# Is TFSA and RRSP enough



## londoncalling (Sep 17, 2011)

There are plenty of threads and articles on RRSP vs TFSA but I had a conversation recently with someone that insisted a maxed out RRSP and maxed out TFSA along with an average home would not be enough to retire on. I understand this hypothetical situation is quite subjective but what is the likelihood one could retire comfortably(ex. maintain current lifestyle) if they have maxed their RRSP and TFSA do not have any consumer debt and have their home paid off. I understand earnings rates and home values vary and one could sell their home and relocate or downsize. I am wanting to remove these factors from the basic premise. Is additional income aside from CPP and OAS needed such as rental income or non registered investments? Is it different for a couple than an individual?


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## cainvest (May 1, 2013)

londoncalling said:


> There are plenty of threads and articles on RRSP vs TFSA but I had a conversation recently with someone that insisted a maxed out RRSP and maxed out TFSA along with an average home would not be enough to retire on.


To open of a statement.
How long have they been saving to RRSP and with what salary?
What are their current annual living expenses?
What are their avg yearly returns on RRSP/TFSA investments?

Quick answer though ... one _could_ easily retire on maxed RRSP/TFSA/CPP/OAS with a paid for home.


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## Ponderling (Mar 1, 2013)

I maxed my RRSP every year since I started working full time after uni at age 25, and so it has been perking along for almost 35 years now. Close to 1.4$M in it now.

Wife RRSP not as aggressive or as early so about $520K

I have maxed the funding of the TFSA every year since it started up. About $180K in it now. Wife $195K.

We have lived below our earning means for our whole working life. Can and do live quite well for a family of 4 on $70K per year. We do not count car purchases, paid for in cash, in that 70K number

Mortgage on house currently est value 1.3$M was paid off 10 years ago. 

So as upthread has said - a lot depends on individual circumstances.


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## like_to_retire (Oct 9, 2016)

londoncalling said:


> Is it different for a couple than an individual?


That's an understatement. Income splitting in retirement is a huge tax advantage for a couple while the single person gets nothing. Quite unfair.

ltr


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## Plugging Along (Jan 3, 2011)

londoncalling said:


> There are plenty of threads and articles on RRSP vs TFSA but I had a conversation recently with someone that insisted a maxed out RRSP and maxed out TFSA along with an average home would not be enough to retire on. I understand this hypothetical situation is quite subjective but what is the likelihood one could retire comfortably(ex. maintain current lifestyle) if they have maxed their RRSP and TFSA do not have any consumer debt and have their home paid off. I understand earnings rates and home values vary and one could sell their home and relocate or downsize. I am wanting to remove these factors from the basic premise. Is additional income aside from CPP and OAS needed such as rental income or non registered investments? Is it different for a couple than an individual?


Yes, with a few more assumptions that you would have to add. 

One would have to max out the RRSP & TFSA EVERY year starting at 18 (when you are first eligible for your TSFA), and you would have to be putting in the RRSP contribution amount too even if you have to defer the RRSP deduction for when you have higher income.
Retirement age is 65
Your pre-retirement life style is not subsidized else where (like inheritance or parents, etc) and does not increase
No inflation

TFSA - contributing $6000/year for 47 years at 5% would be work just over $1 Mil
RRSP - using a based even off of $30000 would be $5400/year for 47 years at 5% would be .95 Mil.

A $2 mil portfolio for someone who makes $30k a year would generate $80K a year. 

The hard part is how does one save the $6000 and max RRSP while paying off a home at the same time. For the $30k salary, already almost $12k is going to savings, after taxes and paying off there home. 

The big factors are what are the expected retirement expenses. That will be a determine factor. A couple is different in the process of having more disposable income, if both are working. If one one works, being in a couple on factors for the addition OAS and income splitting.


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## TomB16 (Jun 8, 2014)

I think in a reasonably simple scenario, RRSP and TFSA are enough. Both scale to infinity, although it is pretty rare to see a TFSA above $250~300K, at this point, but they will blow past that level very shortly.

Having unregistered money can be a big tax efficiency. We took a pretty big tax hit when we commuted a pension. Fortunately, we had enough unregistered money to be able to survive without touching our RRSPs, that tax year. Our TFSAs could have smoothed that pothole but I treat our TFSAs like they are sacred. That will be some of the last money we spend down.

One of the strengths of RE is the unregistered nature of the gains. There are other tax efficiencies, as well. That's not to say RE is any sort of panacea.

But yeah, it's a huge advantage to be able to control the flow out of your RRSPs without having to consider money on which to survive. We will only consider tax efficiency on these withdrawals.

If you had everything planned and implemented well, you could shift into retirement without a big tax hit so unregistered money wouldn't lever up as much but who among us has a life that is that smooth? Certainly, I do not.


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## ian (Jun 18, 2016)

like_to_retire said:


> That's an understatement. Income splitting in retirement is a huge tax advantage for a couple while the single person gets nothing. Quite unfair.
> 
> ltr


The amount of that advantage depends on respective incomes. I believe our tax saving for income splitting this year was only $1500 or so.

The far bigger tax advantage for us has been spousal loans.


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## TomB16 (Jun 8, 2014)

It became clear to me 30 years ago, people who understand how to optimize their tax load and have their spending under control will do far, far better than people who do not. Lots of great ideas in this thread.

If I had $600K in an RRSP and $200K in a TFSA, I could retire tomorrow. I wouldn't, of course. I would wait until it is a multiple of that because my financial perspective is modelled on the Cowardly Lion from Oz.

My parents did phenomenally well on remarkably little money. They had a lake house and a winter home in Phoenix (mobile home). None of it was fancy but in good shape and there was always a spare room for family and friends. My Dad used his contractor skills to make our lives great on very little money. Every time I worry about my money running out, I think about my parents and how well they did on 5% of what we have.

Don't forget, if you take out little enough money from your RRSP, you can qualify for GIS. If you can float along for a couple of years on TFSA/unregistered, GIS is a nice little boost for some people.

Keep in mind, we are on the prairies where things are a whole lot cheaper.


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## KaeJS (Sep 28, 2010)

TomB16 said:


> If I had $600K in an RRSP and $200K in a TFSA, I could retire tomorrow. I wouldn't, of course. I would wait until it is a multiple of that because my financial perspective is modelled on the Cowardly Lion from Oz.


This is funny. 🤣


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## newfoundlander61 (Feb 6, 2011)

For me and my wife we have no RRSP's but a TFSA each and one joint non-reg account. On the backend I have a DBPP, so we decided to use that as an RRSP and not have one. Its too late now due to our ages but we feel this works for us.


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## ian (Jun 18, 2016)

delete


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## Covariance (Oct 20, 2020)

londoncalling said:


> There are plenty of threads and articles on RRSP vs TFSA but I had a conversation recently with someone that insisted a maxed out RRSP and maxed out TFSA along with an average home would not be enough to retire on. I understand this hypothetical situation is quite subjective but what is the likelihood one could retire comfortably(ex. maintain current lifestyle) if they have maxed their RRSP and TFSA do not have any consumer debt and have their home paid off. I understand earnings rates and home values vary and one could sell their home and relocate or downsize. I am wanting to remove these factors from the basic premise. Is additional income aside from CPP and OAS needed such as rental income or non registered investments? Is it different for a couple than an individual?


I would think a big element of the analysis is the return on the maxed out contribution. If they made nothing, or worse lost or had a decent return over 30 - 40 years it would paint very different outcomes.


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## afulldeck (Mar 28, 2012)

londoncalling said:


> There are plenty of threads and articles on RRSP vs TFSA but I had a conversation recently with someone that insisted a maxed out RRSP and maxed out TFSA along with an average home would not be enough to retire on.


I agree with your "someone". My personal belief would be you need N-reg > RRSPmax to retire.


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## cainvest (May 1, 2013)

afulldeck said:


> I agree with your "someone". My personal belief would be you need N-reg > RRSPmax to retire.


For some maybe, all depends on your retirement needs and plans. I wouldn't say it is required to retire though.


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## TomB16 (Jun 8, 2014)

A lot of less investment savvy people seem to think RRSP equals retirement. Certainly, everyone here are more sophisticated but the general public is shockingly unaware of financial mechanisms which affect them most.

