# Do we have enough to retire on?



## piano mom (Jan 18, 2012)

Thanks everyone for your input.


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## MoneyGal (Apr 24, 2009)

piano mom said:


> I'm very worried that we won't have enough money to last us for another 40 to 50 years.


Then why is he cashing in the DB pension?


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## the-royal-mail (Dec 11, 2009)

Wow very interesting. And I'm sorry to hear of the job loss. That can be devastating for a lot of people.

The only thing I disagree with is borrowing to invest, but in your case you have a heck of a lot of savings. Even without the $330K from the DB you still have lots of money.

At this point it would be my recommendation not to touch DB, RRSP and RESP. How much money would that leave you with?

Retiring at 43 may be a bit early. He probably still has a few good earning years ahead of him.

Could you sell the house and move into something much more modest in the $150-200K range? Or perhaps move to a smaller town far from any big city? That would give you some cash from the sale of the house.

You should also cash in that investment loan and pay it off right away. Even if the returns are more than the income, that won't help you now as you need CASH now, not a small amount of monthly income.

You'll obviously have to map this out in some sort of an excel sheet.

Good luck.


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## Four Pillars (Apr 5, 2009)

piano mom said:


> I'm very worried that we won't have enough money to last us for another 40 to 50 years.





MoneyGal said:


> Then why is he cashing in the DB pension?


And why is he completely leaving the work force?

If you don't think you have enough, then one or both of you should get a job - part time even.

What about the business? Can that be expanded if more time is put into it?


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## kcowan (Jul 1, 2010)

I think it is premature to consider retiring. Focus on replacing the earnings. Spreadsheets will just prove this.


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## MoneyGal (Apr 24, 2009)

I'd be curious to know what the estimate of $330K for the DB pension is based on. 

You should visit an actuary and get a very clear understanding of how the lump sum is calculated. 

In particular, you should understand:

(a) what the DB pension would provide in retirement at normal retirement age, 

(b) what it would cost to purchase THE SAME income at normal retirement age at a variety of different interest rate assumptions, and 

(c) the expected return on investment factored into the lump sum offered. (That is, what return are the pension actuaries assuming you will earn on the lump sum such that it is equivalent to the DB pension income.)

You should also factor your own longevity into the pension calculations, given that women are expected to outlive their male partners, and your expression of being "very worried" about outliving your funds.


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## piano mom (Jan 18, 2012)

Thank you for all the responses. To answer the question from MoneyGal, my husband is wanting to cash out his DB because the pension fund has not been fully funded for a few years now and it could mean reduced or loss of retirement income for him in the future. He figures $330k will grow to a more substantial sum by the time he is allowed to start withdrawing from it (55 years old).

He also likes to sail and be more involved in raising our children, helping with homework and sports. 

The business is REALLY small and we don't think it can get big enough to replace the incomes but if needed, I can probably obtain employment myself and earn about $35,000 a year, although he wants me to quit with him.

Our $800k savings is about 60% non registered. It is nice to earn dividend and have capital gain too so leveraging is working well for us thus far and we would like to keep paying down the loan over time instead of selling off right now.





Besides being too early for him to retire, can we do it, though?


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## Eder (Feb 16, 2011)

If I was you I would pay off the loan, sell the house, buy a boat and go on permanent vacation...you'll never miss the 9-5.


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## piano mom (Jan 18, 2012)

Eder said:


> If I was you I would pay off the loan, sell the house, buy a boat and go on permanent vacation...you'll never miss the 9-5.


That's funny, he does love sailing and is currently with a sailing coop Unfortunately, I can't stand sailing, I get seasickness easily.


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## RoR (Jan 18, 2012)

Eder said:


> If I was you I would pay off the loan, sell the house, buy a boat and go on permanent vacation...you'll never miss the 9-5.


You forgot about the kids.


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## piano mom (Jan 18, 2012)

MoneyGal said:


> I'd be curious to know what the estimate of $330K for the DB pension is based on.
> 
> You should visit an actuary and get a very clear understanding of how the lump sum is calculated.
> 
> ...



Thanks MoneyGal, he based his calculation on his previous annual pension statements and arrived at $330k. He thinks this sum is conservative.


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## steve41 (Apr 18, 2009)

PM me with the RRSP/TFSA/etc breakdowns (by spouse) and I will fire you off a plan.


