# Seeking advice as I plan for future retirement draw down.



## trillian (Feb 3, 2011)

Hey Community.

Looking for some advice as I start to plan for a future retirement and draw down.

Lifestyle:

Late 40's, rent, no kids, live alone (in a long term relationship, maybe live together some day?)
Good career, 200K+, can likely continue working another 5-15 years if required/desired.
Spend less than 40k per year for the last 7 years. This may or may not increase during retirement. I'd like to do some travel.
No pension (although partner will)
No other assets except investments (Partner owns condo)
All numbers below are mine, are rounded and might not add up correctly
Assets:
... Redacted ...

~45:55 cash to equity

Yes, ultra conservative (and likely stupid) but I needed to respect my comfort zone
Up from 30:70
Aiming for 50:50 or 60:40
Mix assets:

50% ETFs: Mostly VBAL/XBAL, but some TD ETFs
50% STOCK: CU, BCE, EMA, H, REI, T, BMO, BNS, FTS, MFC, RY, SLF, TRP, TD
Notes:

To make life easier, I've put ETFs and Stocks in tax sheltered accounts, and kept non-reg full of cash/GIC's.
I assumed (perhaps naively) that any income tax on interest (0-2%) would be less than dividends (3-4%). No clue if this was a good idea or not.
Aiming to increase allocation to 50:50 or 60:40, but this now requires investing in non-reg accounts.
Questions:

When can I retire? How do you calculate the math?
Should I change my asset allocation and account location?
I want to start investing in non-reg account (I think), but I'm confused on how to manage that with respect to tax filing, etc. Do I get papers from bank indicating what numbers to enter into Tax Software like T4 and T5? What is ACB and how do I keep track of that? etc
How do I plan for draw down?
Dividends
I like the idea of dividend income to make draw down easier and <40K dividend tax benefit.
Should I move all individual dividend stocks into non-reg account?
What do I need to keep track of for tax purposes?
Should these be DRIPs or just DIVs until I retire?

ETFs
I'm not knowledgeable on stock picks
Have preferred the index investing / all-in-one ETF hands off approach
I don't understand the tax implications or work required to invest in non-reg accounts.
I don't understand how to draw down from ETFs without eventually going to zero. At least with dividends, you're not selling shares.


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## cainvest (May 1, 2013)

trillian said:


> When can I retire? How do you calculate the math?


Use a spreadshseet to calculate your yearly expenses vs investment (and other) income from the current year to expected end of life (95?). Make sure you include taxes required and inflation numbers.



trillian said:


> How do I plan for draw down?


Withdrawals can be a little more complicated but one starting point for you could be,

Calculate dividend output (no sale of dividend shares for now)
Subtract your yearly budget from dividends and other income sources like CPP, OAS, pension, etc.
The leftover withdrawal amount would come from sale of ETFs/MFs like VBAL, etc.

The above should give you a good ball park idea of your financial status for retirement.


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## OptsyEagle (Nov 29, 2009)

You could probably retire now if your expenses are truly in the $40K range. A spreadsheet would help if you want to see what happens when you factor in some inflation to those expenses and the addition of OAS and CPP at later ages. You will never know for sure that you will be able to retire. Arguably no one ever knows for sure, but people without pensions have a lot more uncertainty with the question. I will leave the answer to that up to you, but I will say, compared to many others right now who are comfortably retired, you are in as good of shape. Also, keep in mind that your most valuable asset right now is not the $1.5 million dollars. It is the ability to be happy only needing to spend $40K per year.