RRSP is just a tax optimization mechanism. Having $4M in an RRSP wouldn't optimize anything. You would have to pull out so much every year, you would be in the top tax bracket, negating all value of the deduction. Even $2M is way too much. Depending on an individual's other income, it doesn't make much sense to pump that balloon beyond perhaps $1m. Maxing out an RRSP is probably not the best strategy for more affluent people, IMO.


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## cainvest (May 1, 2013)

TomB16 said:


> A lot of less investment savvy people seem to think RRSP equals retirement. Certainly, everyone here are more sophisticated but the general public is shockingly unaware of financial mechanisms which affect them most.
> 
> RRSP is just a tax optimization mechanism. Having $4M in an RRSP wouldn't optimize anything. You would have to pull out so much every year, you would be in the top tax bracket, negating all value of the deduction. Even $2M is way too much. Depending on an individual's other income, it doesn't make much sense to pump that balloon beyond perhaps $1m. Maxing out an RRSP is probably not the best strategy for more affluent people, IMO.


Given the average savings for a faimly 55-64 is only ~$645k ($377k for singles) I don't think it would be much of an issue for many people. I doubt all of those savings are RRSP held though. Anyone banking away millions will likely know (or been directed) to keep various account types especially with TFSA around now.


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## Eclectic21 (Jun 25, 2021)

londoncalling said:


> ... what is the likelihood one could retire comfortably(ex. maintain current lifestyle) if they have maxed their RRSP and TFSA do not have any consumer debt and have their home paid off.


 Good for some people I can think off who have had good incomes/reasonable amounts of RRSP contribution room granted who have reasonable expectations.

Bad for others I know who have had little RRSP contribution room granted who also have reasonable expectations.

Also bad for some I know with good incomes/reasonable amounts of RRSP contribution room granted but whose expectations are off the charts (think California, Florida and Italian homes plus large sailboat plus a new car every three years for starters ).


Cheers


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## Eclectic21 (Jun 25, 2021)

TomB16 said:


> A lot of less investment savvy people seem to think RRSP equals retirement. Certainly, everyone here are more sophisticated but the general public is shockingly unaware of financial mechanisms which affect them most ...


Interesting you'd say that ... because the shocking thing for me are my co-workers for whom RRSP = tax refund with no idea that the taxes are deferred and only a weak understanding linking the RRSP to retirement.


Cheers


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## cainvest (May 1, 2013)

Eclectic21 said:


> Interesting you'd say that ... because the shocking thing for me are my co-workers for whom RRSP = tax refund with no idea that the taxes are deferred and only a weak understanding linking the RRSP to retirement.


On the plus side, at least they put some money away for retirement even if they do spend the so called "refund".


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## MrBlackhill (Jun 10, 2020)

Plugging Along said:


> TFSA - contributing $6000/year for 47 years at 5% would be work just over $1 Mil
> RRSP - using a based even off of $30000 would be $5400/year for 47 years at 5% would be .95 Mil.


Yup. That's why I don't understand how one would _not_ be able to retire with TFSA & RRSP.

Clearly, if one is able to max TFSA every year, one would be a millionaire inflation-adjusted at retirement. Same for RRSP.

Having a house paid and no more need to save for retirement, a million dollar is definitely enough to retire. And one would have more than a million dollar by maxing TFSA and RRSP every year.


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## afulldeck (Mar 28, 2012)

MrBlackhill said:


> Yup. That's why I don't understand how one would _not_ be able to retire with TFSA & RRSP.


Recency bias. If you look further and start adding inflation you might come to a different conclusion. 



MrBlackhill said:


> Clearly, if one is able to max TFSA every year, one would be a millionaire inflation-adjusted at retirement. Same for RRSP.


It depends on two factors (a) age at which you start saving and (b) your return. Folks > age 50 today do not have a million in the TFSA. 



MrBlackhill said:


> Having a house paid and no more need to save for retirement, a million dollar is definitely enough to retire. And one would have more than a million dollar by maxing TFSA and RRSP every year.


 Again recency bias at play. If your assumption is that you take 40K-60K out per year, that hardly says living it up. Perhaps your prefer to stay at home and read books?


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## afulldeck (Mar 28, 2012)

cainvest said:


> For some maybe, all depends on your retirement needs and plans. I wouldn't say it is required to retire though.


True. Nothing is required to retire. The real question is what type of life do you want to be living? and how much it costs?


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## Eclectic21 (Jun 25, 2021)

MrBlackhill said:


> ... Clearly, if one is able to max TFSA every year, one would be a millionaire inflation-adjusted at retirement. Same for RRSP ... nd one would have more than a million dollar by maxing TFSA and RRSP every year.


Looks to me you have assumptions build in here for a YMMV situation.

Are you really saying someone aged say 60 who is missing out on decades of TFSA contribution room is going to retire with a huge TFSA?

Similarly ... what's your assumption for their income that is generating the RRSP contribution room?


Sure - if they were born after 2009 plus had a high employment income for a long time, it's possible but there are many people I know who aren't going to come close to this. There's just no way with them retiring _this year_, having been granted $81.5K for the TFSA plus years of a small amount of RRSP contribution room being granted.


Cheers


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## cainvest (May 1, 2013)

afulldeck said:


> If your assumption is that you take 40K-60K out per year, that hardly says living it up. Perhaps your prefer to stay at home and read books?





afulldeck said:


> True. Nothing is required to retire. The real question is what type of life do you want to be living? and how much it costs?


The average individual annual salary is just over $56k/yr in Canada for ages 55-64. Taking "40K-60K out per year" would likely put them in line with their current standard of living. They'd also add on their CPP / OAS to their savings withdrawals, maybe another $15k/yr or so.

Guess the avg canadian will just be reading books in retirement?


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## MrBlackhill (Jun 10, 2020)

afulldeck said:


> It depends on two factors (a) age at which you start saving and (b) your return. Folks > age 50 today do not have a million in the TFSA





Eclectic21 said:


> Are you really saying someone aged say 60 who is missing out on decades of TFSA contribution room is going to retire with a huge TFSA?


No, for someone who was able to start contributing to a TFSA at 18. I agree that someone who's 60 this year certainly didn't get the chance to reach a million in TFSA, that's impossible. But kids starting their TFSA now, they can. The issue though is that no one makes enough money to max every year both TFSA and RRSP while owning a mortgage, shortly out of school. But I was replying to the hypothetical situation where one would be able to max them. Maybe I haven't read the first post properly.

If one contributes a fixed $6000 in equities every year for 40 years, not inflation adjusted, one has more than 50% chance of ending with more than $1M inflation-adjusted and more than 90% of ending with more than $500M inflation-adjusted.




afulldeck said:


> If your assumption is that you take 40K-60K out per year, that hardly says living it up. Perhaps your prefer to stay at home and read books?


That's more than enough to live decently and travel a lot! Once you don't have a mortgage to pay, once you don't have to set aside money for retirement, once you don't have kids at home, once you get the government contributions, you don't need much to live very decently!

We make $200k+ as a household, or somewhere around $120k+ after taxes and half of this goes into mortgage, kids, savings, renovations, debts and the remaining half, about $60k is more than enough for both of us to live a great life and travel every year.


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## Plugging Along (Jan 3, 2011)

Eclectic21 said:


> Looks to me you have assumptions build in here for a YMMV situation.
> 
> Are you really saying someone aged say 60 who is missing out on decades of TFSA contribution room is going to retire with a huge TFSA?
> 
> ...


I did a rough calculation which the post was quoted from. Part of my original post with the assumptions. OP wanted to really simple calculations. 




> One would have to max out the RRSP & TFSA EVERY year starting at 18 (when you are first eligible for your TSFA), and you would have to be putting in the RRSP contribution amount too even if you have to defer the RRSP deduction for when you have higher income.
> [*]Retirement age is 65
> [*]Your pre-retirement life style is not subsidized else where (like inheritance or parents, etc) and does not increase
> [*]No inflation






> TFSA - contributing $6000/year for 47 years at 5% would be work just over $1 Mil
> RRSP - using a based even off of $30000 would be $5400/year for 47 years at 5% would be .95 Mil.
> 
> A $2 mil portfolio for someone who makes $30k a year would generate $80K a year.
> ...


The tough part isn't the contribution room, even with on a $30k salary, by maxing all TFSA and RRSP IMMEDIATELY starting when that contribution room is available (18), with a long time horizon and average 5% returns. They could have more in retirement than in their income earning years.

