# Can I Retire in 2023 at age 55?



## Mookie

Hi all, I’m planning to retire in 2023 at age 55. For the final stretch I thought it would be useful for me to start a money diary so all of you wise folks can poke holes in my plan, and hopefully I can plug those holes before 55, and retire as planned! 

Sorry for the long initial post. I will try to update this thread with my progress once or twice a year, and respond to any feedback in between. 

General Info:

Goal: to retire at age 55, in 2023
I’m 48 years old, and my wife is 47
We have 2 kids, aged 16 and 13

Annual Income

My salary: $104,000
My non-registered dividend income: $7,100
Wife’s non-registered dividend income: $18,100
Basement suite income: $10,400
Total Annual Income: $139,600


Typical Annual Expenses

Taxes: $24,000
Non-Discretionary: $27,000
Discretionary: $22,000
Total Annual Expenses: $73,000


Assets:

House: $810,000 (probably worth $1M currently, but using a conservative number due to the potential housing bubble)
My Non-Registered Account: $204,000
Wife’s Non-Registered Account: $480,000
My TFSA: $77,000
Wife’s TFSA: $77,000
My RRSP: $98,000
Wife’s RRSP: $66,000
Spousal RRSP: $191,000 (will be wife’s income in retirement)
RESP: $155,000 (for kids education only, not retirement) 
Investments are generally invested in dividend paying large cap stocks, ETFs, and mutual funds. Canadian exposure is about 85%, US is 11%, International 4%.
Above investments currently generate a total of about $50,000/yr in dividends, of which only the portion in the non-registered accounts are taxable. 
Total Assets: $2,158,000


Liabilities:

HELOC @ 2.7% (non investing): $15,000
HELOC @ 1.85% (My investing): $37,000
HELOC @ 2.7% (Wife’s investing): $159,000
The non-investing HELOC is due to a new car purchase a couple months ago, and will be back to zero where it should be within the year.
The investing HELOCs are being gradually paid down over time, but we’re in no rush, as the interest is tax deductible, and the interest rate is lower than the overall yield on the investments (let alone the capital gains).
In the past, we’ve used the investing HELOCs to jump in and buy more equities on a price correction, but as we get closer to retirement, we’re more resistant (but not immune) to those temptations.
Total Liabilities: $211,000

 
Current Net Worth: $1,947,000

Planned sources of income in retirement:

Basement suite income of $10,400 will continue until 2028 when we plan to downsize
My DB pension from current employer: $14,600/yr starting at age 55, with a bridge of $3,200/yr from 55 to 65, indexed to inflation
My DB Pension from previous employer: $24,000/yr starting at age 65, indexed to inflation
My CPP: $12,600/yr starting at age 70, indexed to inflation
My OAS: $6,942/yr starting at age 65, indexed to inflation
Wife’s CPP: $3,000/yr starting at age 70, indexed to inflation
Wife’s OAS: $6,942/yr starting at age 65, indexed to inflation
Ongoing dividends from existing investments (currently around $50,000/yr, but will be more in retirement, partly tax sheltered)
RRSP withdrawals as needed
All of the above pensions could be started earlier or later for a trade-off of a bit more/less per year. The decision of when to actually take them will probably boil down to our overall health and expectations for longevity at the time.


Expected expenses in retirement

I expect our expenses in retirement to be slightly lower than pre-retirement, mostly due to being in a lower tax bracket. Some work related expenses will drop off, but I expect those will be offset by additional spending on fun.


The Plan:

Continue to max out the spousal RRSP between now and 2020, then switch to contributing to my RRSP for 2021-2023. This will allow my wife to start drawing down on the spousal RRSP in 2023.
My wife to start gradually withdrawing from her RRSP from 2017-2023, as her taxable income level is very low. In 2016 she paid zero taxes, despite rental and dividend income.
Continue to max out both TFSAs annually both before and after retirement 
Use any remaining excess cashflow between now and 2023 on HELOC repayment, and/or additional investing
Retire in 2023 at age 55
Keep total taxable annual income as even as possible year over year from age 55 onwards, and keep taxable income as balanced as possible between me and my wife to be as tax-efficient overall as possible. This will be achieved by withdrawing more from RRSPs earlier in retirement, then withdrawing less from RRSPs as other pensions kick in. 
Downsize from existing house in 2028, when value is expected to be $1,250,000. Use $800,000 for downsized home, and move $450,000 to dividend paying equities to further fund retirement.


About 5 or 6 years ago, I created a massive spreadsheet to project all of the above out to age 85. I’m assuming an inflation rate of 2%, an average annual total return on investments of 5%, and an average annual total return on my primary residence of 4%. I’ve also padded my future expenses with $10,000 per year of “contingency” for any unforeseeable expenses.

I have been comparing estimates to actual amounts on a yearly basis. So far, my actuals have been better overall than my estimates in every year except one where my investments underperformed my estimate, however my trailing 5 year total return for investments is currently at 8.3%, which is comfortably above my 5% assumption.

According to current projections, my net worth will just keep growing exponentially after retirement, and we’ll end up with about $8M at age 85, including primary residence. 

So what do you think? Am I set to retire at 55? Should I wait longer? Should I retire tomorrow?


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## gibor365

> Continue to max out the spousal RRSP between now and 2020, then switch to contributing to my RRSP for 2021-2023. This will allow my wife to start drawing down on the spousal RRSP in 2023.


 If your wife is planning to get only RRIF minimum, you can continue to contribute until last day, SRRIF minimum withdrawals will be attrubuted to your wife's income, not yours (unless she withdraw more than RRIF minimum).



> We have 2 kids, aged 16 and 13


 Do you have RESPs? imho, kids education would be the most unpredictable expense . Another "unknown" expense is medical/dentist as if you retire , you won't have any coverage.... 
Otherwise,again, imho, you may retire tomorrow.



> and we’ll end up with about $8M at age 85


 Do you really need then 8M?! Not better to retire earlier and enjoy the life?!


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## redsgomarching

looks really good, not sure how much we could help as it looks like you are pretty set! near $2 mill networth and a good plan for the future.

Envious of your TFSA balances!!! 

My take, you have 2 kids set to hit post secondary 2 yrs and 5yrs which is still within the time you will be working. Those years will most likely be big expense years but it looks like you are covered with your RESP balance of 155k. 
Assuming per kid, tuition + living ends up nearly at a estimate of 20k (on the higher end) depending if they are close to home or not. This means 80k per child 160k altogether, if you continue with your contributions you will be over that. Most likely you will be ok here, jsut remember your 2nd child will be in university while you plan to retire.

The only thing really to keep in mind is if they plan on doing graduate studies etc. Do they work? Do you know what they plan on studying? 
Are you in a position to help them with a job??


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## gibor365

> The only thing really to keep in mind is if they plan on doing graduate studies etc. Do they work? Do you know what they plan on studying?
> Are you in a position to help them with a job??


Oh, I missed that you have plenty of cash in RESP  , thus I'm not sure if you need to wait another 7 years for retirement



> Ongoing dividends from existing investments (currently around $50,000/yr


 Very nice! We have combined on all accounts (reg and non-reg) about 1.3M (split 55/45 - equities/FI) and our dividend/interest income just above 30K+


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## birdman

You look in pretty good shape to me,, particularly with the DB plans. You may be surprised at the reduced payouts for retiring early. You may wish to watch your incomes and income splitting to avoid OAP clawback. Also, asset allocation could effect income. You didn't mention your plans post retirement which will of course affect your disposable income. I retired at 55 yrs (now 71) and live an active lifestyle. Inflation, low interest rates, and activities (travel, sports, hobbies, etc) do take their toll. I guesstimate my annual expenditures are about $60,000. PA plus extraordinary expenses such as new vehicles, condo special assessment of 15,000., major home updates or repairs eg roof, special gifts to children (family vacation 15,000.) etc. Good job.


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## gibor365

> You may wish to watch your incomes and income splitting to avoid OAP clawback


 Just curious.... won't be better if OP wife will already convert SRRSP to SRRIF and withdraw minimum payment and OP can open 2nd SRRSP for new contributions?


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## Steve Divi

I think you are looking pretty good for 55. 

Just learn to live as frugal as you can and see how much you like it.


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## agent99

Just a few comments:

- when you downsize, fees and taxes will eat into that $450k.
- 5% return with 2% inflation(3% real) is aggressive. Real return of 1.5-2% might be more realistic. Remember you won't be reinvesting income from investments
- The dividends and interest in the RRSPs will be taxed same as interest income when withdrawn. 
- Markets go up and down so there can be bumps in the road. We had more than you have now when we retired 14 yrs ago. It grew. Then went back almost to where it was before starting to grow again. Several bumps since then. Shorter time horizon, but we will never see $8million! 

If you take the home equity and RESP out of it you realistically have about $1million. Not bad, but I would keep working and try to get that up in the $1.5Million in 2017 $$ (~$1.7Million in 2023) by time you retire.


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## Ihatetaxes

Looks like you are a good planner and have been focused on your future for a long time - congrats! Nice job on the TFSA's and RESP. Good use of HELOC for investing. I think if you hated your job you could retire now or find something part time until kids are off to University then downsize. Otherwise stick to the plan and still be retired before 99% of Canadians will.


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## redsgomarching

Steve Divi said:


> I think you are looking pretty good for 55.
> 
> Just learn to live as frugal as you can and see how much you like it.


tbh i dont think he needs to learn how to live frugally considering what they have built on single income


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## gibor365

> Otherwise stick to the plan and still be retired before 99% of Canadians will.


