# Chicken Little early retirement forecasting assumptions



## Ponderling (Mar 1, 2013)

So I am 55, my wife is 57 and is already early retired. 
We have no company pensions.
We have always lived below our means.

Current jointly RRSP's/LIRA's about $1.5M, TFSA's about $320K, Non reg, or as we say, OPENs about $750K.

Our house is fully paid for and in good repair, and likely could sell easily for $1M in this bonkers market. But we are not using the value of our house in our retirement planning cash flow calculations

No loans .

Kids 18 and 21 still at home, pursuing school, with oldest one taking a pause since he wants in studio design experience. RESP has 180K in it, so we count their uni costs as paid for.

We currently have pretty comfortable existence living on 70K per year or less. Like 2020 Covid for $45K locked down style, with biggest being dental for back logged fillings and crowns.

So I am being the pessimist when projecting an early retirement for me. 

My assumptions:
The 70K everyday spending inflates at 2.5% annual inflation every year until I am 90. 


Big ticket things over the 70K comes out of OPEN, where tax hits on withdrawls are most minor.

I suck RRSP down so I pull 77k today, and inflate so try to stay in same tier, but again taxed at 30%.

Wife draws RRSP down so when bundled with divvy income she lands at about 50K today, and again taxed at 30%. 
We both qualify for about 70% of max CPP, and plan to defer it to when we are 70 to give a bigger stake that is inflation protected. Plus deferring it helps to give more time to melt off the big RRSP in early retirement and to 70 so not strangled by forced big RRIF min withdrawals at age 71.

The average tax rate will run at 30%, no dividend tax credit, no income splitting after 65 in my assumptions
Also presume that the claw back rate on OAS will end up lowered radically so that we will see none of it.

LIRA accounts, bond heavy are set to return .5% over inflation. 
RRSP, more REIT and US and International ETFs focused set to yield 1% over inflation.
TFSA more growthy stocks set to yield 2.5% over inflation.
Open account mostly blue chip divvy players set the return zero over inflation, but spin 2.5% dividend which we spend.

My run shows the RRSP and LRIF are gone by 90, but we project to still have 800K in each TFSA and 700K in open. So $2.5M at 90 does not buy as much as it did at 55, but not broke and most of it is in TFSA's

I have looked at VPW, but knocked off 0.01 off withdrawals for a 60% equity portfolio , as I see low growth in the decades ahead. Most of the years we are under the VPW on projected withdrawals 

So why am I still having a hard time pulling the plug, with all these Chicken Little assumptions.

Your comments would be appreciated.


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## prisoner24601 (May 27, 2018)

_So why am I still having a hard time pulling the plug, with all these Chicken Little assumptions._

You look to be in excellent financial shape and your projections use conservative assumptions. Your ace in the hole is a modest level of expenses compared to your capital. Clearly, only you can answer the question for yourself but here are some of my own worries (demons) that have caused me to delay pulling the plug:

the thought of deciding to give up a large paycheck feels almost reckless even though the numbers tell me I'll be OK. Then I realize the obvious that this paycheck is not free and is work really what I want to be thinking and stressing about all the time?
what if the market crashes just as I pull the plug? I have a projection stress test where market drops 40% in first 5 years and takes 4 years to recover. Not great but I have low non-discretionary expenses and would be similar to covid living for a few years.
what will it cost to fill in the hours when I am no longer working? Not sure but my wife and I are happy puttering around home with occasional travel so probably OK.
does going to work make me happy? Not really. Nothing to do with my company/boss/colleagues who are great but I just don't find the same satisfaction as my early career when I was trying to climb the ladder. Maybe I'll return to work in the future if a project comes along that looks interesting/challenging. Maybe not!

Best of luck with your decision

P


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## Ponderling (Mar 1, 2013)

Thanks for your reply. 

Yes, giving up the pay cheque is a bit of a challenge, but this year I have had a bit of ride at this with some training wheels. I work as a consulting engineer, and this past year work has slowed to almost stopped, as most of the pubic agencies I design with devote their energy to covid. 

So in the past year for about 5 months we cut back to 30 hour weeks, and even with that we also ate a lot of accrued vacation to fill the 30 hours. Now back to 35 hours and some weeks are full, but others... We have to work at least 22.5 hours a week to maintain health and group retirement benefits. So I have seen my pay cheque ebb and flow in the past year. I know gobs of people have been fully out of work, like my son, but I have not.

But I would like less on my mind so that maybe I can sleep more than 7 hours before my brain awakens me thinking of work issues.

To deal somewhat with market volatility factorsI work to keep at least half a year of core expense funds as cash in a chequing account. Then another about 60k in the OPEN account as cash, but that varies as opportunities for investments come and go. Core expenditures could go very low if needed in an extended market funk period.