The tough part is how the heck does an 18 year old, low income earner, or someone just starting out contribute the max each AND live. 

This is the piece I am trying to help my kids think through.


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## afulldeck (Mar 28, 2012)

cainvest said:


> The average individual annual salary is just over $56k/yr in Canada for ages 55-64. Taking "40K-60K out per year" would likely put them in line with their current standard of living. They'd also add on their CPP / OAS to their savings withdrawals, maybe another $15k/yr or so.
> 
> Guess the avg canadian will just be reading books in retirement?


No interest in average. Average is the temperature in the center of the herd. Check out What is your monthly income in retirement? there is already a number of folks who are shooting for 15K per month after taxes so greater than 252K per year.


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## afulldeck (Mar 28, 2012)

MrBlackhill said:


> *That's more than enough to live decently and travel a lot! *Once you don't have a mortgage to pay, once you don't have to set aside money for retirement, once you don't have kids at home, once you get the government contributions, you don't need much to live very decently!


De gustibus non est disputandum. Completely a judgement call by you. My tastes are more .... especially since I have sacrificed greatly......


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## cainvest (May 1, 2013)

afulldeck said:


> No interest in average. Average is the temperature in the center of the herd. Check out What is your monthly income in retirement? there is already a number of folks who are shooting for 15K per month after taxes so greater than 252K per year.


Not sure what your point is?

Remember the OP's vague question was can someone retire on maxed RRSP/TFSA alone.


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## cainvest (May 1, 2013)

Plugging Along said:


> The tough part is how the heck does an 18 year old, low income earner, or someone just starting out contribute the max each AND live.


Probably needs to be at least an average income earner over their working lifetime with fairly low living expenses to pull off maxed RRSP/TFSA. There will likely be an offset as well, less saved in early years and more saved in latter years.


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## afulldeck (Mar 28, 2012)

cainvest said:


> Not sure what your point is?
> 
> Remember the OP's vague question was can someone retire on maxed RRSP/TFSA alone.


My point is that and RRSP/TFSA alone is not enough.


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## KaeJS (Sep 28, 2010)

afulldeck said:


> My point is that and RRSP/TFSA alone is not enough.


I agree.

You need more.
If you don't have TFSA/RRSP maxed and a Non-registered as a side account, then you're not having a great retirement or an early one.

Anyone can retire, even without maxing a TFSA or RRSP. But you'd probably have to live in a tiny home and, as one other user suggested, read books for fun...

This isn't to say that maxing a TFSA and RRSP is not an accomplishment, because it is. It just wouldn't be the great retirement lifestyle that I think the majority of people would want or envision.

I am sure many of us on this forum, including myself, could retire right now if we really wanted to sacrifice our lifestyles. I am not willing to do that. I am hoping to have a greater lifestyle in 20 years from now than I do right now.


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## Eclectic21 (Jun 25, 2021)

MrBlackhill said:


> No, for someone who was able to start contributing to a TFSA at 18.
> 
> I agree that someone who's 60 this year certainly didn't get the chance to reach a million in TFSA, that's impossible ...


Which is why it's YMMV. 




MrBlackhill said:


> ... But kids starting their TFSA now, they can. The issue though is that no one makes enough money to max every year both TFSA and RRSP while owning a mortgage, shortly out of school.


They also need to feel the TFSA is important. My fellow university student in the rooming house refused to put any of his more than needed co-op job funds into anything but a kick-*** stereo because "retirement is a life time away - there's no point".




MrBlackhill said:


> ... But I was replying to the hypothetical situation where one would be able to max them. Maybe I haven't read the first post properly.


It may be my bias in that few that I talk to discuss retirement until five years or less to go (when it is much harder to fix any mistakes!!!). I read the discussion as being someone close to retirement which cuts out years of TFSA contribution room.

It would be a youngster ... though it would be an exceptional one. 


Cheers


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## Eclectic21 (Jun 25, 2021)

Plugging Along said:


> ... The tough part is how the heck does an 18 year old, low income earner, or someone just starting out contribute the max each AND live.


YMMV ... I and my friends almost all fit the "how the heck" scenario.

OTOH ... a couple of the guys in the rooming house (software engineers) as well as the actuary likely would have had no problem as their co-op terms paid more than enough. Their full time jobs were starting at $80K in the 1990's with a set schedule of pay increases. Mine was $18K, with no promise of pay increases.

There's also the unconventional types. I can remember a university student being profiled who acted as a bridge tournament official. She didn't say how much but did say it was over $50K a year she was making this way, while attending university full time.


For most though, assuming they are interested in maxing both out so early in life - I expect the bank of mom&pop would have to cover the lions share for several years.


Cheers


*PS*
I would add the three teens who when selling their web site, each pocketed $10 million with a $40K a year job to keep the web site running. Their plans for the money were reasonable so I doubt they needed to max the TFSA and RRSP.


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## ian (Jun 18, 2016)

This is no right answer. Financial situations change over time. Some do well in the market, some have DB's, some have inheritances, others will see significant increases in their earnings potential as the years progress in the form of salary, bonus, stock options/grants,etc. 

The latest stats show the Canadians are on the verge of by far the largest wealth transfer in history. Given the growth in real estate values in certain markets that wealth transfer number can only increase.

This is even before you start on the retirement spend side of the equation.

Could we have the same early retirement as we do without RSPs? The answer is yes. But that answer was unknown to us 30 years ago. 

For others, like my BIL, the answer is no. He retired at 70, has no DB or DC but lives very well thanks to his RSP contributions and investment performance.


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## cainvest (May 1, 2013)

afulldeck said:


> My point is that and RRSP/TFSA alone is not enough.


For you personally ... sure, I can see that. 

For many others though, I'm sure it is enough.


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## Tostig (Nov 18, 2020)

londoncalling said:


> ... I understand this hypothetical situation is quite subjective but what is the likelihood one could retire comfortably(ex. maintain current lifestyle) if they have maxed their RRSP and TFSA do not have any consumer debt and have their home paid off...


The answer is highly likely. However, I think your real question is how to max out the RRSP and TFSA for a comfortable lifestyle when you do have all that debt.

Depending on your RRSP and TFSA growth, you may or may not retire with an improved lifestyle than when you were working.

Let's say you are a current working-poor. Full time cook at McDonald's with minimum wage for 40 years. Your lifestyle may unlikely to be comparable to a middle-class suburbanite but if you still have maxed your RRSP at 18% of your previous year's income and the maximum TFSA, you'l be retiring with the same kind of lifestyle as while you were working at McDonald's without having to work at McDonald's.


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## ian (Jun 18, 2016)

Tostig said:


> The answer is highly likely. However, I think your real question is how to max out the RRSP and TFSA for a comfortable lifestyle when you do have all that debt.
> 
> Depending on your RRSP and TFSA growth, you may or may not retire with an improved lifestyle than when you were working.
> 
> Let's say you are a current working-poor. Full time cook at McDonald's with minimum wage for 40 years. Your lifestyle may unlikely to be comparable to a middle-class suburbanite but if you still have maxed your RRSP at 18% of your previous year's income and the maximum TFSA, you'l be retiring with the same kind of lifestyle as while you were working at McDonald's without having to work at McDonald's.


That is why we have GIS.


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## cainvest (May 1, 2013)

KaeJS said:


> I agree.
> 
> You need more.
> If you don't have TFSA/RRSP maxed and a Non-registered as a side account, then you're not having a great retirement or an early one.
> ...


You must have some expensive designs for retirement, nothing wrong with that BTW. I could easily maintain all my current hobbies with $60k/yr in retirement with no book reading.  Sure, I'll likely spend more on things not really needed just because I can but it won't really improve my quality of life much, if any.



KaeJS said:


> I am hoping to have a greater lifestyle in 20 years from now than I do right now.


Of course you can back load your life with the hopes of a better retirement. Myself, I prefer a more balanced approach ... live very well now and a little better in retirement.


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## londoncalling (Sep 17, 2011)

I tried to keep my initial post fairly vague to allow for others to put their own spin on what would be needed to retire with the intent for the thread not to become another house prices have gone parabolic thread. Good questions.



cainvest said:


> How long have they been saving to RRSP and with what salary?