 Really?! only 1% of Canadians retire before 55?


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## scorpion_ca

Would you mind to share the name of stocks and ETFs that you are holding? It would give an idea to young investor on what to invest.


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## Mookie

gibor365 said:


> If your wife is planning to get only RRIF minimum, you can continue to contribute until last day, SRRIF minimum withdrawals will be attrubuted to your wife's income, not yours (unless she withdraw more than RRIF minimum).
> 
> Do you really need then 8M?! Not better to retire earlier and enjoy the life?!


Thanks Gibor, I had heard about this trick regarding RRIF minimum withdrawals, but we plan to take out more than the minimum in the early years of retirement, to avoid higher taxes later. Anyway, it's OK, we will drain my wife's RRSP first, then the spousal.

Regarding the $8M, this is a projection 37 years out. A lot can happen between now and then. We might end up with way more, or way less. I guess we'll just have to adjust our lifestyle accordingly.


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## Mookie

redsgomarching said:


> My take, you have 2 kids set to hit post secondary 2 yrs and 5yrs which is still within the time you will be working. Those years will most likely be big expense years but it looks like you are covered with your RESP balance of 155k.
> Assuming per kid, tuition + living ends up nearly at a estimate of 20k (on the higher end) depending if they are close to home or not. This means 80k per child 160k altogether, if you continue with your contributions you will be over that. Most likely you will be ok here, jsut remember your 2nd child will be in university while you plan to retire.
> 
> The only thing really to keep in mind is if they plan on doing graduate studies etc. Do they work? Do you know what they plan on studying?
> Are you in a position to help them with a job??


Our older daughter plans on doing a Bachelor of Science in Nursing. The younger one is not sure yet, but maybe engineering. Both will be living at home while attending a local university. We expect them both to chip in at least a little bit towards their education so they have some skin in the game. We've already told them that we will fund them for a bachelor's degree, but if they want to go beyond that, they will need to contribute more to the cost (although I think we could afford to pay for it anyway).


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## Mookie

frase said:


> You look in pretty good shape to me,, particularly with the DB plans. You may be surprised at the reduced payouts for retiring early. You may wish to watch your incomes and income splitting to avoid OAP clawback. Also, asset allocation could effect income. You didn't mention your plans post retirement which will of course affect your disposable income. I retired at 55 yrs (now 71) and live an active lifestyle. Inflation, low interest rates, and activities (travel, sports, hobbies, etc) do take their toll. I guesstimate my annual expenditures are about $60,000. PA plus extraordinary expenses such as new vehicles, condo special assessment of 15,000., major home updates or repairs eg roof, special gifts to children (family vacation 15,000.) etc. Good job.


Thanks Frase, good to hear from someone who's been there and done that.  The amounts I mentioned above for the various pensions are the reduced amounts based on my planned retirement date of 2023. I realize OAS clawback may become an issue, and I will definitely have to keep an eye on that. This is another reason to retire early. If I retire later, I may lose my OAS completely. I added the $10,000 per year of contingency for exactly the reason you stated of various expenditures popping up. I've also allowed for new cars every 10 years. Our plans for retirement will probably include more travel, we've budgeted $10,000/year for that. Apart from travel, we would just spend more time on hobbies and local activities.


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## Mookie

Steve Divi said:


> I think you are looking pretty good for 55.
> 
> Just learn to live as frugal as you can and see how much you like it.


Hi Steve, my wife and I lived frugally in our younger days, which is partly how we got to where we are today. I believe our plan is solid enough that living frugally going forward is not required.


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## Steve Divi

Mookie said:


> Hi Steve, my wife and I lived frugally in our younger days, which is partly how we got to where we are today. I believe our plan is solid enough that living frugally going forward is not required.


That might have sounded different than I meant it 

My line of thinking was you could always test your estimated retirement income in real time to see how much you enjoy living that way as a base line. For instance, I know I can live comfortably off around $3000 a month with a family of 5. 

This gives me a baseline to know what I will need in retirement. 

Cheers.


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## gibor365

> Thanks Gibor, I had heard about this trick regarding RRIF minimum withdrawals, but we plan to take out more than the minimum in the early years of retirement, to avoid higher taxes later. Anyway, it's OK, we will drain my wife's RRSP first, then the spousal.


 In any case, I'd first start withdraw SRRIF rignt now, and leave RRSP for later (when you will be retired) or also convert her RRSP into RRIF and withdraw from both. I don't know what brokerage you use, but in CIBC IE minimum withdrawals from RRIFs are free and from RRSP - you pay fees. Also with RRSP withdrawals you pay withholding tax on day of redemption, that's OK if you do it in end of December, but not so good if earlier


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## coolbeans

Based on your posts, you've probably already checked this, but:
- The CPP benefit calculation is quite involved. Retiring at 55 and waiting until 70 messes with the eligible benefit as you only have <8 drop-out years. Waiting until 70 means you have 7 zero income years dragging down your benefit calc (not to mention any zero or low pensionable earnings years after 18).
- Some DB pensions are indexed to say 0.6x of inflation, not 1x.

Ps. I hadn't known about SRIFF min withdrawal avoiding the 3 year rule.


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## mordko

Looks remarkably similar to our position with the same age and retirement target. Technically we have higher net worth but you have more DB. Higher salary but you have extra rental income. We have a smaller outstanding financial commitment to kids' education as ours are older, at university and earning but you have a large RESP. 

I think your growth projections are plausible but optimistic. Regardless; the plan is financially sound. Good luck.


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## james4beach

Another question from a young investor... where can I get a job to build up a pension like that?

Additionally, I understand you're receiving dividend income but since you're still employed you may want to reinvest all dividends and distributions to achieve the highest total returns. I don't see the point of starting on portfolio withdrawals before retirement, and those dividends are effectively withdrawals, unless you reinvest them.


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## My Own Advisor

Very well done Mookie...!!

With assets over $2M now, your biggest hurdle is the liabilities. 

They say "life begins when you're debt free"!

First of all, great work on tax-efficient dividends in non-reg. accounts. 

Your TFSAs are in great shape! I wouldn't count on them in early retirement for income though, I would deplete all RRSPs and potentially non-reg. accounts BEFORE TFSA assets. 

"Investments are generally invested in dividend paying large cap stocks, ETFs, and mutual funds." Absolutely the way to go I think, as long as mutual funds are low-cost...

"Above investments currently generate a total of about $50,000/yr in dividends, of which only the portion in the non-registered accounts are taxable."

Didn't understand this one. All dividends are taxable at some point? Unless you have no other income of course, which you do.

Income plans:
I think if you can live off the following, early in retirement, you are set:

1. DB pension from current employer: $14,600/yr starting at age 55, with a bridge of $3,200/yr from 55 to 65, indexed to inflation.
2. Dividend income.
3. Rental income.
4. RRSP-generated income.

This is because your other pension ($24,000/yr starting at age 65, indexed to inflation) is fixed income and I'd delay earning that until 65.

Ideally CPP + OAS will replace all your RRSP-generated income (RRSP gone in your 50s and 60s) and you can rely on the following in your 60s and 70s:

1. Tax-efficient dividend income (say $25-$35K per year and always growing, and
2. A healthy dose of pensions and government benefits as part of fixed income (upwards and likely north of $40K per year).

Sounds like a dream


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## Mookie

scorpion_ca said:


> Would you mind to share the name of stocks and ETFs that you are holding? It would give an idea to young investor on what to invest.


Here's a list of the securities I currently hold:

BCE
BMO
BNS
RBF1018
RY
VXC
XRE
ZDJ
ZWU
BPF.UN
TD

As previously mentioned, I focus mostly on large cap dividend payers, and I'm very much a buy and hold investor. I believe that "time in the market" is better that "timing the market". I think the most important part of a buy and hold strategy is to not panic and sell when market downturns occur. So long as you're invested in good quality companies, then there is no need to panic. Just hang on, and remember Warren Buffet's famous quote: "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”


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## Mookie

coolbeans said:


> Based on your posts, you've probably already checked this, but:
> - The CPP benefit calculation is quite involved. Retiring at 55 and waiting until 70 messes with the eligible benefit as you only have <8 drop-out years. Waiting until 70 means you have 7 zero income years dragging down your benefit calc (not to mention any zero or low pensionable earnings years after 18).
> - Some DB pensions are indexed to say 0.6x of inflation, not 1x.


Thanks coolbeans, my current estimate for CPP is based on some numbers I ran a few years back, which supposedly took into consideration the non contributory years, but it was not an official estimate from the CPP folks, so a couple weeks ago I mailed in a request (from the link below) to confirm my numbers. When I get a reply, I will update this thread with the numbers. 

http://www.servicecanada.gc.ca/fi-if/index.jsp?app=prfl&frm=isp1003&lang=eng

Regarding DB pension indexing, mine are indexed 100% to inflation, so long as the index reserve fund is adequately funded. I guess there's never a guarantee of that, so something to be mindful of.


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## gibor365

Mookie said:


> When I get a reply, I will update this thread with the numbers.
> 
> http://www.servicecanada.gc.ca/fi-if/index.jsp?app=prfl&frm=isp1003&lang=eng


Interesting  , gonna fill out this form too... I'm just not clear, when they ask about retirement age/year-month... is it date when my package ends or date when my IE ends?


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## Mookie

james4beach said:


> Another question from a young investor... where can I get a job to build up a pension like that?
> 
> Additionally, I understand you're receiving dividend income but since you're still employed you may want to reinvest all dividends and distributions to achieve the highest total returns. I don't see the point of starting on portfolio withdrawals before retirement, and those dividends are effectively withdrawals, unless you reinvest them.