As for drawing retirement income from ETFs. First one needs to know how much income one may need from this. To know that one needs to know one's expenses, which you seem to know, but also other incomes. So how much is coming from GIC interest, dividends, etc. Any shortfall needs to come from the ETFs. Before I get to that, one might also want to put some common sense into the portfolio construction. With that one needs to figure out the proper asset allocation and just as importantly, where those allocated assets should be. So fixed income, mostly in tax sheltered investments, like RRSPs and TFSAs, and equities, dividend or not in the non-sheltered accounts. Then figure out a minimum cash level. $400K, in my opinion, is way too much, but you need to decide this. The minimum number should be 3 times your annual income needs but if you find you like more, so be it. Then what you do is you simply draw all your required income from that cash. Once a year you ask a simple but very important question. Did my equity ETFs do well or not so well last year? If they did OK, like some kind of positive return, higher then 6%, for example, you sell the amount of money you spent from your cash last year, so as to replenish your cash reserve. If the answer to the equity performance question, is a negative return, you don't sell anything. Let it all ride and keep taking your income from your cash reserve. Eventually the answer to the equity question will be positive and you sell the amount you require to replenish all the spent money since the last time you did this. Simple and done. That is how you do it.


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## prisoner24601 (May 27, 2018)

Hi Trillian, you are wise to think about building a retirement income stream and asset location. I recently retired with a similar location and mix 'issue' and am slowly transferring assets to fix it. I wish I started a couple of years ago. Like you, I had a good chunk of dividend paying Canadian stocks in my RRSP. When I was accumulating, not really a problem as dividend income was tax free and I didn't want it taxed heavily in my non-reg account. But now that I'm retired, I need the cash and want to minimize tax. So what I am doing is rebalancing gradually (about 50K each month) with a goal to have my whole Canadian equity allocation in my non-reg and at the same time diversify from existing 20 canadian stocks (similar to your list) to 50+ stocks in an ETF. Each month here is my process:

sell single stocks in my RRSP after checking the ex-dividend date
sell international equity or fixed income ETF in my Non-Reg
buy CAD dividend ETF in my non-registered account
buy global equity or fixed income in my RRSP to maintain asset allocations


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## Spudd (Oct 11, 2011)

Try a calculator to figure out if/when you can retire. 
Here are a few:








FIRE Calculator: When can I retire early? - Engaging Data


How long will it take you to save up for retirement? This interactive early retirement calculator will estimate your retirement age for a range of inputs.




engaging-data.com









FI Calc







ficalc.app












FIRE Calculator


Find out how soon you could reach financial independance and retire early with our FIRE Calculaor. Our calculator will tell you at what age you could retire, and how much money you need to invest per month to do so.




hardbacon.ca




The MoneyReady App— 


Using PERC to calculate your retirement income


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## peterk (May 16, 2010)

trillian said:


> Notes:
> 
> To make life easier, I've put ETFs and Stocks in tax sheltered accounts, and kept non-reg full of cash/GIC's.
> *I assumed (perhaps naively) that any income tax on interest (0-2%) would be less than dividends (3-4%). No clue if this was a good idea or not.*
> ...


No time for a longer reply sorry - but you've got it right that you need to think carefully about the blanket concept of just saying "dividend stocks go in unregistered" when you're a high income earner. That's a good rule of thumb for middle income earners and middle income retirees, but not for everyone. You rightly observe that total tax paid is what's important. This is changing now though with higher interest rates, which should cause the calculation to favor dividend in non-registered more than it previously did.

Either way - you pay loads of tax as a high earner, and can't get out of it


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## trillian (Feb 3, 2011)

Wow what great responses! Thanks everyone



cainvest said:


> Use a spreadshseet to calculate your yearly expenses vs investment (and other) income from the current year to expected end of life (95?). Make sure you include taxes required and inflation numbers.


Thanks @cainvest. How do you forecast taxes? I've created spreadsheets in the past and I get tripped on forecasting taxes. Dividends vs Capital Gains vs Income have different rates in different locations. And depending on how much tax I assume, my money lasts to 75 or 100. World of a difference between the two.



OptsyEagle said:


> You could probably retire now if your expenses are truly in the $40K range. A spreadsheet would help if you want to see what happens when you factor in some inflation to those expenses and the addition of OAS and CPP at later ages. You will never know for sure that you will be able to retire. Arguably no one ever knows for sure, but people without pensions have a lot more uncertainty with the question. I will leave the answer to that up to you, but I will say, compared to many others right now who are comfortably retired, you are in as good of shape. Also, keep in mind that your most valuable asset right now is not the $1.5 million dollars. It is the ability to be happy only needing to spend $40K per year.