I have enough non work things perking to not worry on my time being too idle once the day job goes. 

I like the design part of the job, but project management and cost accounting liaison drives me nuts with frustration. Sometimes clients too. 

Thank you for your reply.


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## MillionDollarJourney (Apr 3, 2009)

@Ponderling, have you considered using an online calculator to run some projections?
Here is a free one: Using PERC to calculate your retirement income


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## Gator13 (Jan 5, 2020)

prisoner24601 said:


> _So why am I still having a hard time pulling the plug, with all these Chicken Little assumptions._
> 
> You look to be in excellent financial shape and your projections use conservative assumptions. Your ace in the hole is a modest level of expenses compared to your capital. Clearly, only you can answer the question for yourself but here are some of my own worries (demons) that have caused me to delay pulling the plug:
> 
> ...


This is exactly the situation I am in. 

Years back we set some goals for ourselves:

Accumulate enough savings to live off off the dividends from our RRSP, TFSA and taxable accounts without touching the principal. 
Start retirement with 1.5 years of cash on hand.
Set aside enough cash to start retirement with new vehicles, new furnishings, etc.
We have achieved our initial goals and now we keep setting the bar a little higher to build a bigger "just in case" cushion. Save a bit more so we don't have to touch our TFSA's, don't withdraw all the income from RRSP's, have 2 years of cash on hand, etc.

As you mentioned, it's a tough decision to walk away from the security of that large paycheck.


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## prisoner24601 (May 27, 2018)

Gator13 said:


> This is exactly the situation I am in.
> 
> Years back we set some goals for ourselves:
> 
> ...


This sounds very familiar Gator13... I do agree with building a bigger cushion - these 'die broke' projections cause me exactly the same anxiety I get when I am coasting on fumes with unknown distance to the next gas station!


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## prisoner24601 (May 27, 2018)

Ponderling said:


> Thanks for your reply.
> 
> Yes, giving up the pay cheque is a bit of a challenge, but this year I have had a bit of ride at this with some training wheels. I work as a consulting engineer, and this past year work has slowed to almost stopped, as most of the pubic agencies I design with devote their energy to covid.
> 
> ...


Sounds like you are very well prepared. I tried living off our expected retirement income last year but it wasn't the same since I knew the paycheck was coming in as a backstop. Waking up without thinking about work issues sounds awesome. Take care


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## cainvest (May 1, 2013)

Ponderling said:


> My run shows the RRSP and LRIF are gone by 90, but we project to still have 800K in each TFSA and 700K in open. So $2.5M at 90 does not buy as much as it did at 55, but not broke and most of it is in TFSA's
> 
> I have looked at VPW, but knocked off 0.01 off withdrawals for a 60% equity portfolio , as I see low growth in the decades ahead. Most of the years we are under the VPW on projected withdrawals


With $2.5M still at 90 I'd have to say you are well past the point of financial security for retirement, plus you have the value of your house. I guess you're planning to leave a significant amount to the kids?



Ponderling said:


> So why am I still having a hard time pulling the plug, with all these Chicken Little assumptions.


Letting the goose that lays the golden eggs go isn't an easy step. I guess it'll depend which you enjoy more, work or free time. Now if work doesn't really get in the way of free time it becomes a really difficult choice.

I'm sitting on the same edge as you right now, better half retired, everything paid for and funds to last past 90, well over 100 if cut back. Guess what ... I'm still working too!


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## Gallop (Jan 26, 2021)

Tangential to your question but: I will learn more from this thread than contribute, but being in roughly similar circumstances, one thing I’ve recently realized with dealing with aging parents is:
We all likely have a health and mobility curve that will impact our future selves. For me that probably means a big slow down at age 70. As I fine tune my future spending model it gives me more confidence to factor this type of thing in. ( though who knows if it will be accurate).
The other thing I would contribute is that giving while you are alive might be something to consider. For me, having parents who passed with an estate, I would have much rather they left me half the amount while they were alive.
Not at all core to your post, but thought I’d throw it into the mix in case it rings a bell for you.


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## Gallop (Jan 26, 2021)

“So why am I still having a hard time pulling the plug”
Maybe because it’s a big change in life and you’re current approach has served you very well. I get the impression you are happy. And you are more worried about being unhappy than anything to do with the numbers. Maybe , once COVID is over and you can get the kids out, you two go on a 6 week practice retirement. Spend money, travel or do whatever and get comfortable without the work safety net. 
My internet stranger guess is that the hard time pulling the plug has nothing to do with the money. No tweaking of the model will get you there. Look elsewhere.