Hi James, I know, DB pensions are not that easy to come by anymore. I definitely consider myself lucky in that regard. Government jobs and crown corporations are the place to be for DB pensions in general. I remember in my younger days people would have all these negative comments about public sector jobs. They thought they could do much better in the private sector, and who knows, maybe some of them did, but if they weren't disciplined in setting aside part of their salary for retirement, then they're probably starting to regret that by now. 

Having DB pensions allowed my wife and I to be more aggressive with the rest of our retirement savings because we already had a solid base to rely on in the DB pensions.

Regarding dividends, in the TFSAs, RRSPs, and RESP dividends are all reinvested. In the non registered accounts, we don't reinvest, but instead use the extra cashflow to gradually pay down the investing HELOCs.


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## gibor365

> Government jobs and crown corporations are the place to be for DB pensions in general


 My wife just got a letter from her pension plan. Thus, if she retires at 55, she gonna get $23,200. At 60 - $37,700, At 65- $55,200 (last year statement showed $21,500 , $35,200 and $51,500). I tried to estimate what will be her pension if she retires at age 50 ,but couldn't figure out how .
And she can take it as lump sum or wait until 55 and start getting it monthly


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## ddivadius

I think you also have some upside in your OAS when you take it 15 years from now as the amounts you have are the 2017 payouts. I would expect these to rise each year for 15 years and end up closer to $9K per year in 2033.


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## GreatLaker

gibor365 said:


> My wife just got a letter from her pension plan. Thus, if she retires at 55, she gonna get $23,200. At 60 - $37,700, At 65- $55,200 (last year statement showed $21,500 , $35,200 and $51,500). I tried to estimate what will be her pension if she retires at age 50 ,but couldn't figure out how .
> And she can take it as lump sum or wait until 55 and start getting it monthly


Would they let her take a pension at 50? Doubtful. There should be pension documentation that gives rules and formulas. Even if she were to take a lump sum it would still have to go into a LIRA and be subject to withdrawal constraints of the LIRA rules and jurisdiction.


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## My Own Advisor

That's my understanding as well. LIRAs can be unlocked, depending on provincial rules, up to 50%. 

@gibor, any chance your wife can defer some pension - say until age 60? $37,700 is a good pension. Maybe she/you can draw down personal assets first?


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## gibor365

My Own Advisor said:


> That's my understanding as well. LIRAs can be unlocked, depending on provincial rules, up to 50%.
> 
> @gibor, any chance your wife can defer some pension - say until age 60? $37,700 is a good pension. Maybe she/you can draw down personal assets first?


On the statement is written "If you remain with "employer" until age XX pension will be .....", so I understand that she will get $37,700 if she will be working until age 60. This if she defers to age 60 ,she will get more that uf defers to age 55, but much less than 37,700


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## Plugging Along

gibor365 said:


> My wife just got a letter from her pension plan. Thus, if she retires at 55, she gonna get $23,200. At 60 - $37,700, At 65- $55,200 (last year statement showed $21,500 , $35,200 and $51,500). I tried to estimate what will be her pension if she retires at age 50 ,but couldn't figure out how .
> And she can take it as lump sum or wait until 55 and start getting it monthly


Most pension do not let you take it out before 55 which is considered early already unless there is some sort of bridging because the company decides to retire her first. 

The rule in our pension is base on the 85 factor (though they are looking to change it to the 90 factor). It's your age plus the number of years of service is when you can start withdrawing with age 55 being the minimum. Any time one withdraws before they hit their 85 factor, each year has a reduction of certain percent. So if your wife wanted to retire at 50, unless she started contributing her pension at 15 years old, she will not be allowed. If she quotes at 50, then at 55 she could withdraw the pension, and her pay out would be based on (85-55-years service) times the reduction amount for each year under 85.


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## gibor365

> Any time one withdraws before they hit their 85 factor, each year has a reduction of certain percent. So if your wife wanted to retire at 50, unless she started contributing her pension at 15 years old, she will not be allowed.


Don't get it . From statememt I understand that she can retire even at 40, but to get monthly pension she should wait to at least 55 Or just take a lump sum (probably LIRA)


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## Mookie

ddivadius said:


> I think you also have some upside in your OAS when you take it 15 years from now as the amounts you have are the 2017 payouts. I would expect these to rise each year for 15 years and end up closer to $9K per year in 2033.


Yes, I guess I should have been more clear in my initial post. The numbers for OAS and CPP are in today's dollars, but because they are indexed to inflation, the amount will be more by the time I start to collect. You are correct that my OAS in 2033 will be in the $9,000 range, given an inflation rate of 2%.


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## GreatLaker

gibor365 said:


> Don't get it . From statememt I understand that she can retire even at 40, but to get monthly pension she should wait to at least 55 Or just take a lump sum (probably LIRA)


I recently left a company, and took a lump sum and created a LIRA. People that were 55 or older when they left had 3 basic options: immediate monthly pension, deferred monthly pension starting any age up to 65, or immediate lump sum. People that left younger than age 55 only had 2 options: lump sum or deferred pension starting no earier than age 55; anyone younger than 55 had no option to start a monthly pension immediately. They could quit the company with no intention to work again, therefore calling it retirement, but the company would not pay a retirement pension to anyone younger than 55.

It may vary by company, but my understanding is that is common. (Except for some high burnout jobs such as police and firefighters where the normal retirement age is 60 and the pension can be taken as early as 50.)


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## gibor365

> They could quit the company with no intention to work again, therefore calling it retirement, but the company would not pay a retirement pension to anyone younger than 55.


 Yes, exactly what I said. My wife has 2 options, move lump sum to LIRA or defer to 55 and start getting monthly payments.... the question is how bigger it would be if she defers not to 55 , but to 60


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## Plugging Along

gibor365 said:


> Don't get it . From statememt I understand that she can retire even at 40, but to get monthly pension she should wait to at least 55 Or just take a lump sum (probably LIRA)


Yes, she can take a lump sum at any time before she turns 55. If you are trying to calculate the amount, it's actually a really complicated formula. It's based on the interest rate at the time, her pensionable service, etc. You won't be able to get that number from here. There should be a pension calculator, but mine only does it for if you are leaving in three months. It will not calculate long term. 



gibor365 said:


> Yes, exactly what I said. My wife has 2 options, move lump sum to LIRA or defer to 55 and start getting monthly payments.... the question is how bigger it would be if she defers not to 55 , but to 60


The formula is based on her age and number of years of pensionable service. How many years will she have contributed before she retires.


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## mordko

gibor365 said:


> Yes, exactly what I said. My wife has 2 options, move lump sum to LIRA or defer to 55 and start getting monthly payments.... the question is how bigger it would be if she defers not to 55 , but to 60


A lot bigger. She'll get extra years and pay rises which usually beat inflation. 

However, for commuting... Now is not a bad time. The value of commuted pension is linked to interest rates; rising interest rates may reduce the value even with the extra years.


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## Mookie

gibor365 said:


> In any case, I'd first start withdraw SRRIF rignt now, and leave RRSP for later (when you will be retired) or also convert her RRSP into RRIF and withdraw from both. I don't know what brokerage you use, but in CIBC IE minimum withdrawals from RRIFs are free and from RRSP - you pay fees. Also with RRSP withdrawals you pay withholding tax on day of redemption, that's OK if you do it in end of December, but not so good if earlier


Thanks Gibor, definitely good to consider the administration fees. I'm with BMO Investorline. I just called to check the fees for RRSP and RRIF withdrawals. RRSP withdrawals are $50 per transaction, but since I'm a "5-star" member (total value greater than $250k across all accounts) I get a 50% discount. If I convert it to a RRIF, I can get monthly, quarterly, or annual automatic scheduled RRIF payments with no fee. 

Also, Investorline charges a $100 annual admin fee for RRSP or RESP (but not TFSA) accounts under $25k in value, but those fees are also waived for 5-star members.


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## gibor365

Mookie, then what advantages of withdrawing money from RRSP and not converting to RRIF , taking no fee minimum and to do smaller RRSP redemptions if needed? I don't see any, unless you wifw if planning to earn income


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## gibor365

> A lot bigger. She'll get extra years and pay rises which usually beat inflation.


 maybe I wasn't clear . Yes, obviously if she continues to work until 60 penison will be much bigger.... 
I meant, that if my wife retires at 50 (and won't work anymore), she can start getting pension at 55 or at 60, thus she won't have any raises and salaries.... what can be the difference if she just let money to be with her plan for additional 5 years...?


----------



## Mookie

gibor365 said:


> Mookie, then what advantages of withdrawing money from RRSP and not converting to RRIF , taking no fee minimum and to do smaller RRSP redemptions if needed? I don't see any, unless you wifw if planning to earn income


Yes, we will probably convert her RRSP to a RRIF this year then, and take an annual lump sum withdrawal in December of each year of maybe between $10k and $15k. Then we can use the RRIF withdrawal cash in January to top up the TFSAs, and (hopefully) get back most of the witholding taxes at tax time.


----------



## GreatLaker

Mookie said:


> Yes, we will probably convert her RRSP to a RRIF this year then, and take an annual lump sum withdrawal in December of each year of maybe between $10k and $15k. Then we can use the RRIF withdrawal cash in January to top up the TFSAs, and (hopefully) get back most of the witholding taxes at tax time.