I suppose it would be different for someone who is near retirement and have maxed out both plans than someone starting today. Some would argue that a certain salary is required to pay off a mortgage, max out rrsp and tfsa. Mathematically that is true but based on geography it that number differs greatly. 

Although income is a factory I felt that if one could manage to maximize the plans on any income then the premise is more about savings than earnings. I believe the intent of both vehicles is to provide mechanisms to save for retirement although both can be more than that via HBP and regaining contribution space with the TFSA. Maybe that is true and maybe it isn't. 



cainvest said:


> What are their current annual living expenses?





cainvest said:


> What are their avg yearly returns on RRSP/TFSA investments?
> Quick answer though ... one _could_ easily retire on maxed RRSP/TFSA/CPP/OAS with a paid for home.


Rate of return would certainly matter. There is already some debate on if the balanced portfolio (60,40 etc.) is still relevant. Recent moves by the B of C and Fed may have shown why diversification and allocation affect returns.

I appreciate that more info is needed for a proper answer just as much as the quick answer. To be honest I don't if a paid home, max RRSP and max TFSA is/is not enough to maintain lifestyle after working years. Perhaps there are too many variables.

I will try to catch up to this thread as I have time. Thanks to all who have posted thus far.


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## londoncalling (Sep 17, 2011)

like_to_retire said:


> That's an understatement. Income splitting in retirement is a huge tax advantage for a couple while the single person gets nothing. Quite unfair.
> 
> ltr





ian said:


> The amount of that advantage depends on respective incomes. I believe our tax saving for income splitting this year was only $1500 or so.
> 
> The far bigger tax advantage for us has been spousal loans.


I think income splitting has less advantage than it once did. A clear differentiation would be two income households vs a previous era of a primary breadwinner. At least from my own peer group the difference in spousal income is not that large compared to those older than me. I understand that my experience is not the same as others. I hope as we move closer to gender wage parity the discrepancy will become even less relevant. I realize this will take a lot more time but am glad to see progress being made. 

I agree that dual income households have an advantage over single income households. Obviously DINKS have the greatest advantage and single income parents the least.


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## cainvest (May 1, 2013)

londoncalling said:


> Perhaps there are too many variables.


Indeed there are, way too many.

I know of people living off less than $1M in savings and have been for many years after paying off their home. Sure their lifestyle is frugal but they are enjoying life much more than when working.

On the other side of the coin I have a friend who can't afford to retire. He spends more on booze each year than I do on auto insurance for three vehicles! He hasn't even paid off his home yet.


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## londoncalling (Sep 17, 2011)

TomB16 said:


> It became clear to me 30 years ago, people who understand how to optimize their tax load and have their spending under control will do far, far better than people who do not. Lots of great ideas in this thread.
> 
> If I had $600K in an RRSP and $200K in a TFSA, I could retire tomorrow. I wouldn't, of course. I would wait until it is a multiple of that because my financial perspective is modelled on the Cowardly Lion from Oz.
> 
> ...


This was the sentiment of the discussion I was engaged in that sparked my post. Previous generations were able to retire with the tools available but future ones won't was the view point provided to me. I am not sure if that statement was true and is likely more about individuals and circumstance than the savings plans themselves. I am hopeful that I won't qualify for GIS. I would like to see it revised to address what it is for. Makes little sense that high net worth people can qualify for the same program as seniors paying rent and living a low income lifestyle. I don't blame those who leverage the mechanism as I do the mechanism itself. 

In reality geography plays a huge role. As much as I would enjoy life in a booming metropolis, it would come with some large tradeoffs. Housing affordability being the biggest but you are correct my fellow stubblejumping friend manyt things on the prairies are cheaper.


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## TomB16 (Jun 8, 2014)

It's been over a decade since I heard the first story story of people with $2M+ in their RRSP. I used to work at a financial institution and occasionally spent time with the folks in retail.

There have been a few more similar stories, since then.

The stories are nearly the same. Couple maxes out RRSP contributions, every year. Couple buys a single, broad market, index every year. 25 years later, couple has a huge amount of money. No balancing. No diversification. No bonds.

I don't know what indices were used in any of these cases. The retail folks didn't share that but VFV would fit that scenario.


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## like_to_retire (Oct 9, 2016)

londoncalling said:


> I agree that dual income households have an advantage over single income households.


An understatement. Sure, just as you and member ian said, it depends on the couple's respective incomes. But, as a single person, if you make $100K and your married neighbour also makes $100K with a partner who has no income, the single person pays tax on $100K and the married guy pays tax on $50K. A massive difference.

How is this fair?

ltr


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## TomB16 (Jun 8, 2014)

londoncalling said:


> This was the sentiment of the discussion I was engaged in that sparked my post. Previous generations were able to retire with the tools available but future ones won't was the view point provided to me. I am not sure if that statement was true and is likely more about individuals and circumstance than the savings plans themselves.


People will be able to retire using only RRSP and TFSA well into the future. That doesn't mean everyone will be able to do it. People will have to meet the tax law half way by actually saving money and learning to be happy within their means.

Spenders and people riddled in debt should continue to whine because they are going to need a whole lot of money from the government to retire.

This isn't new. People who can manage their money have always had a massive life advantage over people who have no self control. I know lots of people older than me who retired on nothing and lived out their remaining years with little more than TV and cigarettes to show for their life.


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## TomB16 (Jun 8, 2014)

One last rant for today....

I know tons of people who are gambling away their RRSP and TFSAs at discount brokerages. They are trading, scalping, and doing all sort of things they don't seem to fully understand.

What I consider unforgivable is the government will somehow bail these people out and save them from the wreckage of their compulsions.

I read about a lot of active trading on this forum, and others. Balancing and moving money around has never worked well.

My grandparents could buy Bell or AT&T, knowing they would be fine in retirement. That still holds. If you can find an honest company that is well run (there are still a few out there), it will take care of you. You buy it and consider it a partnership. You don't sell when it goes up. You don't sell when it goes down. You sell because management demonstrates lack of integrity, regardless of the stock performance. The point being, a well run business will take good care of you.

Anyone who thinks a stop-loss order is a good idea, is not going to do as well in retirement as someone who is an investor who wants to own companies.


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## londoncalling (Sep 17, 2011)

Tostig said:


> The answer is highly likely. However, I think your real question is how to max out the RRSP and TFSA for a comfortable lifestyle when you do have all that debt.
> 
> Depending on your RRSP and TFSA growth, you may or may not retire with an improved lifestyle than when you were working.
> 
> Let's say you are a current working-poor. Full time cook at McDonald's with minimum wage for 40 years. Your lifestyle may unlikely to be comparable to a middle-class suburbanite but if you still have maxed your RRSP at 18% of your previous year's income and the maximum TFSA, you'l be retiring with the same kind of lifestyle as while you were working at McDonald's without having to work at McDonald's.


To be completely honest I am not sure what the real question was and I started the thread. 
I knew this thread would head in several directions and there is definitely value in that. I did provide the stipulation of maintaining lifestyle without considering the point provided by others that some are sacrificing current lifestyle for a greater lifestyle in retirement. 

I guess the entire premise of the conversation I had was that your average working schmuck can/cannot afford to do what they do now when they are no longer working. I assume that if you can afford to max the plans and pay off a home as well as take a vacation now and again you should be able to continue to do so in retirement. 

If you are correct in your synopsis then I guess the programs serve their intended purpose for the majority that are able to utilize them.


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## like_to_retire (Oct 9, 2016)

cainvest said:


> You must have some expensive designs for retirement, nothing wrong with that BTW. I could easily maintain all my current hobbies with $60k/yr in retirement with no book reading.


So, is book reading in retirement considered a bad thing, because I do a lot of book reading?

ltr


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## TomB16 (Jun 8, 2014)

Speaking of compulsions... I can't stop.  

One of the things I don't see mentioned is that maxing out RRSP and TFSA contributions puts a serious dent in expendable income for all but the highest earners. I had to stretch to max these out, most years.

So, these contributions teach us to live on less because they prevent our lifestyle from consuming all of the money.

Learning to be happy with less is learning to be happy.


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## MrBlackhill (Jun 10, 2020)

afulldeck said:


> If your assumption is that you take 40K-60K out per year, that hardly says living it up.





afulldeck said:


> De gustibus non est disputandum. Completely a judgement call by you.