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## Ponderling (Mar 1, 2013)

MillionDollarJourney said:


> @Ponderling, have you considered using an online calculator to run some projections?
> Here is a free one: Using PERC to calculate your retirement income


Thanks for the link. No huge surprises.

I used to run RRIFMetric, but the sole developer has passed away, and so it no longer is getting updates on the tax data it uses.

It was also developed prior to TFSA's becoming the powerful investing tool they can be today. Yes you could fit them into its model, but it was not too smooth at using them. 

But it was very good at running Monte Carlo models to gave you the mode and range of anticipated outcomes


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## fireseeker (Jul 24, 2017)

Your plan and thinking seem sound. My guess is that your reluctance is not mathematical, it's psychological.

I retired 1.5 years ago at 53. Feeling many of the doubts you do, I stalled a couple of years to build even an even greater cushion. I also negotiated an exit package. My wife was already retired.

The reality -- for me, and I think you -- is that money wasn't the issue. I look at our pile today and can't imagine spending it all. There was definitely the fear of moving on -- leaving a steady paycheque, a job I used to love, an identity, a career. Departing the familiar for the unfamiliar. It's hard. Big changes are exciting at 25 -- at 55, it's a different feeling.

My advice is not to rush to pull the plug. Think about why you're doing it and what you want in your future. Speaking from experience, I can tell you that what I have missed more than the regular paycheque is the regular schedule. (To be fair, Covid hasn't helped.) Reconfiguring your life is more challenging than reconfiguring your finances. Plan how you will try to replace the mental and social stimulation that work provides.

But I don't mean for any of this to sound negative. Freedom may have costs, but it also has rewards.

Good luck.


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## Ponderling (Mar 1, 2013)

Gallop said:


> One thing I’ve recently realized with dealing with aging parents is:
> We all likely have a health and mobility curve that will impact our future selves. For me that probably means a big slow down at age 70. As I fine tune my future spending model it gives me more confidence to factor this type of thing in. ( though who knows if it will be accurate).
> The other thing I would contribute is that giving while you are alive might be something to consider. For me, having parents who passed with an estate, I would have much rather they left me half the amount while they were alive.
> QUOTE]
> ...


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## Ponderling (Mar 1, 2013)

Sorry, Gallop, I must have deleted a formatting character in paraphrasing your reply. My reply text shows as part of the quote.


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## birdman (Feb 12, 2013)

My recommendation is to just do it and retire, its a great life. Our situation was quite different than your in that my wife worked in the home and her CPP is only about 200. PM. On the other hand, I have a small defined benefit plan of about 20,000. PA. I also managed to negotiate a nice severance package which I took over 15 years and this ended 5 years ago. Anyways, during this time we have gone on lots of vacations, travelled most years, and really enjoy our larger home on a .7 acre landscaped lot, and ski condo where we spend 3 months (mid week only) a year. Sold the travel trailer last year but we both have individual sports we are very active in. Since retirement our total investments have grown every year and they are invested very conservatively with emphasis on fixed income (which may change). Furthermore, we are now getting to the age that larger trips that we did previously (Turkey, Africa, longer cruises, going south for month every winter, etc) are probably behind us and we actually find ourselves saving more and spending less. You worked all your life and have a nice nest egg, sit back and enjoy it but just be sure you have a plan to keep yourselves busy -its great!


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## scorpion_ca (Nov 3, 2014)

Ponderling said:


> Current jointly RRSP's/LIRA's about $1.5M, TFSA's about $320K, Non reg, or as we say, OPENs about $750K.


Would you mind to share what type of investment you have in your portfolio?


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## Ponderling (Mar 1, 2013)

So we hold quite a pile. 

My LIRA is IXUS international index excluding USA in $US and american AGG in $USand canadian bond XQB.
Wife LIRA is VDU- like i-xus, but in $CAD
My RRSP is some in XQB, and some small in AP -a reit, to about 89K $CAD. 
Then the USD side is 
IYW for technology since finding cdn quality tech cos is not always easy.
VBR for small cap value US co's - used to be VTI but I think smaller co's have more upside coming out of covid. Small is relative. Most have caps larger than cdn bue chips.
small in VZ
small in RTX
small in LLY
small in ABBV

Wife RRSP 
reits- smalls in CSH, GRT, HR, CSH, KMP, IIP 
$US pharmas - smalls in JNJ, MRK, PFZ, VTRS
$US small PEP, and AMAZ that started small but now is about 60K
More I-XUS international

My TFSA, and Wife TFSA
mostly smalls of comanies in canada and US that do not pay big dividends- mining, oil, etc.

OPEN 
about 40 smalls on Canadain TSX listed stocks that generally pay a decent dividend
then 240K in HPR, an actively managed preferred share ETF

When I say smalls I mean about 11k-15k holding in a company.