Similar to my plan. TD also charges partial deregistration fee on RRSP withdrawal but no fee for RRIF withdrawal or transfer RRSP to RRIF. I plan to withdraw an amount annually in Dec (around $10k) from retirement to age 71 that will minimize or eliminate OAS clawback when mandatory RRIF conversion takes place. Also will use some of that to fund TFSA.

I won't convert my entire RRSP to RRIF immediately because it would force me to withdraw too much.


----------



## gibor365

> I won't convert my entire RRSP to RRIF immediately because it would force me to withdraw too much.


 advantage of converting RRSP to RRIF ASAP is that younger you are, less minimum withdraval you have to take.... I plan to do it at 52 and my min withdrawal will be just about 2.5%, if you start at 70, your minimum rate will be much much higher and can affect you OAS


----------



## redsgomarching

gibor365 said:


> advantage of converting RRSP to RRIF ASAP is that younger you are, less minimum withdraval you have to take.... I plan to do it at 52 and my min withdrawal will be just about 2.5%, if you start at 70, your minimum rate will be much much higher and can affect you OAS


but why convert to rrif? you are forced to take it out when you can just use the rrsp nad withdraw when you need to? what if one year you dont need the funds?


----------



## gibor365

redsgomarching said:


> but why convert to rrif? you are forced to take it out when you can just use the rrsp nad withdraw when you need to? what if one year you dont need the funds?


If your target to deplete principal to avoid OAS clawback, why you won't need? Also , in OP case , he can always invest into SRRSP proceeds from his wife RRIF withrawals and thus pay less taxes...


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## mordko

gibor365 said:


> advantage of converting RRSP to RRIF ASAP is that younger you are, less minimum withdraval you have to take.... I plan to do it at 52 and my min withdrawal will be just about 2.5%, if you start at 70, your minimum rate will be much much higher and can affect you OAS


Don't they have a minimum age for setting up RRIFs?


----------



## cashinstinct

redsgomarching said:


> but why convert to rrif? you are forced to take it out when you can just use the rrsp nad withdraw when you need to? what if one year you dont need the funds?


Banks often have fees for each RRSP withdrawal, compared to RRIF. 

Also, no tax is withheld when the minimum amount is withdrawn from a RRIF. (You will pay tax at the end of the year when you do your tax return).

You don't need to convert your whole RRSP to a RRIF before 71 years old, you can take a specific amount. 

My mother has both a RRIF and a RRSP for example.



mordko said:


> Don't they have a minimum age for setting up RRIFs?


No.


----------



## gibor365

mordko said:


> Don't they have a minimum age for setting up RRIFs?


No! I was before, but not anymore. You can start at any age. So, mordko, if you wife has SRRSP and retired, consider converting to RRIF


----------



## gibor365

> Banks often have fees for each RRSP withdrawal, compared to RRIF.
> 
> Also, no tax is withheld when the minimum amount is withdrawn from a RRIF.
> 
> You don't need to convert your whole RRSP to a RRIF before 71 years old, you can take a specific amount.


True! or you can convert SRRSP to SRRIF and open another SRRSP . I just don't get wny so many people don't like RRIFs


----------



## Plugging Along

gibor365 said:


> maybe I wasn't clear . Yes, obviously if she continues to work until 60 penison will be much bigger....
> I meant, that if my wife retires at 50 (and won't work anymore), she can start getting pension at 55 or at 60, thus she won't have any raises and salaries.... what can be the difference if she just let money to be with her plan for additional 5 years...?



On our plan the difference is a 3% reduction each year that is early. Without all the details, you would be looking at around 15% difference between 55 or 60 assuming no further contributions.


----------



## Mookie

mordko said:


> Don't they have a minimum age for setting up RRIFs?


There is no minimum age to convert a RRSP to a RRIF. The minimum withdrawal percentage for anyone under 71 is defined as 1/(90-age). If we convert my wife's RRSP to a RRIF this year, our minimum withdrawal amount would be 1/(90-47) = 2.3%.

http://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm


----------



## gibor365

Plugging Along said:


> On our plan the difference is a 3% reduction each year that is early. Without all the details, you would be looking at around 15% difference between 55 or 60 assuming no further contributions.


Thanks! This is what my impression too (about 15%)... btw, do you know who long before you want to withdraw , you need to submit request ?


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## Mookie

My Own Advisor said:


> "Above investments currently generate a total of about $50,000/yr in dividends, of which only the portion in the non-registered accounts are taxable."
> 
> Didn't understand this one. All dividends are taxable at some point? Unless you have no other income of course, which you do.


What I meant was that across all accounts, I am presently bringing in about $50,000 / yr in dividends, but the dividends earned (and reinvested) in the RRSP, RESP and TFSA accounts do not attract any taxes on an ongoing basis. Only the dividends earned in the non-registered accounts result in taxes at this point. I do realize that when the funds in the RRSP accounts are withdrawn later, they will be taxed as regular income, but as mentioned, I plan to do this in the early years of retirement, before my other pensions kick in to keep the marginal rate low.


----------



## cashinstinct

To comeback to op's question: pretty clear to me you can retire at age 55. Good work!


----------



## gibor365

cashinstinct said:


> To comeback to op's question: pretty clear to me you can retire at age 55. Good work!


I'd even say that he can retire much earlier  (esp. considering his DB)


----------



## cashinstinct

gibor365 said:


> I'd even say that he can retire much earlier  (esp. considering his DB)


Well I answered his question literally.

Considering his DB, he would take a big hit to retire before 55, since there are penalties in such situations. He could probably afford it... depends on how much flexibility he wants.


----------



## My Own Advisor

This my understanding:
-RRSP can be converted to RRIF at any age, don't need to be age 71!
-some brokerages charge a fee for RRSP withdrawals, some same brokerages charge no fee once RRIF set up
-no withholding taxes on RRIF min. withdrawals, there is ALWAYS RRSP withholding taxes on RRSP withdrawals
-you don't have to convert all your RRSP into a RRIF, you can convert just a portion, say $100k if you wanted
-"forced" RRIFs minimum withdrawals can help with a) income you want, now, and b) smoothing out taxes as to avoid getting a large tax hit(s) later in life.

If you have a decent amount inside RRSP, consider withdrawing from RRSP or convert to RRIF when not working; defer workplace pensions to maximize their payout benefit and avoid pension income penalties (i.e., age 55 or even age 60). Most pensions I know have penalties associated with them if you tap them early, examples:

• 0.3% for each month between age 60 and age 65, (pension is reduced) and
• 0.4% for each month by which your early retirement date precedes age 60.

Ouch!


----------



## gibor365

My Own Advisor said:


> This my understanding:
> -RRSP can be converted to RRIF at any age, don't need to be age 71!
> -some brokerages charge a fee for RRSP withdrawals, some same brokerages charge no fee once RRIF set up
> -no withholding taxes on RRIF min. withdrawals, there is ALWAYS RRSP withholding taxes on RRSP withdrawals
> -you don't have to convert all your RRSP into a RRIF, you can convert just a portion, say $100k if you wanted
> -"forced" RRIFs minimum withdrawals can help with a) income you want, now, and b) smoothing out taxes as to avoid getting a large tax hit(s) later in life.


One more RRIF advantage.... for SRRIFs , minimum withdrawals ALWAYS attributed to beneficiary , not to contributior , if you withdraw more than min , rest of the amount will be attributed to contributor (if contribution were made in last 3 years).


----------



## Mookie

cashinstinct said:


> To comeback to op's question: pretty clear to me you can retire at age 55. Good work!





gibor365 said:


> I'd even say that he can retire much earlier  (esp. considering his DB)


Thanks to everyone so far for your input! I do get the feeling from the discussion so far that my plan is pretty solid. 

I do believe that I could retire today if I really wanted to, but this wouldn't leave much of a buffer if the markets underperformed my projections over an extended period of time. 

I guess these last few years of working are mainly about building up that buffer to a level that I feel comfortable making the leap into retirement.


----------



## My Own Advisor

You're in stellar shape Mookie  Very well done.


----------



## redsgomarching

My Own Advisor said:


> This my understanding:
> -RRSP can be converted to RRIF at any age, don't need to be age 71!
> -some brokerages charge a fee for RRSP withdrawals, some same brokerages charge no fee once RRIF set up
> -no withholding taxes on RRIF min. withdrawals, there is ALWAYS RRSP withholding taxes on RRSP withdrawals
> -you don't have to convert all your RRSP into a RRIF, you can convert just a portion, say $100k if you wanted
> -"forced" RRIFs minimum withdrawals can help with a) income you want, now, and b) smoothing out taxes as to avoid getting a large tax hit(s) later in life.
> 
> If you have a decent amount inside RRSP, consider withdrawing from RRSP or convert to RRIF when not working; defer workplace pensions to maximize their payout benefit and avoid pension income penalties (i.e., age 55 or even age 60). Most pensions I know have penalties associated with them if you tap them early, examples:
> 
> • 0.3% for each month between age 60 and age 65, (pension is reduced) and
> • 0.4% for each month by which your early retirement date precedes age 60.
> 
> Ouch!


i thought there was a small amount of withholding tax on rrif withdrawals


----------



## Eclectic12

^^^

YMMV ... up to the minimum RRIF withdrawal does not have withholding tax. Taking more than the minimum means the difference is subject to the same scale as an RRSP withdrawal.

For example, take exactly the minimum RRIF withdrawal = no withholding tax, take the minimum plus $3K = $3K subject to the 10% withholding tax.

http://www.taxtips.ca/rrsp/rrifminimumwithdrawal.htm
http://www.taxtips.ca/rrsp/withholdingtax.htm


Of course, when the tax return is filed up to April the following year, any discrepancy for the actual tax versus the withholding tax will be reset as needed (like the employment withholding tax).