No. It's a judgement call by you. You should've written "If your assumption is that you take 40K-60K out per year, that hardly says living it up *according* *to my personal needs and tastes*."

Median income is around those numbers $40k-$60k, so it's not a judgement call by me, it's simply stats. If a median income should allow people to have kids and save for retirement, then that same median income should be enough once they retire with no kids at home, no need to save anymore for retirement, plus the government contributions.


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## cainvest (May 1, 2013)

like_to_retire said:


> So, is book reading in retirement considered a bad thing, because I do a lot of book reading?


It appears some others may think so ... I'm fine with it.


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## TomB16 (Jun 8, 2014)

Perhaps a question that will cast some light on, "Is the RRSP retirement mechanism sufficient?" is this:

What if the government doubled the RRSP contribution headroom to 36% to the same maximum of $27,830? How would that change the dynamic?


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## AltaRed (Jun 8, 2009)

like_to_retire said:


> An understatement. Sure, just as you and member ian said, it depends on the couple's respective incomes. But, as a single person, if you make $100K and your married neighbour also makes $100K with a partner who has no income, the single person pays tax on $100K and the married guy pays tax on $50K. A massive difference.
> 
> How is this fair?
> 
> ltr


That is not really true for the neighbour unless the neighbour made the most of spousal loans, spousal RRSPs and to the extent there is pension income post retirement, up to 50% of pension split. Few couples would have taken enough advantage of spousal opportunities to be in a $50k/$50k scenario.

This is a position/thought/perspective you take on a regular basis but seldom is it quite the way you think.


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## off.by.10 (Mar 16, 2014)

Plugging Along said:


> The tough part is how the heck does an 18 year old, low income earner, or someone just starting out contribute the max each AND live.
> 
> This is the piece I am trying to help my kids think through.


It's simple: you live somewhat below your means. I've been maxing out my RRSP for as long as I've been doing real work, except when I used the HBP. I paid that back in about 4 years. It's never been particularly difficult. And no, I don't have crazy high income. Still a good distance from 6 figures after two decades working.

I don't think it would be very realistic on minimum wages (some expenses you just can't shrink that much) but it's definitely possible for a large number of people.


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## Plugging Along (Jan 3, 2011)

off.by.10 said:


> It's simple: you live somewhat below your means. I've been maxing out my RRSP for as long as I've been doing real work, except when I used the HBP. I paid that back in about 4 years. It's never been particularly difficult. And no, I don't have crazy high income. Still a good distance from 6 figures after two decades working.
> 
> I don't think it would be very realistic on minimum wages (some expenses you just can't shrink that much) but it's definitely possible for a large number of people.


I ran the calculation starting at 18 when incomes could be pretty low. 

My rough example was based on a minimum income of $30000 (gross) a year. For someone making that amount to be able to put in $6000 for the TFSA and $5400 for their RRSP yearly, that leaves them with only $20600 a year for living. Add in the small mortgage as that was a requirement for OP's assumptions, and you don't have much of a standard of living.


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## TomB16 (Jun 8, 2014)

Plugging Along said:


> My rough example was based on a minimum income of $30000 (gross) a year. For someone making that amount to be able to put in $6000 for the TFSA and $5400 for their RRSP yearly, that leaves them with only $20600 a year for living.


That was the point of my question in #53. You could double the RRSP deduction and it wouldn't make much difference.

Assuming 36% RRSP contribution limit:

A guy making $80K gross is going to choke on $27,830 RRSP per year and $6000 TFSA per year. He is going to pay tax on 52170 of maybe 25% blended, so now he $39,127 to live on or $33,127 if he maxes his TFSA. You end up with a guy making $80K, living on $2750 per month. That is, if his company doesn't subtract money for benefits, union fees, or whatever. Who can do that?


At the current 18% contribution limit:

Under the current rules, 80K will allow a $14,400 contribution, leaving $65,600. His blended tax rate is probably closer to 30% so that leaves him with $45,920. If he cares to max out his TFSA, he is left with 39,920. Now he has $3325/mo to live on, again assuming no benefits, union dues, etc. That's going to be tough, unless he lives like a university student but who wants to do that on $80K/year? Well, me but that's another story....


It would be pointless to increase the RRSP contribution ratio. So, if enabling more tax deferred saving won't do the job, we are talking about social assistance for retirees. I'm sure that would be on the table for the current administration but it makes me furious.

... and then there is the problem of financial "advisers" mis-stating their performance by quoting lifetime returns, instead of charting annual returns. If people would consider what works and what does not, they would see there are ways to stump up a nice nest egg by saving $$10~15K per year for 30 years. You just can't give 2% to some dude who under performs the market like it's his job.


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## ian (Jun 18, 2016)

like_to_retire said:


> An understatement. Sure, just as you and member ian said, it depends on the couple's respective incomes. But, as a single person, if you make $100K and your married neighbour also makes $100K with a partner who has no income, the single person pays tax on $100K and the married guy pays tax on $50K. A massive difference.
> 
> How is this fair?
> 
> ltr


It has nothing to do with fairness.

It is all about politics, ie votes.

No different than some other Provincial or Federal programs/regulations.

Premier Ford did not cancel car reg fees because he wants to help people in the Province. No different than when Premier Klein sent each Albertan a $100. cheque.

One thing in common.....ALWAYS happens just before an election.

Why on earth do you think Harper brought in pension income splitting for seniors?? Seniors have the highest demographic voter turnout.


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## londoncalling (Sep 17, 2011)

ian said:


> This is no right answer. Financial situations change over time. Some do well in the market, some have DB's, some have inheritances, others will see significant increases in their earnings potential as the years progress in the form of salary, bonus, stock options/grants,etc.
> 
> The latest stats show the Canadians are on the verge of by far the largest wealth transfer in history. Given the growth in real estate values in certain markets that wealth transfer number can only increase.
> 
> ...


I agree that the question was very hypothetical. Your point about having answers to outcomes 30 years out is indeed unknown. Many do not put much thought into their retirement as forum members here are somewhat of an anomaly in that thinking. 

As an aside, I have given consideration previously to the upcoming wealth transfer for Canadians due to large inheritances. Not everyone will participate in this transfer and those that do will not all be to the same extent. I am not saying that they should but again trying to highlight that there are always differences.


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## off.by.10 (Mar 16, 2014)

TomB16 said:


> Now he has $3325/mo to live on, again assuming no benefits, union dues, etc. That's going to be tough, unless he lives like a university student but who wants to do that on $80K/year? Well, me but that's another story....


 when I was a university student, some two decades ago, I lived on $1k per month. Including tuition. Granted, there's been inflation, but $3k a month is very nice student life in most places.


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## marina628 (Dec 14, 2010)

My husband and I both started our RRSP at age 18 with only $1000 -$2000 a year. I stopped contributing to mine years ago while my husband at one point was faithfully putting in his max contribution as he had no private pensions just what we have saved. You never know what will happen but we find ourselves in a situation where no matter what we do our income is going to be higher in retirement than when he was working. It is a good problem to have I suppose ,he took a early retirement from his day job and year by year we will see what occurs .He is taking the maximum t4 income from our corporation for the cpp down the road ,I am 55 and he is 54 .In 2022 I will only take dividends plus whatever my non registered investments earn for me. At age 59 I will have to start pulling down some of the RRSP but will also then start taking sizable dividends from My corporation.


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## Eclectic21 (Jun 25, 2021)

like_to_retire said:


> ... But, as a single person, if you make $100K and your married neighbour also makes $100K with a partner who has no income, the single person pays tax on $100K and the married guy pays tax on $50K ...


Can you explain how the transfer of taxable income to a spouse happens?

I'll check with my co-worker. I'm confident he will say that his software engineer salary about about $100K was almost all on his tax return while his wife's selling paintings for about $10K went on her tax return. Dad said the same thing for stay at home, almost zero income mom.

I'm not sure what they and their accountant missed.

Unless maybe "income" is pension income that can be split but does not apply for a long time?


Cheers


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## like_to_retire (Oct 9, 2016)

Eclectic21 said:


> Unless maybe "income" is pension income that can be split but does not apply for a long time?