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## piano mom (Jan 18, 2012)

steve41 said:


> PM me with the RRSP/TFSA/etc breakdowns (by spouse) and I will fire you off a plan.


Thanks Steve41, I'm new here and have to wait for my PM enabled. Will do then.


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## marina628 (Dec 14, 2010)

My husband retired at 42 and works 1 day a week just to keep insurance benefits at his old job he had for 25 years.We have a nine year old and she loves the fact my husband takes her to and from school and has so much time for her than he did not have working the 9-5.The only reason we were comfortable to have him leave his job was because my business is well establish and I now split my $xxx,xxx paycheck with him.
Our oldest has moved out and attends university and one of the things my husband has done since retiring is take up cooking classes so the entire family has benefited not to mention we save about $500 a month on the restaurant bills!We also save on his commuting costs , car repairs ,clothing expenses etc so all these things will add up.


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## piano mom (Jan 18, 2012)

marina628 said:


> My husband retired at 42 and works 1 day a week just to keep insurance benefits at his old job he had for 25 years.We have a nine year old and she loves the fact my husband takes her to and from school and has so much time for her than he did not have working the 9-5.The only reason we were comfortable to have him leave his job was because my business is well establish and I now split my $xxx,xxx paycheck with him.
> Our oldest has moved out and attends university and one of the things my husband has done since retiring is take up cooking classes so the entire family has benefited not to mention we save about $500 a month on the restaurant bills!We also save on his commuting costs , car repairs ,clothing expenses etc so all these things will add up.


Thanks for sharing your experience with us. I think taking cooking lessons is a great idea!!! We can keep our house for the rent, keep our small home business, partly for hobby and withdraw just enough from rrsp to avoid paying taxes. That way, when his LIRA is ripe for collecting, we can start withdrawing from that as well. We should't have to touch our non-reg and that may end up being a good way to leave for our children as inheritance.

Do you guys agree?


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## marina628 (Dec 14, 2010)

We have RESP for the kids but beyond that not going to live my life with them in mind lol.I give my daughter $500 gross check a month while in school and she works for us for that money when she has the time(we have web business so she can work any time and remotely),she can use my cottage and boat when we are not there or borrow my car but my life plan is not worried about leaving stuff to my kids. I will help them out as they go along with education ,buying their first car ,house etc but they will not be waiting for me to kick off lol


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## Square Root (Jan 30, 2010)

You think you can get by on about $40k after tax so say about $50k before tax. To earn this indefinately including inflation, you would require( at 4% SWR) about $1.25 million in a non registered nestegg. I think you might be a little short but fairly close. CPP and OAS will help in later years.


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## piano mom (Jan 18, 2012)

Hi Square Root,

Why all of the $1.25 mil in non-reg? What is the rrsp portion saved for? And my husband's LIRA (his cashed out DB)? We will also eventually sell our almost 4000 sq ft home and perhaps downsize or just rent when the kids are grow.


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## Ihatetaxes (May 5, 2010)

By the time you pay off that $275k loan, your $800k turns into $525k. Add $330k from the pension and your total portfolio would be $855k and net worth of $1,555,000. 

Sell the house, buy a $300k house with a rentable finished basement in Collingwood, Owen Sound or some other town along Georgian Bay (best sailing waters in Ontario plus skiing at your doorstep). You would then have $1.25m invested and early retirement is pretty feasible if you live lean.


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## mind_business (Sep 24, 2011)

I'm certainly not an expert at Pension plans, however I thought I'd share some information about my company's Pension Plan. If I were to take out the Pension as a one time payout, a significant portion (approx 25%) of the amount is taxable. 

This has been a bit of a shock to a few of our retirees over the years. Not sure if you guys have already taken this into account when calculating the net value of your plan. Something to consider.


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## RedRose (Aug 2, 2011)

Would you be able to transfer your hubby's DB pension to a registered plan to save paying straight taxes on it and withdraw at your discretion.
Just my two cents...


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## piano mom (Jan 18, 2012)

Mind Business: He is not allowed to withdraw his pension at this time. It will be locked into a LIRA. We hope to slowly draw from it when it becomes available when he's 55, hopefully minimizing on the taxes.


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## piano mom (Jan 18, 2012)

RedRose: Funny we both thought of the same thing at the same time


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## Daniel A. (Mar 20, 2011)

It does not need to go into an LIRA it can be moved into a locked in RRSP and drawn down from there.