Cheers


----------



## Eclectic12

My Own Advisor said:


> This my understanding:
> -RRSP can be converted to RRIF at any age, don't need to be age 71!


+1 ... some of the posters writing about their early retirement have written that part of their plan for dealing with the OAS clawback was to convert some/all of their RRSP to a RRIF many years before age 71.




My Own Advisor said:


> ... -some brokerages charge a fee for RRSP withdrawals, some same brokerages charge no fee once RRIF set up


I would bump the "some brokerages" to "almost all brokerages". 

This thread had few exceptions.
http://canadianmoneyforum.com/showt...unt-Brokerage-NOT-charge-for-RRSP-withdrawals

I haven't done a thorough review so it may have changed but somehow, I doubt it.




My Own Advisor said:


> ... -no withholding taxes on RRIF min. withdrawals, there is ALWAYS RRSP withholding taxes on RRSP withdrawals
> -you don't have to convert all your RRSP into a RRIF, you can convert just a portion, say $100k if you wanted


+1 ... though this wording may obscure that where the RRIF withdrawal is over the minimum, the same withholding tax schedule is used as RRSPs.
Like employment withholding tax, the final tax return will fix any discrepancies.


Cheers


----------



## Mookie

Mookie said:


> my current estimate for CPP is based on some numbers I ran a few years back, which supposedly took into consideration the non contributory years, but it was not an official estimate from the CPP folks, so a couple weeks ago I mailed in a request (from the link below) to confirm my numbers. When I get a reply, I will update this thread with the numbers.
> 
> http://www.servicecanada.gc.ca/fi-if/index.jsp?app=prfl&frm=isp1003&lang=eng


Well, I finally got my official CPP Estimate from Service Canada, after 3.5 months. I was starting to wonder if they had lost it.

According to what they sent me, if I stop working at age 55, and don’t start collecting my CPP until age 70, I will get $16,050 per year. My previous estimate from a non-official source was $12,600 per year, so assuming they are correctly accounting for those non-contributory years from age 55 to 70, this is a small favorable adjustment to my overall retirement projections.


----------



## al42

Mookie said:


> Well, I finally got my official CPP Estimate from Service Canada, after 3.5 months. I was starting to wonder if they had lost it.
> 
> According to what they sent me, if I stop working at age 55, and don’t start collecting my CPP until age 70, I will get $16,050 per year. My previous estimate from a non-official source was $12,600 per year, so assuming they are correctly accounting for those non-contributory years from age 55 to 70, this is a small favorable adjustment to my overall retirement projections.


Well i had a similar experience..I retired at 48 and asked them for a estimate and they told me a would receive aprox. $8000. if 
i took CPP at 65. I asked again this year and now they tell me it will be $12,500 per year. So,I'm not sure which one I should believe.
Guess the only way to know for sure is wait till I'm 65 and see what they decide to give me.


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## Ihatetaxes

Mookie said:


> Well, I finally got my official CPP Estimate from Service Canada, after 3.5 months. I was starting to wonder if they had lost it.
> 
> According to what they sent me, if I stop working at age 55, and don’t start collecting my CPP until age 70, I will get $16,050 per year. My previous estimate from a non-official source was $12,600 per year, so assuming they are correctly accounting for those non-contributory years from age 55 to 70, this is a small favorable adjustment to my overall retirement projections.


Interesting result! I am requesting estimates for the wife and I. She retired at 43 and I will be done at 53 so interested in the projections for 60, 65 and 70.


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## RBull

Eclectic12 said:


> I would bump the "some brokerages" to "almost all brokerages".
> 
> This thread had few exceptions.
> http://canadianmoneyforum.com/showt...unt-Brokerage-NOT-charge-for-RRSP-withdrawals
> 
> I haven't done a thorough review so it may have changed but somehow, I doubt it.
> 
> 
> 
> 
> 
> Cheers


On the RRSP withdrawal fees I believe there was only one exception mentioned- RBC Direct Investing - Royal Circle members. I have made approx 18 RRSP withdrawals in the past 3 years and can confirm there is no fee for RBC DI RC members. Not sure if any other institutions offer this free or not.


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## RBull

Mookie said:


> Well i had a similar experience..I retired at 48 and asked them for a estimate and they told me a would receive aprox. $8000. if
> i took CPP at 65. I asked again this year and now they tell me it will be $12,500 per year. So,I'm not sure which one I should believe.
> Guess the only way to know for sure is wait till I'm 65 and see what they decide to give me.


 



al42 said:


> Well i had a similar experience..I retired at 48 and asked them for a estimate and they told me a would receive aprox. $8000. if
> i took CPP at 65. I asked again this year and now they tell me it will be $12,500 per year. So,I'm not sure which one I should believe.
> Guess the only way to know for sure is wait till I'm 65 and see what they decide to give me.





Ihatetaxes said:


> Interesting result! I am requesting estimates for the wife and I. She retired at 43 and I will be done at 53 so interested in the projections for 60, 65 and 70.



Interesting but not surprising from Service Canada. I tried their calculator but it doesn't seem at all accurate for earlier retirees. Didn't try calling though. 

This one seems more reasonable and is very close to the unofficial (free) estimates dogger1953 did for me and for my wife before he stopping doing them. http://www.holypotato.net/?p=1694


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## gibor365

> Guess the only way to know for sure is wait till I'm 65 and see what they decide to give me.





> Interesting but not surprising from Service Canada.


You're right! I called Service Canada, the clerk checked my file and after 10-15 min of extensive calculations  gave me amount (stop working at 50, start CPP at 65). Week after I mailed form with same info and ... got completely different numbers . So, I assume that more or less correct numbers we gonna get when we contact them 1 year before applying for CPP or .... after 1st CPP payment .
Also , from the letter, I got that the difference between starting CPP at 60 and 65 is 40%! It's a lot! Did you get similar %?


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## RBull

Hey gibor365,

not sure who your question was directed to but from the spreadsheet link I posted above. IIRC, I had about 29 years max contributions (early retiree, self employment etc.) 

For me:

@65 amount is increased 40.6% vs. 60
@70 amount is increased 81.5% vs. 60, and 29.1% vs. age 65


----------



## Ihatetaxes

RBull said:


> On the RRSP withdrawal fees I believe there was only one exception mentioned- RBC Direct Investing - Royal Circle members. I have made approx 18 RRSP withdrawals in the past 3 years and can confirm there is no fee for RBC DI RC members. Not sure if any other institutions offer this free or not.


Thanks RBull, helpful to know. No point moving to early RRIF if they continue this policy.


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## RBull

Ihatetaxes said:


> Thanks RBull, helpful to know. No point moving to early RRIF if they continue this policy.


You're welcome Ihatetaxes. Simple and free. Withdrawing is the same process as you're using to transfer cash between accounts instantly. No paperwork etc. The other way RBC DI differs from some others is withdrawals are not cummulative withholding tax wise. Meaning you can do can do as many as you want (as long as they are separated by 24 hours) at a particular level <5K or <15K. Tax is calculated for each specific withdrawal, not the cume total for the year, like some institutions do, potentially delaying tax or for some eliminating unnecessarily paying more. 

I have a LIRA as well that I just set up minimum withdrawals on this year, but don't want to move any RRSP assets there at this point to maintain max flexibility.


----------



## janus10

RBull said:


> Hey gibor365,
> 
> not sure who your question was directed to but from the spreadsheet link I posted above. IIRC, I had about 29 years max contributions (early retiree, self employment etc.)
> 
> For me:
> 
> @65 amount is increased 40.6% vs. 60
> @70 amount is increased 81.5% vs. 60, and 29.1% vs. age 65


Hi RBull,

I, too, had about 29 years at max YMPE, but using the calculator link you provided I'm seeing 100% more by taking it @ 70 vs. @ 60 with my calculations. I think it depends on also how early one retires so that it affects how many zero earning years are NOT dropped out.


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## gibor365

> @65 amount is increased 40.6% vs. 60


So it's about same number I got


----------



## al42

Also , from the letter, I got that the difference between starting CPP at 60 and 65 is 40%! It's a lot! Did you get similar %?[/QUOTE]

From the letter i received in 2009 the difference starting at 60 or 65 is 22%.
From the letter I got this year the difference is 36%.
I remember they made some changes a few years ago that would probably explain the difference
i just don't remember exactly what they did.


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## livewell

As an exercise I took a CPP spreadsheet (based on the same source) and created a table showing the cumulative CPP paid vs Age, for each Age 60-70 for starting CPP. I then went through the table highlighting the cell in each row that maximizes my CPP payout. In short

If I die before 72 - start CPP @60
If I die @75 - start CPP @62
If I die @80 - start CPP @64
If I die @85 - start CPP @67
If I die @90 - start CPP @69
And I have to reach 93 to maximize CPP payout by delaying to start to 70.

Now that's good, all I need to know now is how long I will live for 

This doesn't consider the potential value from investing early CPP payout, nor the benefit of CPI indexed longevity insurance from delaying CPP.


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## gibor365

> As an exercise I took a CPP spreadsheet (based on the same source)


 Actually I wanted to do exactly the same , so thank you for publishing those results...


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## Mookie

gibor365 said:


> Also , from the letter, I got that the difference between starting CPP at 60 and 65 is 40%! It's a lot! Did you get similar %?


According to what Service Canada sent me, I will get 42% more $$$ at age 70 than I would if I take my CPP at 65.