I'm definitely referring to retired pension splitting.
In terms of strategies for Canadians entering retirement, retirees can use pension income splitting to give their spouse or common law partner up to 50% of their eligible pension income.

ltr


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## TomB16 (Jun 8, 2014)

marina628 said:


> My husband and I both started our RRSP at age 18 with only $1000 -$2000 a year. I stopped contributing to mine years ago while my husband at one point was faithfully putting in his max contribution as he had no private pensions just what we have saved. You never know what will happen but we find ourselves in a situation where no matter what we do our income is going to be higher in retirement than when he was working.


I thought you were self employed? If so, I don't understand why you would continue contributing to your RRSP, unless you drew a salary instead of owner dividends.

If you would consider shedding some light on this, I would appreciate it.


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## marina628 (Dec 14, 2010)

TomB16 said:


> I thought you were self employed? If so, I don't understand why you would continue contributing to your RRSP, unless you drew a salary instead of owner dividends.
> 
> If you would consider shedding some light on this, I would appreciate it.


 Yes we always took t4 income to get maximum CPP ,We also take some dividends.


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## TomB16 (Jun 8, 2014)

Got it. Thank you for the clarification. 

I always took dividends so my CPP is going to be pretty thin, when I reach that age.


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## marina628 (Dec 14, 2010)

TomB16 said:


> Got it. Thank you for the clarification.
> 
> I always took dividends so my CPP is going to be pretty thin, when I reach that age.


We pay our share plus the business share but with no Pension we thought it was important to do many years ago ,it is not as big of a deal right now .I had 11 years of no income though due to my accident ,recovery etc so from 2007 to present catching up .


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## bigmoneytalks (Oct 3, 2014)

marina628 said:


> We pay our share plus the business share but with no Pension we thought it was important to do many years ago ,it is not as big of a deal right now .I had 11 years of no income though due to my accident ,recovery etc so from 2007 to present catching up .


Great post. I've been wondering myself. My in-laws have pensions no TFSA no RRSPs. 25 years of service both retired.at age 57 and get 70k each. They had modest incomes when they worked 80-100k.

Those with similar incomes if they invest in RRSPs and TFSA and bare all the risk of doing it themselves, I don't see them getting to a portfolio size where they can retire at age 57 drawing 70k income...

Point all of this? You have a pension? You won the lottery. Shame they are disappearing...


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## londoncalling (Sep 17, 2011)

bigmoneytalks said:


> Great post. I've been wondering myself. My in-laws have pensions no TFSA no RRSPs. 25 years of service both retired.at age 57 and get 70k each. They had modest incomes when they worked 80-100k.
> 
> Those with similar incomes if they invest in RRSPs and TFSA and bare all the risk of doing it themselves, I don't see them getting to a portfolio size where they can retire at age 57 drawing 70k income...
> 
> Point all of this? You have a pension? You won the lottery. Shame they are disappearing...


If the question is being posed to the OP, I can provide the following:

I have mixed thoughts on if current and future generations are better off than the generation previously. I do not mean developed nations being better off because of technology and realm of possibility. I wonder if the average person is in a better position than the previous generations. Again this is subjective. From my own experience I have managed to do well but it came with significant cost. I spent the past decade working non stop to get to where I am (50-60 weeks), working on vacation etc. I do not intend to do so until I retire and will be shifting to a less intense career path over the next while. 

As a comparison to the narrative shared about your in laws. This is the crux of my question. How likely is their experience, which I am led to believe enabled many of their generation to retire comfortably, to occur today and in the future. The reality today is the majority do not enter the work world and toil for the same company for the bulk of their career as was once common. There are many reasons and we could speculate as to why businesses and workers have less loyalty to one another. 

I do not have one giant DB pension but several pensions and none of them COLA'd. Perhaps this is better from a risk perspective to be diversified. I do consider myself fortunate, to have them but I also put money away for my retirement when I did not have them. I also have money in RRSP and TFSA as I would hate to experience a pension fund solvency issue where I see my pension reduced. I am not sure if my next workplace will have a pension or not because I haven't made that switch but I am certain I will make less than I do currently.


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## Eclectic21 (Jun 25, 2021)

like_to_retire said:


> I'm definitely referring to retired pension splitting.
> In terms of strategies for Canadians entering retirement, retirees can use pension income splitting to give their spouse or common law partner up to 50% of their eligible pension income.


Okay ... so it's not a broad based, whole sale transferring of all type of income for all ages.

I'll have to check. 

IIRC, after dad's death - mom had to report all income for much longer than they were able to split the income so YMMV.


Cheers


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## Eclectic21 (Jun 25, 2021)

bigmoneytalks said:


> ... Those with similar incomes if they invest in RRSPs and TFSA and bare all the risk of doing it themselves, I don't see them getting to a portfolio size where they can retire at age 57 drawing 70k income ...
> 
> Point all of this? You have a pension? You won the lottery. Shame they are disappearing...


Maybe you are fixed on a special pension with someone who makes top dollar that has many years of service?

For one company I worked for, the pension was a DC one that was 1% of salary, matched by 1% from the company that one had to decide between four funds to invest in. Someone who joined the company two months earlier was in DB pension that put in 3% of salary for a payout formula.

I'm pretty sure that if I said "nurse", most would assume a good DB pension. When my friend who works at a LTC home had me review the pension newsletter, it said "x dollars pension for x hours worked" but then in the fine print said "if investment income is too low, the pension paid may be cut". It seems to be some form of hybrid that has a conditional formula for payout while the pensioner has no control of the investments but still shoulders all of the investment risk. 


Cheers


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## londoncalling (Sep 17, 2011)

@Eclectic21's example is quite common. Many pensions are changing as longevity risk is now a major factor in these plans. I know of several plans that have 3 different pay models based on when one became vested. The earlier plans were much better but not sustainable. Newer members see lower benefit with higher contribution rates. Even with great returns over the last decade many plans are faced with a massive uptake in retirees and withdrawals. Like it or not these plans will do anything to avoid reducing retiree benefits sometimes at the expense of future retiree's payout. I am talking about DB plans specifically. DC plans are very similar to a managed RRSP where everyone has their own portfolio account balance. Don't get me wrong a good DB plan provides one with an almost guaranteed income for life. Some plans accounted for the boomer exodus with their solvency and payout guidelines. Like most things generally speaking pensions are wonderful but individual pensions vary as to how good they actually are.

People do not pay close attention to what their pension actually entails. Ask the average person to explain how their plan works and I am almost certain they have no idea. One also has to remember that pension contributions eat up RRSP contribution space. Depending on age and circumstance this may not be a great thing. For example, as far as I know a DB plan does not allow one to take advantage of the HBP from those contributions. Many DC plans as well. The only way that I was aware of was a group RRSP which is quite an uncommon pension set up.


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## Italicum (Feb 10, 2017)

TomB16 said:


> A lot of less investment savvy people seem to think RRSP equals retirement. Certainly, everyone here are more sophisticated but the general public is shockingly unaware of financial mechanisms which affect them most.
> 
> RRSP is just a tax optimization mechanism. Having $4M in an RRSP wouldn't optimize anything. You would have to pull out so much every year, you would be in the top tax bracket, negating all value of the deduction. Even $2M is way too much. Depending on an individual's other income, it doesn't make much sense to pump that balloon beyond perhaps $1m. Maxing out an RRSP is probably not the best strategy for more affluent people, IMO.


Yes, I agree with this. I stopped contributing to my RRSP 8 years ago when it reached 500k. It doubled on its own since then, while still building a 5 year GIC ladder within it. This has also allowed me to optimize drawings from my small business by switching from mostly salary to mostly dividends.


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## Italicum (Feb 10, 2017)

afulldeck said:


> My point is that and RRSP/TFSA alone is not enough.





KaeJS said:


> I agree.
> 
> You need more.
> If you don't have TFSA/RRSP maxed and a Non-registered as a side account, then you're not having a great retirement or an early one.
> ...


A bit extreme and generic, with all due respect: My RRSP + TFSA are well over 1mil. A quick look at online calculators tell me that with that amount I could withdraw in excess of 80k/year for 20 years (assumptions: 3% inflation, which looks so passe' these days; 8% average return, which I handily have exceeded on average for over 20 years). I have sizable equity in my small business but as a single person with a paid for home, I know MY retirement expectations can be met by RRSP + TFSA (80k + OAS + CPP) at 65. Bonus: if they could not be met, I would adjust my expectations. Within reason, I treat both side of the equation as variables that can be adjusted. 