I play dumb asset allocation.
Aim for about 22% bond holding
Aim for about 29% real estate, with reits, and own home value
Aim for about equal weight in international, US, and CDN equities, but with individual stocks leaping CDN is now about 20%, US15% and Intl 14%

I break equities into 11 subcategories per TGAM. I aim for more or less equal weight per each sub category, and rebalance casually at most quarterly Most sub categories these days hover around 100K for us prior to de-cumulating beginning.

I then buy usually larger companies that fit those categories. I use Norm Rothery NDIR site for ideas. I also use Itrade research reports. Most smalls start as a 11K to 12K buy, and get trim sold to get back to that weighting unless research suggests overweight might look good. 
.


That is the 2000 foot view of my investing approach.

I am sure there are more rigorous or disciplined but this is the get affluent slow approach that seems to have worked ok for us.

Being at this for a while also helps to tune out the day to day noise of fiscal markets. Did not go to cash in 2000 dot comm mess ( not did I buy in, chase nortel or bre-x either) In 2008 GFC did buy in on the dip and did well on that. In COVID I sat pat until June, and then sold the dogs beyond short term redemption, and bought things beat up that had hope, like some reits, and cdn banks. 

I tend to buy us equities only to broaden a small pool like cdn telecom, or pharmacare, or when we have stumbled to a good thing.

Hope this is enough to get you informed on how I in a manner have got to where we are.


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## livewell (Dec 1, 2013)

Financially you are more than prepared for retirement - your risk level is super low, there are many couples retired with similar expenses on less assets. What I would ask is how ready are you emotionally? The lifestyle changes associated to retirement are sometimes overlooked when you focus on just the financials. Do you have a good idea of what hobbies and activities will fill your time in a beneficial way?


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## Ponderling (Mar 1, 2013)

Well, I am a project manager in the present day day job, so of course the skills of that spill into my private life. So when you take a fuzzy goal and get closer to it happening and advance plans to deal with it happening, well in the biz the term is progressive elaboration. 

Once covid is over the plans will start to flow. 

Twice a year I am part of a community theatre company that mounts a musical. In the past have been on the company board, and might do that again. In retirement I would have time to spend more with the mostly retired band of folks who create the sets and props design the sound, hang the lights etc. etc. So that can fill 12 weeks pretty easily two week nights and a weekend day, with two weeks of pretty much 7 days straight on move in til the show opens.

Then there is what was once called Area Scouters. Name has changed, but role remains. Organize multi troop camping weekends, etc to help foster events that happen without new Scout Leader necessarily having the experience to pull this together for their own troop on their own yet. So three weekends a year , but with about 6 weeks of semi organized planning, and parcelling out organising tasks before the event happens with other Scouters I have become friends with.

Ham radio - on local club exec now. Club has about 160 members, but only about 40 are semi active coming to bi weekly meetings, etc. On the air contests happen almost every weekend if you go looking for them. Sort of like fishing derbies, but you hunt contacts on the radio instead to compete with others for scoring. Could work 48 hours straight if I wanted to, but usually you team it, and get some sleep. Organize one pubic park radio event every June, and one flea market where we host. Then I go to probably 5 other flea market - known as ham fests - to sell and swap gear on a Saturday morning mostly. Could work on the education committee to get new folks educated and licensed to get on the air one I have a bit more free time. Once retired I could see logging on to a network on the radio and chat on a round table every day if I wanted to for say 40 minutes daily. More time casually as I want to on the air.

Have a darkroom in the basement, freezer full of film and print paper, and a collection of cameras that do not get out and used nearly enough at present. Usually teach/lead a couple of work shops twice a year at community dark rooms to help others expand their skill level or explore a new technique. Once retired I hope to get back to one or two half days and nights every few weeks when other things are not busy.

Make up own chili, pasta sauce, soups, jams, relishes etc and store to the cold cellar. This usually takes a couple of days a week in the fall when things come ripe. 

So I am presently not too afraid of not having anything to do once I leave the day job.


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## CAP (Apr 20, 2021)

Hi Ponderling,

I took the liberty of running your numbers through professional tools that we use to manage our own FIRE journey, and it looks like your $70k spending is well under what you "could" spend based on the following assumptions in addition to your own:

60/40% portfolio for all accounts with a return of 4.9% annually
Account balances are split 50/50 between spouses.
Both spouses taking CPP @ 70
If you spend $70k throughout retirement, the projections show that you'll have an estate value of $10.5M ($3.4M in today's dollars) at age 100. This includes: $8.2M in capital assets and $2.5M in real assets (your home).

All in all, providing my assumptions are correct, it looks like a very comfortable retirement.


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