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## Franky Jr

Mookie, has this all been accomplished on 1 salary, in and around the 100K mark for your life? Looks well planned to me.


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## Mookie

Franky Jr said:


> Mookie, has this all been accomplished on 1 salary, in and around the 100K mark for your life? Looks well planned to me.


Not entirely. When my wife and I met, we were both working. My salary of course was less back then, and although her salary wasn't that much, it all adds up. She continued to work until we had our first child (17 years ago), and has been a stay at home mom ever since. Meanwhile my salary gradually increased as the years went on, to the point where it is now.


----------



## Retiredguy

Mookie said:


> According to what Service Canada sent me, I will get 42% more $$$ at age 70 than I would if I take my CPP at 65.


Mookie. I just saw and read your orginal post. As far as CPP is concerned I suggest you read the many articles by Doug Runchey on RETIREHAPPY.CA and at DRPENSIONS.CA. Doug is an expert in CPP and it's much more complicated than any information CPP provides. Don't rely on info from CPP.

With regard to your original post its obvious you're on a great financial track and easy to see retirement at 55. My comments are about "what ifs" that you should consider.
Do you have Wills?
Do you have Enduring PA's?
What happens if you or your wife die, what does the financial picture look like and vi sa versa?
What happens with your pensions? Do they die with you or maybe carry-on at a reduced amount for your wife?
Do you have each other designated as successor holders of the TFSA's (as opposed to beneficiaries)
Do you have your non reg accounts as JWROS.
Do you have the RRSP accounts with each other as named beneficiaries?
What impact would a death have on CPP and OAS. (CPP is not a straight forward as it seems...learn from Doug). Upon one death its entirely possible with your projected income that you will lose both (2) OAS amounts and if it's you that dies your wife may only get half or less of your CPP ... not the 60% CPP talks about, and much less than half to you of hers if she passes.. Do you understand that there is no greater survivor benefit by delaying CPP to age 70? I personally think you should take CPP at 65 and OAS at 70 not the other way you have stated. If at 70 you are not eligible for OAS because of your income level it might be appropriate to hand off money to the kids to reduce your income. At age 70 the top end of the clawback range is correspondingly higher as well.
Do you have your bank accounts in JWROS?
Cars in JWROS?
House in JWROS? Also I wouldn't be too firm in the plan about downsizing in 2028 . That thinking might change and you probably won't need/want the additional cash flow.
Medical costs. We're blessed in Canada but things are changing. 
Life Insurance, hopefully you have some now but will consider getting rid of it as your financial situation continues to expand .... and the insurance premiums rise.
Don't know where you live but young people getting into Real Estate is much more difficult now than it was generations ago. Helping my kids into RE that's something I never planned for but have done and many families are now doing it.!
Children's Weddings can be expensive!
Travelling is probably the most expensive thing in retirement. 
Also if your kids get married there is additional birthdays gifts etc and if grandchildren you'll probably want to start giving and saving for their education! This costs me 1000 per month!.

Finally don't concern yourself with an absolute wealth number. My own opinion is that while a big number might make you feel good it is the monthly cash flow amount that is important.


----------



## Retiredguy

Mookie

If you retire at 55 AND have paid MAXIMUM contributions since age 18 you will have 37 years of the 39 years required to get full normal pension at age 65. Based on 37/39 of 2017 max you would get 12684.40 per year at age 65. HOWEVER !! if you have not paid the max each each you will get less. The formula is age 65-18 = 47 years of possible contributions, less a 17% dropout of low or no contribution years .... so they use your best 39 years, but if any of those years is less than max it will reduce your pmt accordingly. For instance maybe someone has 30 max years and 9 years where they didn't contribute max. As an example lets says they only contributed half for those 9 yrs. Despite making contributions for 39 years they get credit for only a total of 34.5 so their pmt would equal 34.5/39 at age 65.
The 17% low or no contribution dropout years is not optional.


----------



## Retiredguy

You also have to factor in that new pensions are based on the AYMPE industrial wage index whereas pension being paid are indexed at the CPI. The trend now and has been for the past 10 or so years for the industrial wage index (IWI) to be more than CPI so for example someone age 70 in 2017 starting their pension will be getting 42% plus 5% more. Why, because if they had taken their pension in 2012 it would have been indexed on the CPI which has been less than the IWI. Will that trend continue or reverse who knows?

Don't pay any attention to the CPP estimates. Once you have your stmt of contributions and if you are not working further you can learn to do your own calculations following great instruction from Doug Runchey (RETIREHAPPY.CA or DRPENIONS.CA) or for a fee he will do them for you.


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## Joebaba

HolyPotato.net also has a CPP calculator that is very easy to use. Just google HolyPotato and CPP.
I followed Doug's instructions, and then used the HolyPotato calculator, and they came to within $30 of each other.


----------



## Mookie

Hi Retiredguy, thanks for your thorough and thoughtful posts. Many great things to consider, some of which I’ve got covered, and others which will go on my to-do list.



Retiredguy said:


> I suggest you read the many articles by Doug Runchey on RETIREHAPPY.CA and at DRPENSIONS.CA. Doug is an expert in CPP and it's much more complicated than any information CPP provides. Don't rely on info from CPP.





Retiredguy said:


> If you retire at 55 AND have paid MAXIMUM contributions since age 18 you will have 37 years of the 39 years required to get full normal pension at age 65. Based on 37/39 of 2017 max you would get 12684.40 per year at age 65. HOWEVER !! if you have not paid the max each each you will get less. The formula is age 65-18 = 47 years of possible contributions, less a 17% dropout of low or no contribution years .... so they use your best 39 years, but if any of those years is less than max it will reduce your pmt accordingly.


I had done some research a few years ago about how to calculate CPP myself, based on my CPP contributions statement. Based on that info, I created a spreadsheet to do the calculations but I thought that getting an official estimate straight from Service Canada would be the most accurate and reliable source of truth. It’s disappointing to hear it’s not that simple. 

I’ve paid maximum CPP contributions since 1992, so by 2023 I should have 32 years of max contributions, plus some “less than max” amounts between 1986 and 1991. 

From a big picture perspective, CPP is just a small component of my overall financial plan for retirement, so even if my actual CPP ends up being half of what they told me, I will still be just fine. Having said that, I will definitely take some time to read through these articles to get a better understanding and refresh my memory (and my spreadsheet) on how to calculate this myself. 



Retiredguy said:


> Do you have Wills?
> Do you have Enduring PA's?
> Do you have your non reg accounts as JWROS.
> Do you have the RRSP accounts with each other as named beneficiaries?
> Do you have your bank accounts in JWROS?
> Cars in JWROS?
> House in JWROS?
> Do you have each other designated as successor holders of the TFSA's (as opposed to beneficiaries)


Yes to all of the above.



Retiredguy said:


> What happens if you or your wife die, what does the financial picture look like and vi sa versa?
> What happens with your pensions? Do they die with you or maybe carry-on at a reduced amount for your wife?


I’ve run some what-if projections on these scenarios in the past. Since I’m the only income earner, my wife would have taken a significant hit financially, however I’ve mitigated this through life insurance on myself. I don’t have life insurance on my wife, as there’s no income to be lost (although some tax benefits would be lost). 

Regarding company pensions, I will have to make a choice at retirement about what kind of survivor benefit level (if any) to choose, with of course a trade-off in the pension amount while we’re both still alive. I think the decision here will need to be made closer to retirement based on our health and risk tolerance at the time.



Retiredguy said:


> What impact would a death have on CPP and OAS. (CPP is not a straight forward as it seems...learn from Doug). Upon one death its entirely possible with your projected income that you will lose both (2) OAS amounts and if it's you that dies your wife may only get half or less of your CPP ... not the 60% CPP talks about, and much less than half to you of hers if she passes.. Do you understand that there is no greater survivor benefit by delaying CPP to age 70? I personally think you should take CPP at 65 and OAS at 70 not the other way you have stated. If at 70 you are not eligible for OAS because of your income level it might be appropriate to hand off money to the kids to reduce your income. At age 70 the top end of the clawback range is correspondingly higher as well.


Part of the reason I want to retire at 55 and not later is so I can keep my taxable income lower through a longer retirement. By working longer and retiring later, my total income would be high enough that OAS clawback would be an issue. I understand that if one of us dies, then the surviving spouse will end up with all the taxable income from non-registered investments etc, which will further impact OAS clawback amounts. There’s probably more I need to know here, so I will be learning from Doug, and based on that will reconsider what age to take CPP and OAS. Thanks again.



Retiredguy said:


> Also I wouldn't be too firm in the plan about downsizing in 2028 . That thinking might change and you probably won't need/want the additional cash flow.


2028 is just a date I picked in my projection. I figured it was a reasonable assumption based on the age of my kids, but if we’re happy living there longer, then I see no rush to downsize as we should have enough cash to live comfortably either way. 



Retiredguy said:


> Medical costs. We're blessed in Canada but things are changing.


This one is really hard to plan for. I think the best I can do is look at my projection, which includes $10,000 of contingency expenses every year, plus the fact that it says we’ll die with an estate of $8M, and I can say that between those two, there should be enough slack to cover it. 



Retiredguy said:


> Life Insurance, hopefully you have some now but will consider getting rid of it as your financial situation continues to expand .... and the insurance premiums rise.


As mentioned above, I have term insurance on myself, but not on my wife. I don’t see a need to continue with life insurance on myself after I’m retired. 



Retiredguy said:


> Don't know where you live but young people getting into Real Estate is much more difficult now than it was generations ago. Helping my kids into RE that's something I never planned for but have done and many families are now doing it.!