P.S. I would not have posted this reply, if your post read 'I need more'.


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## cainvest (May 1, 2013)

Italicum said:


> I know MY retirement expectations can be met by RRSP + TFSA (80k + OAS + CPP) at 65.


And that's the key to the RRSP/TFSA question ... expectations.

For me I can't think of a time (home purchase not included) I spent $80k in one year, even the years I purchased a brand new vehicle!


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## KaeJS (Sep 28, 2010)

cainvest said:


> And that's the key to the RRSP/TFSA question ... expectations.
> 
> For me I can't think of a time (home purchase not included) I spent $80k in one year, even the years I purchased a brand new vehicle!


Crazy...

My expenses are about 70k a year. No new vehicles!


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## MrBlackhill (Jun 10, 2020)

KaeJS said:


> My expenses are about 70k a year


What kind of luxury lifestyle do you have to have so many expenses?

With $120k net for the household 2 adults 1 baby, we're able to pay the mortgage, taxes, maintenance, etc. totalizing $50k, then save $30k or more, then pay for the baby's expenses, then eat healthy, then travel abroad two weeks or more, then pay for other weekly/monthly activities and then I don't even know what more we could do. And we have a car. And I also have a motorcycle. Oh, and we have two dogs. And one is sick and cost about $3k a year for treatment.


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## KaeJS (Sep 28, 2010)

MrBlackhill said:


> What kind of luxury lifestyle do you have to have so many expenses?
> 
> With $120k net for the household 2 adults 1 baby, we're able to pay the mortgage, taxes, maintenance, etc. totalizing $50k, then save $30k or more, then pay for the baby's expenses, then eat healthy, then travel abroad two weeks or more, then pay for other weekly/monthly activities and then I don't even know what more we could do. And we have a car. And I also have a motorcycle. Oh, and we have two dogs. And one is sick and cost about $3k a year for treatment.


I don't live a life of luxury. Things just add up.

Car insurance. Mortgage. Bills. Food. Etc.

My non-negotiable bills are 3500/month.
That's non-negotiable and doesn't include things like entertainment. That's almost 40k a year right there...


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## MrBlackhill (Jun 10, 2020)

KaeJS said:


> That's non-negotiable and doesn't include things like entertainment. That's almost 40k a year right there...


So you have the remaining $30k for entertainment? That's luxury to me!


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## KaeJS (Sep 28, 2010)

MrBlackhill said:


> So you have the remaining $30k for entertainment? That's luxury to me!


I don't think that's a life of luxury... It's not a bad life, but it's not a life of luxury.

After I add in dining out, beer, entertainment, miscellaneous items, new tires or oil changes or repairs, repairs for the house, gifts and Christmas and birthdays, etc..

I wouldn't say it's a life of luxury. I'm not "poppin bottles at da club".

But you're right - it's not a bad life. =)


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## cainvest (May 1, 2013)

MrBlackhill said:


> So you have the remaining $30k for entertainment? That's luxury to me!





KaeJS said:


> I don't think that's a life of luxury... It's not a bad life, but it's not a life of luxury.


I'd say $30k on entertainment is an awful lot but we each have to pay for the lifestyles we enjoy.


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## TomB16 (Jun 8, 2014)

cainvest said:


> I'd say $30k on entertainment is an awful lot but we each have to pay for the lifestyles we enjoy.


If "entertainment" includes travel, that seems about right to me. If it doesn't include travel then I'm with you. That's ridiculous.


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## TomB16 (Jun 8, 2014)

It seems to me, the elephant in the room is someone who declares TFSA and RRSP to be insufficient for retirement either needs to have a big amount of unregistered wealth saved up or they need to shut the hell up. If someone doesn't save enough to max out their registered accounts or if they suck at investing to the point where they have made less than 5% lifetime CAGR, they need to accept the fact they are incompetent and need to learn to live on less because that is the cost of being inferior.

I sympathize with these people but only to a limited extent. I worked like a moron for decades, saved every last penny, and was always hustling, learning, and experimenting with different ideas. I've done well but I haven't always done well. There were plenty of hard lessons mixed into that education.

I've noticed the people who indicate they are going to need many millions to retire on because they have to live an executive lifestyle tend to be the same people who make 40% per quarter with their stock market gambling and hyper trading. When people tell me how much they make, and it's always a moronic exaggeration, I usually reply, "Great! You should have no problem funding one of the best retirements around in the next couple of years! "


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## londoncalling (Sep 17, 2011)

There are people that have done exceptionally while through either superior skill and knowledge, timing, luck or any combination thereof. However, they are few and far between. Most likely started with more financial help than they would care to admit as well. I am not wired to become one of those people. I am not risk averse enough to take that chance and have made peace with it long ago. I am also not one that sits and dreams about what they would do if only they had X millions in their bank. I have done well for myself and am comfortable with what I have but it did come with a lot of sacrifice. Perhaps at the cost of missing out on a few other things in life. But I did so of my own volition and am content with how it has turned out. I am not quite at FIRE and am now starting to wonder if It is worth the effort to devote 110% to "cross the finish line" in a few years or take the "foot off the throttle" and coast to the end.


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## Eclectic21 (Jun 25, 2021)

londoncalling said:


> @Eclectic21's example is quite common ...


If you mean the hybrid pension for the LTC nurse, I don't believe it is common. The last I checked the numbers by pension type, hybrid as well as multiple employer plans were far fewer than a DB or DC plan.



londoncalling said:


> ... I know of several plans that have 3 different pay models based on when one became vested.


Odd ... the ones I know of changed what each year of service granted the pensioner. So a long term employee might have fifteen years of the first formula then ten years of the second formula and finally eight years of the third formula. Another employee might have five years of the second formula and twelve years of the third formula.

Or the other one I experienced was that those who were employed up to a certain date have a DB pension while those after that date have to be manager or above to have a DC pension.

Vesting is less and less of an issue as most jurisdictions have switched from a time period (usually two years) to immediate vesting.


There are those who have posted on CMF who say their DB pension had employer only contributions with basically the same pension credits as the plans I was in but I had to contribute as well as the employer. IOW, lots of variation.




londoncalling said:


> ... People do not pay close attention to what their pension actually entails. Ask the average person to explain how their plan works and I am almost certain they have no idea.


Sure ... though a couple of people I talked to tried to get their pension info but they employer and union would not provide it.




londoncalling said:


> ... One also has to remember that pension contributions eat up RRSP contribution space. Depending on age and circumstance this may not be a great thing ...


The example of a good thing is my co-worker who was set to leave the DB pension just to have more RRSP contribution room each year. I didn't think he would follow my suggestion of modeling what the RRSP contribution room might do for him versus staying in the pension. To my surprise, he came back months later to say his modeling had him running out of RRSP retirement funds in less than half the ten year guarantee period of the pension. He figured that big picture, he was better to stay in the DB pension.


Cheers

*PS*
One of the many examples of not paying attention to the pension was the co-worker in the "Should you switch from DB to DC pension" presentation by the company. When the slide went up that best case in the DB pension was 60% of salary (with many years of service) there was a gasp and shocked "You mean I won't get 100% of salary in retirement?"

Like me, the presentation was a waste of time as she was below manager so there was no alternative to the DB pension.


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## MrBlackhill (Jun 10, 2020)

Today I've stumbled upon an article and I found it interesting, surprising.

It's an article where specialists reply to questions.

A 65-year old woman was wondering if she had enough to retire. She has:

$415,000 in her RRSP
$60,000 in her TFSA
Doesn't own a house
Debt free
She's traveling every year and plans to continue travelling, but maybe not when she'll be 90.

Her cost of living as a retiree is estimated to $35,000.

She lives in Montreal, in a 2-bedroom apartment at $800 and the owner recently renovated without playing the card of kicking her out or raising her rent like crazy.

The specialist (a financial planner and tax expert) estimates the QPP (Quebec Pension Plan) to $13,400 and the OAS to $7,800 (if she waits 70, then they'll be $17,700 and $10,600). With a net return of 4% and long term average inflation of 2.1%, she'd be out of money at 96 years old, and she'd still have a bit more than $200,000 at 90.

Interesting where only half a million in registered accounts can get you.

All that being said, I hope I won't have to wait to be 65 to retire.