This is reassuring to hear! Since I have no pension, it is stressful. I have no one to talk to in person because those who are retired have a good pension, and the rest are not in a similar financial situation as I am. So it's been a lonely road to get here.

I know my expenses as I make sure to deposit/withdraw from one account so it's easy to track. Where I spend it (besides rent) is less clear, but I've never been a big spender. Work also keeps me busy, so less time to use it. However, that could change when I retire, but I'm not sure by how much.



> As for drawing retirement income from ETFs. First one needs to know how much income one may need from this. To know that one needs to know one's expenses, which you seem to know, but also other incomes. So how much is coming from GIC interest, dividends, etc. Any shortfall needs to come from the ETFs. Before I get to that, one might also want to put some common sense into the portfolio construction. With that one needs to figure out the proper asset allocation and just as importantly, where those allocated assets should be. So fixed income, mostly in tax sheltered investments, like RRSPs and TFSAs, and equities, dividend or not in the non-sheltered accounts. Then figure out a minimum cash level. $400K, in my opinion, is way too much, but you need to decide this. The minimum number should be 3 times your annual income needs but if you find you like more, so be it. Then what you do is you simply draw all your required income from that cash. Once a year you ask a simple but very important question. Did my equity ETFs do well or not so well last year? If they did OK, like some kind of positive return, higher then 6%, for example, you sell the amount of money you spent from your cash last year, so as to replenish your cash reserve. If the answer to the equity performance question, is a negative return, you don't sell anything. Let it all ride and keep taking your income from your cash reserve. Eventually the answer to the equity question will be positive and you sell the amount you require to replenish all the spent money since the last time you did this. Simple and done. That is how you do it.


This method is very helpful! And I agree on the cash part. I didn't realize it was that high until pulling it all together. I'm better at saving then investing, and even better at procrastination.



prisoner24601 said:


> So what I am doing is rebalancing gradually (about 50K each month) with a goal to have my whole Canadian equity allocation in my non-reg and at the same time diversify from existing 20 canadian stocks (similar to your list) to 50+ stocks in an ETF.


@prisoner24601 So you have ETFs in your non-reg account? Is it hard to keep track when doing your taxes? I was advised once to keep ETFs within a reg account because it was "complicated". Do you simply get a T3 with all the information on it? Or is it more complicated than that? 

Are there specific ETF's that are better than others? Is xbal or vbal appropriate in non-reg account? Or is there something else I should consider?



Spudd said:


> Try a calculator to figure out if/when you can retire.


Thanks! I've used similar calculators in the past, and they are really good when building your nest egg. I find it harder to use when deciding to finally retire. I want to fully understand the math behind the calculators. I like the spreadsheet approach recommended by others above, but missing a few key points on how to do that properly.



peterk said:


> Either way - you pay loads of tax as a high earner, and can't get out of it


Hah! I'm doing my duty to keep the economy going!


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## cainvest (May 1, 2013)

trillian said:


> How do you forecast taxes? I've created spreadsheets in the past and I get tripped on forecasting taxes. Dividends vs Capital Gains vs Income have different rates in different locations. And depending on how much tax I assume, my money lasts to 75 or 100. World of a difference between the two.


This is where tax software (like studiotax) can help. It should be pretty easy going with RRSP, TFSA, CPP/OAS. RRSP, CPP/OAS are just plain income, TFSA isn't counted so that's easy. It can get a bit more complicated with non-reg assets but overall not bad. For tax projections it doesn't need to be exact, just like projecting expected yearly returns on investments ... somewhat close is more than good enough.


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## prisoner24601 (May 27, 2018)

trillian said:


> @prisoner24601 So you have ETFs in your non-reg account? Is it hard to keep track when doing your taxes? I was advised once to keep ETFs within a reg account because it was "complicated". Do you simply get a T3 with all the information on it? Or is it more complicated than that?
> 
> Are there specific ETF's that are better than others? Is xbal or vbal appropriate in non-reg account? Or is there something else I should consider?
> 
> ...


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