We’ve taught our kids from an early age to be responsible with money, and that education is the key to a great career. Both are doing excellent in high school, and we’ve got enough set aside in RESPs to completely cover their university education, so they will graduate debt free, and will hopefully land well-paying jobs in their chosen fields. We will likely have the financial resources to help them out with a down payment if necessary, but I do think it’s best for them in the long run to be able to make it on their own if they can. I guess we’ll have to wait and see on that one.



Retiredguy said:


> Children's Weddings can be expensive!


My thought on this one is to give my daughters a lump sum as a wedding gift, which they can use however they like. If they can save money on their wedding, then they can keep the rest. If they want to go off the deep end with things, then they can pay for anything over and above the lump sum. We’ll see if it ends up being as simple as that, but this is what my parents did for me, and it worked well. 



Retiredguy said:


> Travelling is probably the most expensive thing in retirement.


It’s also one of the most expensive things pre-retirement. I’ve set aside $10,000 per year in my projections for travel, which we have yet to exceed currently as a family of four, so should suffice in retirement for the two of us.


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## Mookie

Joebaba said:


> HolyPotato.net also has a CPP calculator that is very easy to use. Just google HolyPotato and CPP.
> I followed Doug's instructions, and then used the HolyPotato calculator, and they came to within $30 of each other.


Hey Joebaba, thanks very much for pointing me to the CPP calculator on HolyPotato.net. It appears that it was built based on Doug Runchey's knowledge of the CPP formulas. After plugging in my numbers for contribution history, my result was that I will receive CPP of $16,136 at age 70, or $11,363 at age 65, assuming I continue to max between now and age 55, and then retire. This is very close to the numbers I got from Service Canada.


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## Retiredguy

Mookie, You're in great shape with the present numbers, your execution and planning. Continued good luck!


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## Mookie

*2017 Year End Update*

Hi folks, overall since I started this Money Diary last year, things have been going smoothly and the numbers are all heading in the expected direction. Assets and pensions are getting larger, debts are getting smaller, my wife and I are getting older… :chargrined:

I believe I’m still comfortably on track to hit the retirement button in 2023, at age 55, but I welcome any comments or questions on my status and my plan.

Below is my 2017 year-end update of the numbers and the plan from Post #1 in this thread:

General Info:

Goal: to retire at age 55, in 2023
I’m 49 years old, and my wife is 48
We have 2 kids, aged 17 and 14

Annual Income

My salary: $106,700 
My non-registered dividend income: $7,600 
Wife’s non-registered dividend income: $19,600 
Basement suite income: $10,680 
Total Annual Income: $144,580

Typical Annual Expenses

Taxes: $28,300
Non-Discretionary: $37,200 (up $10,200 since last year, due to costs to paint our house, replace the fence, braces for 1 kid, and car insurance for a 2nd car – we previously had just 1 car)
Discretionary: $19,300
Total Annual Expenses: $84,800

Assets:

House: $900,000 (Our neighbour’s very similar house just sold for $1.25M, but I’m using a conservative number due to the potential housing bubble)
My Non-Registered Account: $215,000 
Wife’s Non-Registered Account: $517,000
My TFSA: $82,000
Wife’s TFSA: $81,000
My RRSP: $117,000
Wife’s RRIF: $56,000 (converted RRSP to RRIF this year)
Spousal RRSP: $196,000 
RESP: $164,000 (I have just hit the lifetime maximum contribution of $50k for both kids on this, and kid #1 will be starting university this fall, so account will gradually start shrinking going forward)
Investments are generally invested in dividend paying large cap stocks, ETFs, and mutual funds. Canadian exposure is about 85%, US is 11%, International 4%.
Above investments currently generate a total of about $53,000/yr in dividends, of which only the portion in the non-registered accounts are taxable.
Current trailing 5 year total return is 9.0%.
Total Assets: $2,328,000


Liabilities:

HELOC @ 3.2% (non investing): $0
HELOC @ 2.35% (My investing): $31,000
HELOC @ 3.2% (Wife’s investing): $138,000
The investing HELOCs are being gradually paid down over time, but we’re in no rush, as the interest is tax deductible, and the interest rate is lower than the overall yield on the investments (let alone the capital gains).
In the past, we’ve used the investing HELOCs to jump in and buy more equities on a price correction, but as we get closer to retirement, we’re more resistant (but not immune) to those temptations.
Total Liabilities: $169,000

Current Net Worth: $2,159,000

Planned sources of income in retirement:

Basement suite income of $10,680 will continue until whenever we decide to downsize (Maybe around 2028)
My DB pension from current employer: $14,900/yr starting at age 55, with a bridge of $3,200/yr from 55 to 65, indexed to inflation
My DB Pension from previous employer: $24,000/yr starting at age 65, indexed to inflation
My CPP: $16,000/yr starting at age 70, indexed to inflation
My OAS: $6,942/yr starting at age 65, indexed to inflation
Wife’s CPP: $3,000/yr starting at age 70, indexed to inflation
Wife’s OAS: $6,942/yr starting at age 65, indexed to inflation
Ongoing dividends from existing investments (currently around $53,000/yr, but will be more in retirement, partly tax sheltered)
RRSP withdrawals as needed
All of the above pensions could be started earlier or later for a trade-off of a bit more/less per year. The decision of when to actually take them will probably boil down to our overall health and expectations for longevity at the time.


Expected expenses in retirement

I expect our expenses in retirement to be slightly lower than pre-retirement, mostly due to being in a lower tax bracket. Some work related expenses will drop off, but I expect those will be offset by additional spending on fun.


The Plan:

Continue to max out both TFSAs annually both before and after retirement
My wife to gradually withdraw from her RRIF from now until 2023 incurring very little tax, as her taxable income level is very low.
Continue to max out the spousal RRSP between now and 2020, then switch to contributing to my RRSP for 2021-2023. This will allow my wife to start drawing down on the spousal RRSP beginning in 2023.
Use any remaining excess cashflow between now and 2023 on HELOC repayment, and/or additional investing
Retire in 2023 at age 55
Keep total taxable annual income as even as possible year over year from age 55 onwards, and keep taxable income as balanced as possible between me and my wife to be as tax-efficient overall as possible. This will be achieved by withdrawing more from RRSPs earlier in retirement, then withdrawing less from RRSPs as other pensions kick in.
Downsize from existing house around 2028, when value is conservatively expected to be $1,280,000. Use $800,000 for downsized home, and move the remaining $480,000 to dividend paying equities to further fund retirement.


According to my financial forecast spreadsheet, which I update annually with actual numbers, my wife and I are now on track to hit a net worth of $8.4M at age 85 (including primary residence), after accounting for all assumed future income, expenses, and investment returns. Last year at this time, the number was $8.0M.


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## milhouse

Great summary and outline. Really impressed with where you're at with your plan particularly with the single income while bankrolling two teenagers. 
I also tried to convince the missus to unlock some value by using a HELOC to invest but it was pretty much a non-starter with her.


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## My Own Advisor

Mookie,

Very impressed to say the least...geez.... 

Here are my general comments and observations:

Planned sources of income in retirement:
Basement suite income of $10,680 will continue until whenever we decide to downsize (Maybe around 2028) - I was going to ask how long you intend to keep up the basement rental?? Nice to see you have an exit strategy.

My DB pension from current employer: $14,900/yr starting at age 55, with a bridge of $3,200/yr from 55 to 65, indexed to inflation - That's good!! A future "bond" for you.
My DB Pension from previous employer: $24,000/yr starting at age 65, indexed to inflation - As above 

My CPP: $16,000/yr starting at age 70, indexed to inflation - are you planning to defer CPP as long as you can to get a bigger cut from the government? Seems smart to exhaust your personal assets first and shift the longevity risk to the government.
Wife’s CPP: $3,000/yr starting at age 70, indexed to inflation

My OAS: $6,942/yr starting at age 65, indexed to inflation + Wife’s OAS: $6,942/yr starting at age 65, indexed to inflation - I hope they don't make drastic changes to the plan for us 40-somethings!

Ongoing dividends from existing investments (currently around $53,000/yr, but will be more in retirement, partly tax sheltered) - wow.

RRSP withdrawals as needed - makes sense to exhaust most of your RRSP, before TFSA assets AND before you take on CPP + OAS payments. Otherwise you might be in an OAS clawback situation.


The Plan:
Continue to max out both TFSAs annually both before and after retirement - this is our plan as well....I hope we can do this until our 60s anyhow. I don't see the point of dying rich; enjoy it now or gift it accordingly to those in need.

Retire in 2023 at age 55 - Do you plan to be out of debt at time of retirement? You owe $170k now. Curious. It would seem a mix of assets + paid off home + no HELOC is ideal and wondering why you would bother with HELOC at this point given other assets are doing so well??

Lastly, I love the plan of using downsized home sale proceeds for non-reg. dividend paying equities (to further fund retirement) and deferring your CPP. With your pensions + government benefits + TFSAs + healthy non-reg income I think you're really, I mean really, set.

Continued success.


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## Mookie

milhouse said:


> Great summary and outline. Really impressed with where you're at with your plan particularly with the single income while bankrolling two teenagers.
> I also tried to convince the missus to unlock some value by using a HELOC to invest but it was pretty much a non-starter with her.


Thanks Milhouse, in my case, it was actually my wife who first brought up the idea of using the HELOC for investing. With the HELOC interest rate being around 3% (and tax deductible), and total return averaging 9%, she figured why not make a little extra with "other people's money"? I can't argue with that, and it's worked out pretty well for us overall. 

