It does a great job of modeling income, expenses, investments and can help make suggestions on withdrawal optimization. Happy to answer any questions on what I've tried.


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