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## Plugging Along (Jan 3, 2011)

Not all DB can be transfered into a regular RRSP. Mine was locked in.


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## Square Root (Jan 30, 2010)

piano mom said:


> Hi Square Root,
> 
> Why all of the $1.25 mil in non-reg? What is the rrsp portion saved for? And my husband's LIRA (his cashed out DB)? We will also eventually sell our almost 4000 sq ft home and perhaps downsize or just rent when the kids are grow.


I was ignoring the RSP vs non registered distinction. Taxes would be different one vs the other. My point is you need about $1.25 million if you paid average tax rates of about 20% whereever you get the funds. I would not count on personal use real estate providing much help in future as it is really difficult to actually downsize and reduce your quality of life. Good luck on your decision.


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## Four Pillars (Apr 5, 2009)

Daniel A. said:


> It does not need to go into an LIRA it can be moved into a locked in RRSP and drawn down from there.


A LIRA is essentially a locked-in RRSP. And no, you can't just draw it down as you please - it's locked in.


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## hboy43 (May 10, 2009)

Eder said:


> If I was you I would pay off the loan, sell the house, buy a boat and go on permanent vacation...you'll never miss the 9-5.


+1!

Personally, I hear the west shores of NL calling me. Those Gros Morne National Park commercials they beam into ROC are very seductive.

hboy43


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## Daniel A. (Mar 20, 2011)

Four Pillars said:


> A LIRA is essentially a locked-in RRSP. And no, you can't just draw it down as you please - it's locked in.



Where did you read in my statement that you could draw it down as you please.


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## steve41 (Apr 18, 2009)

BTW, once I halved their CPP, at 4% ROR/2% infl, their combined ATI (BQ) comes in at $45K. Keeping the house, they will leave a 1.6M estate. Downsizing would bring that BQ up significantly.


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## Xoron (Jun 22, 2010)

hboy43 said:


> +1!
> 
> Personally, I hear the west shores of NL calling me. Those Gros Morne National Park commercials they beam into ROC are very seductive.
> 
> hboy43


And a cheap place to live to boot. NL housing is cheap, provided you're buying a modest house and it's not located in the larger cities.


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## sags (May 15, 2010)

You said your husband wants to take the commuted value because the pension plan is underfunded..........and I believe that if he takes the commuted value while it is underfunded.........his commuted value would be reduced by the percentage of underfunding.

I believe this is the case, so that people taking out the commuted value don't have an advantage over those who remain within the plan.

In effect, you would be locking in the underfunding.

I could stand corrected on this though........anyone?


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## piano mom (Jan 18, 2012)

Now, that would be a bummer! He heard that the pension package will be handed out next week. Crossing my fingers


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## Beaver101 (Nov 14, 2011)

sags said:


> You said your husband wants to take the commuted value because the pension plan is underfunded..........and I believe that if he takes the commuted value while it is underfunded.........his commuted value would be reduced by the percentage of underfunding.
> 
> I believe this is the case, *so that people taking out the commuted value don't have an advantage over those who remain within the plan*.
> 
> *In effect, you would be locking in the underfunding.*I could stand corrected on this though........anyone?


 ... not necessarily. If the plan remains unfunded to the point of being insolvent, then those who took their c.v. and invested well with it will come out ahead. The question is how safe is that unfunded DB plan? Tough decisions to make.


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## Young&Ambitious (Aug 11, 2010)

As this hasn't been mentioned yet I should add in that you should consider cushioning the budget for the unknown eg. care home expenses, illness, etc.


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## Eder (Feb 16, 2011)

Xoron said:


> And a cheap place to live to boot. NL housing is cheap, provided you're buying a modest house and it's not located in the larger cities.


Cheaper than living in the boat? I'm talking 37' Island Packet here.


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## Cal (Jun 17, 2009)

What are your anticipated living expenses?


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## piano mom (Jan 18, 2012)

Cal said:


> What are your anticipated living expenses?


I initially said $3100/month but let's say $42k/year and that would include $3300 towards a new car, about $6 - $7K annual vacation and $2k towards dining. We buy cheap practical clothings and have cheap or free hobbies 

I think we will both continue with part time work and spend lots of quality time with the kids too.


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