That being said, I think it's more important that you and your wife are both comfortable with your investing strategy, rather than just doing something because it's working for someone else. Happy wife, happy life, as they say...


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## CalgaryPotato

Looks like you are in great financial shape.

The one thing I'd ask is, given your current situation are you too aggressive with your investments? 

I get that you have the DB plans, which allow you to be more aggressive, but you are not just 100% in equities (almost totally in our tiny Canadian economy) you are leveraged on them. If it was me I'd be thinking that the potential benefit of the extra returns would be starting to get outweighed by the risks of losing what is already enough of a nest egg to retire on.

Just some food for thought...


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## Mookie

Hi MOA, thanks for your comments and feedback.



My Own Advisor said:


> My CPP: $16,000/yr starting at age 70, indexed to inflation - are you planning to defer CPP as long as you can to get a bigger cut from the government? Seems smart to exhaust your personal assets first and shift the longevity risk to the government.


Yes, the plan is to defer CPP for both of us to age 70, since we don’t really need this income sooner anyway. If our health declines earlier than expected, we would probably end up taking it earlier. 



My Own Advisor said:


> RRSP withdrawals as needed - makes sense to exhaust most of your RRSP, before TFSA assets AND before you take on CPP + OAS payments. Otherwise you might be in an OAS clawback situation.


Yes, I want to avoid OAS clawback if possible, and also smooth out my taxable income over my entire retirement. It’s surprising how many people think that it’s –always- best to keep money inside your RRSP until you absolutely have to start taking it out at age 71, but for those of us that retire early, there is a big opportunity to take out that RRSP money at very low tax rates between the start of retirement, and the time that income from pensions start coming in. 



My Own Advisor said:


> The Plan:
> Continue to max out both TFSAs annually both before and after retirement - this is our plan as well....I hope we can do this until our 60s anyhow. I don't see the point of dying rich; enjoy it now or gift it accordingly to those in need.


According to my fairly conservative financial forecast spreadsheet, we never need to touch our TFSA money for as long as we live, so if things go according to plan, then we will just have to splurge more in retirement, or quite likely do some pre-inheritance gifting to our kids from time to time. 



My Own Advisor said:


> Retire in 2023 at age 55 - Do you plan to be out of debt at time of retirement? You owe $170k now. Curious. It would seem a mix of assets + paid off home + no HELOC is ideal and wondering why you would bother with HELOC at this point given other assets are doing so well??


Yes, the plan is to continue paying down the HELOCs at a pace that allows for them both to reach $0 by the time I retire. The only reason we still have this debt is because it’s making us extra money. With an interest rate of about 3% (tax deductible) and an average total return of 9%, we’re clearing more than 6% on that $170,000 debt, which is more than $10,000 per year. Hmmm… maybe I should keep this thing rolling in retirement after all… :tennis:


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## Mookie

CalgaryPotato said:


> Looks like you are in great financial shape.
> 
> The one thing I'd ask is, given your current situation are you too aggressive with your investments?
> 
> I get that you have the DB plans, which allow you to be more aggressive, but you are not just 100% in equities (almost totally in our tiny Canadian economy) you are leveraged on them. If it was me I'd be thinking that the potential benefit of the extra returns would be starting to get outweighed by the risks of losing what is already enough of a nest egg to retire on.
> 
> Just some food for thought...


Hi CalgaryPotato, I hear what you're saying, and if I didn't have the DB pensions I probably would be a little less agressive. It's just hard to say goodbye to the extra money that it generates, although I know it's a product of assuming an increased level of risk. 

To put it in perspective, back in 2011 my total leverage debt was $280k, but I'm now down to $169k, which is about 7% of my total portfolio value. I will have this down to $0 by the time I retire.


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## Mookie

*2020 Year End Update*

It’s been three years since I last updated my money diary, so I guess I’m long overdue for an update...

Well, wasn’t 2020 fun? Back in April my wife and I would have been celebrating if our portfolio could somehow miraculously turn around and end the year and be down only 10%, but in the end, we had a total return of +6%. Not bad, all things considered...

Despite the ups and downs of 2020, overall our numbers are all heading in the expected direction, and we believe we can still retire comfortably in 2023, at age 55, if we want to. Lately my wife and I have been pondering delaying retirement to 60, but we’ll wait and see if that’s really needed. My work has been quite manageable and there is of course increased pensions at 60.

Here’s where we’re at as of the end of 2020:

General Info:

Goal: Retire at age 55, in 2023
I’m 52 years old, and my wife is 51
We have 2 kids, aged 20 and 17 (both in university)
Projection assumptions: 5% total return on investments, 4% appreciation rate on house, 2% inflation rate
Annual Income

My salary: $120,000
2020 Annual Expenses

Taxes: $36,000
Non-Discretionary: $28,000
Discretionary: $17,000 (Discretionary would normally be higher, but vacations were not in the cards this year)
Total Annual Expenses: $81,000
Assets:

House Assessed Value: $1,100,000
My Non-Registered Account: $306,000
Wife’s Non-Registered Account: $776,000
My TFSA: $118,000
Wife’s TFSA: 106,000
My RRSP: $143,000
Wife’s RRIF: $37,000
Spousal RRSP: $260,000
RESP: $172,000 (Our kids are in 1st and 3rd year university, so we have been gradually withdrawing from the RESP for a few years now. We expect to only need about $50-$70K to cover their remaining tuition, so the rest will end up back in our retirement savings)
Our investment allocation is about 49% in US Equity Index ETFs, 45% in Canadian banks, and about 6% in International equity ETFs. Since I have a solid base of pensions, we don't feel the need to have a more balanced stock / bond portfolio.
Current trailing 5 year total return is 10.1%, and trailing 10 year total return is 7.5%.
Total Assets: $3,018,000
Liabilities:

HELOC for investing purposes: $275,000
The HELOC is being paid down gradually, but we’re in no rush, as the interest is tax deductible, and the interest rate is lower than the total return on the investments.
We were actually pretty lucky back in mid March of 2020 to pick up another $80K of TD at bargain basement prices through some additional HELOC borrowing.
Current Net Worth: $2,743,000

Planned sources of income in retirement:

My DB pension from current employer: $16,700/yr starting at age 55, with a bridge of $3,400/yr from 55 to 65, indexed to inflation
My DB Pension from previous employer: $26,000/yr starting at age 60, with a bridge of $5,200/yr from 60 to 65, indexed to inflation
CPP and OAS x 2 for the two of us, likely deferred to age 70
All of the above pensions could be started earlier or later for a trade-off of a bit more/less per year. The decision of when to actually take them will probably boil down to our overall health and expectations for longevity at the time.
Expected expenses in retirement

We expect our expenses in retirement to be slightly lower than pre-retirement, mostly due to being in a lower tax bracket. Some work related expenses will drop off, but I expect those will be offset by additional spending on fun. We also plan to spend much more on travel.
The Plan:

Continue to max out both TFSAs annually both before and after retirement
Keep total taxable annual income as even as possible year over year from age 55 onwards, and keep taxable income as balanced as possible between me and my wife to be as tax-efficient overall as possible. This will be achieved by taking advantage of pension income splitting, as well as withdrawing more from RRSPs earlier in retirement, then withdrawing less from RRSPs as other pensions kick in.
Downsize from existing house around 2027, when value is expected to be about $1,390,000. Use about $1,000,000 for a downsized home, and use the remaining $390,000 to further fund retirement.
I have built my own all encompassing financial forecast spreadsheet to track our progress towards retirement, and make sure we stay on track. Assuming retirement at 55 with an average 5% total return, 2% inflation, and based on the above expected sources of income, pensions, and expected future expenses, we would hit a total net worth of $10.7M by age 85. This tells me we are in a very good position to weather any future unforeseen financial turbulence, and still be fine.

I am also a strong believer in VPW, (Variable Percentage Withdrawal) which, if we follow it, should allow us to spend with more freedom and flexibility based on how the market does, so that we can splurge in retirement and enjoy the fruits of our labour rather than being so worried about running out of money that we end up dying with $10.7M in the bank.


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## peterk

Nice looking update!



Mookie said:


> Planned sources of income in retirement:
> 
> My DB pension from current employer: $16,700/yr starting at age 55, with a bridge of $3,400/yr from 55 to 65, indexed to inflation
> *My DB Pension from previous employer:* $26,000/yr starting at age 60, *with a bridge of $5,200/yr from 60 to 65, *indexed to inflation
> CPP and OAS x 2 for the two of us, likely deferred to age 70
> *All of the above pensions could be started earlier or later for a trade-off of a bit more/less per year. *The decision of when to actually take them will probably boil down to our overall health and expectations for longevity at the time.


You are very _sure_ that your previous employer pension provides a bridge benefit, AND it starts at 60? Even though you quit the company priory to age 55?

I thought most pensions, when you retire prior to the earliest retirement date (i.e. quit) give you the option of CV transfer or deferred form pension to whatever the "regular" retirement age is. Either 60 or 65, and that you would not get extra benefits like bridging.
Perhaps I'm wrong, and that's just how my own (less generous) pension works...


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## Mookie

peterk said:


> You are very _sure_ that your previous employer pension provides a bridge benefit, AND it starts at 60? Even though you quit the company priory to age 55?


Thanks Peterk, always good to double-check these things, which I just did... On my latest pension statement from this employer, it does in fact state clearly that I will receive this pension with a bridge from age 60 to 65. There is also the option to start it at age 55, with a 10 year bridge, but at a reduced rate.


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