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## cainvest (May 1, 2013)

MrBlackhill said:


> She lives in Montreal, in a 2-bedroom apartment at $800 and the owner recently renovated without playing the card of kicking her out or raising her rent like crazy.


I'm suprised one could get a 2 bedroom apartment for $800, that seems really cheap.


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## MrBlackhill (Jun 10, 2020)

cainvest said:


> I'm suprised one could get a 2 bedroom apartment for $800, that seems really cheap.


Note that prices in Quebec are much lower than Ontario or BC.

With rent control, there are some people who lived 20, 30, 40 years or more in the same apartment and renting at surprisingly low prices.

I used to live in a 200 apartment building. They don't kick out people for renovations. Obviously though, they hope some people will move out so they can do huge renovations and increase rents. But in that building there were quite a few people in their 60s, 70s and even 80s renting at insanely low prices compared to the market. They've lived there almost all their lives. I lived there 5 years and each year my rent increase was below 2%. I've heard of people renting at $600.

When I bought my duplex in 2019, the tenant was paying less than $1,000 for the 3-bedroom apartment. Luckily for me, he was moving out. I increased rent by 30% (to a price a bit below market price) and yet people coming to visit were all saying it was cheap rent and never even wondered what was the previous tenant paying (which should normally be declared). A win-win situation, I was happy to increase rent when I bought, they were happy to get a cheap rent compared to the market. I still have the same tenants, which are renewing for the fourth year. It's the first time I give them a rent increase.


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## Plugging Along (Jan 3, 2011)

cainvest said:


> I'd say $30k on entertainment is an awful lot but we each have to pay for the lifestyles we enjoy.





MrBlackhill said:


> What kind of luxury lifestyle do you have to have so many expenses?
> 
> With $120k net for the household 2 adults 1 baby, we're able to pay the mortgage, taxes, maintenance, etc. totalizing $50k, then save $30k or more, then pay for the baby's expenses, then eat healthy, then travel abroad two weeks or more, then pay for other weekly/monthly activities and then I don't even know what more we could do. And we have a car. And I also have a motorcycle. Oh, and we have two dogs. And one is sick and cost about $3k a year for treatment.


30K may be a lot, but if you have the money, then it's meant to be enjoyed. It also depends on what one consider 'entertainment'. I believe that this number was just the 'unnegotiable' portions of his monthly expenditures. 

Once someone doesn't have a mortgage, there isn't that much is 'unnegotiable'. So food, shelter, water, and clothing aka taxes, insurance, utilities, basic groceries, basic transportation (maybe car payment, public school fees/child care (if you have kids), medical stuff even though some of it can be deferred and negotiated. 

Everything else is really negotiable. Negotiable doesn't mean fully discretionary or luxury spending. Childcare type, Activities for family, type of schooling/child care(private vs. public), type of groceries, renovations, are all choices. If we take out those, I think we would all find we have more negotiable items than what we think. 

These few posts had me really thinking about how our views on how much we need for retirement really changed through the life stages. I think when we are younger, we are tying to balance establishing ourselves as adults, families and spending alot more money. There is no shortage of what you can spend on when you leave home, or when you have kids. Then as we accumulated the 'stuff' we wanted (could be house, renovations, cars, whatever, we start to see that it's really the activities and memories. (some figure this out earlier than others). The 'memories' or moment come at whatever price one is willing to pay (different for everyone). Then as we get older and the kids are out of the house (still waiting for that) we realize we don't really need to buy much. and when you take out the savings for the future, the cost of working, and that we just don't have the same interests in spending the same amount money and you can do with alot less. 

I used to think I needed millions when I retired, now I think I will be fine with a couple of million and that's for a fairly stress free retirement that considers worst case that both my spouse and I end up in expensive long term care facilities.


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## cainvest (May 1, 2013)

Plugging Along said:


> 30K may be a lot, but if you have the money, then it's meant to be enjoyed.


Totally agree, if you have the money, spend it if that makes you happy. I have friends that spend more on socks than I do on my car insurance. I just think it's a point to bring up when some claims it's tough living and but yet has significant "discretionary or luxury" expenses.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Interesting where only half a million in registered accounts can get you.


Notice though, it comes down to living expenses. In your example, this woman only needs 35K a year. In Canada, that's pretty lean (for a renter).

This speaks to how important spending patterns are, something Mr Money Mustache and FIRE people really emphasize.

I have a friend who tells me he needs *many* millions of $. He's about the same age, also single. When I told him that I live on 38K a year he said -- "that's just my rent!". He's a single guy who _rents an entire house_, which sits mostly empty, but he enjoys stretching his legs.

I don't know his total living expenses but given his taste in housing, upscale food, luxury hotels and other luxury items, I'm sure he spends at least 2X my annual expenses!

If he wants to retire early (no CPP) he's going to need $2 to $3 million, by his estimate. It's just the reality based on the lifestyle he wants.


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## HappilyRetired (Nov 14, 2021)

afulldeck said:


> Again recency bias at play. If your assumption is that you take 40K-60K out per year, that hardly says living it up. Perhaps your prefer to stay at home and read books?


My wife and I live very comfortably on $60k a year. We have a paid off house, just bought a cabin, and spend 3 months every winter in Mexico. We could get by on $40k a year but we have enough so we spend a little more.

I know people with expenses of $70k - $80k a year but a lot of that is excess or waste. Nothing wrong with that if you can afford it but if you want to retire on modest means you have to be smart and get rid of unnecessary expenses:


sell the 2500 sq ft house and downsize to 1200
stop leasing or buying a new car every 3 years
learn to cook
find a hobby that is inexpensive


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## KaeJS (Sep 28, 2010)

james4beach said:


> If he wants to retire early (no CPP) he's going to need $2 to $3 million, by his estimate. It's just the reality based on the lifestyle he wants.


And realistically... Who can acquire 2-3 million?

It's not easy. And certainly nearly impossible to do at a young age. It simply would take too long unless there was a windfall.


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## Plugging Along (Jan 3, 2011)

KaeJS said:


> And realistically... Who can acquire 2-3 million?
> 
> It's not easy. And certainly nearly impossible to do *at a young age*. It simply would take too long unless there was a windfall.


Maybe it's an unrealistic expectation. People have to make choices to save more vs spending vs working longer. That's life. 

You need more $ to retire earlier
You need more $ if you have high spending habits

So really people need to decide if they want to work longer or spend less. It's a balance that shifts through your key stages in your life. If your mortgage is paid off, one could live relatively inexpensively (guessing under $30k a year). If your house maintenance and operations or transportation is really high, then you probably have too much car or too much house. Everything else other than medical bills is a choice.


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## james4beach (Nov 15, 2012)

KaeJS said:


> And realistically... Who can acquire 2-3 million?
> 
> It's not easy. And certainly nearly impossible to do at a young age. It simply would take too long unless there was a windfall.


I agree, accumulating $3 million (especially as a single income earner) is going to be very hard. He needs a very high paying job or some kind of windfall.


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## afulldeck (Mar 28, 2012)

KaeJS said:


> And realistically... Who can acquire 2-3 million?
> 
> It's not easy. And certainly nearly impossible to do at a young age. It simply would take too long unless there was a windfall.





james4beach said:


> I agree, accumulating $3 million (especially as a single income earner) is going to be very hard. He needs a very high paying job or some kind of windfall.


Nope. He needs to start his own business. Working for someone else is limiting in more ways than I can count.


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## james4beach (Nov 15, 2012)

afulldeck said:


> Nope. He needs to start his own business. Working for someone else is limiting in more ways than I can count.


It's true that running his own business opens up that possibility. But if it were that easy, every self-employed person would have $3 million.


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## cainvest (May 1, 2013)

james4beach said:


> It's true that running his own business opens up that possibility. But if it were that easy, every self-employed person would have $3 million.


I think it's more applicable to those that build a business with many employees working for them.


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## afulldeck (Mar 28, 2012)

james4beach said:


> It's true that running his own business opens up that possibility. But if it were that easy, every self-employed person would have $3 million.


Never claimed it was easy, but it is more likely that you can.


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## off.by.10 (Mar 16, 2014)

cainvest said:


> I'm suprised one could get a 2 bedroom apartment for $800, that seems really cheap.


You generally can't. These prices are the result of rent control when staying at the same place for decades. They will usually end with getting kicked out through one of the "legal" means or the building being unmaintained until it becomes a slum and everyone has to go.


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