Comments on: Retirement Calculations – Part V http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Serge http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-53341 Serge Mon, 17 Jan 2011 13:33:15 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-53341 Tim, I am not sure that I understand your BASE shredsheet. How do you calculate column #3 (Pension)? Is this money that you can put aside for pension? Since your annual income is not here, it is difficult to see the balance. I also do not know if the real return rate can be 4-5%, I would rather count on 1-2%, unless you want to take a risk. For convenience, I would even disregard the return money since it will be balanced with inflation. And lastly, I suspect that OAS depends on CPP and RRSP - more you have CPP and RRSP - less you have OAS, there are some treshholds. Tim, I am not sure that I understand your BASE shredsheet. How do you calculate column #3 (Pension)? Is this money that you can put aside for pension? Since your annual income is not here, it is difficult to see the balance. I also do not know if the real return rate can be 4-5%, I would rather count on 1-2%, unless you want to take a risk. For convenience, I would even disregard the return money since it will be balanced with inflation. And lastly, I suspect that OAS depends on CPP and RRSP – more you have CPP and RRSP – less you have OAS, there are some treshholds.

]]> By: Catherine http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-48338 Catherine Sun, 31 Oct 2010 21:37:21 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-48338 I was wondering what kind of estate planning and financial planning you're doing related to the possibility of the early death of you or your spouse. Do you have life insurance over and above anything you're provided with through work? Do you have mortgage life insurance? If you died soon after you retired, how would your wife's financial status be impacted - would she be able to continue not working? Somewhat related to this is a question about how your insurance coverage will change after you retire. Will you be purchasing life and/or medical insurance privately after you retire, or at least until you turn 65 and would qualify for the Saskatchewan Seniors Drug Plan? If you did not have private medical insurance after you retire and you or your wife suffered from a catastrophic illness, the costs of perscription drugs, for example, could become quite high, so I was wondering what kind of contingency planning you're doing for that situation. It may seem academic, but my own father died at 56 and a friend's father died at around the same age, both after suffering from cancer for a number of years. The differences between the medical insurance (particularly drug coverage) and estate planning of each man led to dramatic differences in the financial quality of life of their spouses after their deaths. I was wondering what kind of estate planning and financial planning you’re doing related to the possibility of the early death of you or your spouse. Do you have life insurance over and above anything you’re provided with through work? Do you have mortgage life insurance? If you died soon after you retired, how would your wife’s financial status be impacted – would she be able to continue not working?

Somewhat related to this is a question about how your insurance coverage will change after you retire. Will you be purchasing life and/or medical insurance privately after you retire, or at least until you turn 65 and would qualify for the Saskatchewan Seniors Drug Plan? If you did not have private medical insurance after you retire and you or your wife suffered from a catastrophic illness, the costs of perscription drugs, for example, could become quite high, so I was wondering what kind of contingency planning you’re doing for that situation.

It may seem academic, but my own father died at 56 and a friend’s father died at around the same age, both after suffering from cancer for a number of years. The differences between the medical insurance (particularly drug coverage) and estate planning of each man led to dramatic differences in the financial quality of life of their spouses after their deaths.

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-48130 Canadian Dream Tue, 26 Oct 2010 02:27:27 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-48130 Estimate spending doesn't increase because inflation was removed from the calculations (hence real returns and today dollars). As to Chart 1 I'm a little confused on what you are asking about. Could you please explain it in a bit more detail? Thanks, Tim Estimate spending doesn’t increase because inflation was removed from the calculations (hence real returns and today dollars). As to Chart 1 I’m a little confused on what you are asking about. Could you please explain it in a bit more detail? Thanks, Tim

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-48127 Canadian Dream Tue, 26 Oct 2010 02:14:58 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-48127 Perry, Some excellent points to consider. Re:#1 TFSA do have a provision to increase with inflation, but only in $500 increments, but I think your point is still mostly valid. At best the increases are uneven and thus introduce an error into the model. Re: #2 I'm very aware that actual investment returns are non linear and thus might blow my plan out of the water or speed up the plan. It's impossible to predict so I take the average and basically hope for the best and adjust the plan as I go. Re: #3 I do model the retirement fund at a lower rate of return since at that point I would shift some of the money into GIC cash to cover that very issue. Re: #4 Actually I haven't found the entire thing hard at all. Neither has my wife. The kids are young yet so that might change, but if they rebel that is less of an issue. Also I do pick up any after inflation pay increases over time which will provide a little more fun money as they get older. Thanks for reading, Tim Perry,

Some excellent points to consider.
Re:#1 TFSA do have a provision to increase with inflation, but only in $500 increments, but I think your point is still mostly valid. At best the increases are uneven and thus introduce an error into the model.
Re: #2 I’m very aware that actual investment returns are non linear and thus might blow my plan out of the water or speed up the plan. It’s impossible to predict so I take the average and basically hope for the best and adjust the plan as I go.
Re: #3 I do model the retirement fund at a lower rate of return since at that point I would shift some of the money into GIC cash to cover that very issue.
Re: #4 Actually I haven’t found the entire thing hard at all. Neither has my wife. The kids are young yet so that might change, but if they rebel that is less of an issue. Also I do pick up any after inflation pay increases over time which will provide a little more fun money as they get older.
Thanks for reading,
Tim

]]> By: Perry http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-48119 Perry Mon, 25 Oct 2010 19:08:23 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-48119 In attempting to create a similar retirement worksheet for myself I learned a few things you might need to think about. 1. The RRSP and TFSA limits are not adjusting upward with inflation. So to keep everything in 2010 dollars you need to adjust your contributions downward. 2. The results are highly sensitive to the rate of return on your investments. Investment returns are compounded (geometric) so the results are especially sensitive to large drops in returns early on. 3. Large lump sum expenses (e.g. new car) are hard to model. Is your asset allocation including a pool of cash that you can use without risking equity withdrawal? 4. The difficulty of maintaining a frugal lifestyle when others do not should not be underestimated. You, your wife or your kids may rebel at a later point. Good luck! Your posts have me thinking! In attempting to create a similar retirement worksheet for myself I learned a few things you might need to think about.
1. The RRSP and TFSA limits are not adjusting upward with inflation. So to keep everything in 2010 dollars you need to adjust your contributions downward.

2. The results are highly sensitive to the rate of return on your investments. Investment returns are compounded (geometric) so the results are especially sensitive to large drops in returns early on.

3. Large lump sum expenses (e.g. new car) are hard to model. Is your asset allocation including a pool of cash that you can use without risking equity withdrawal?

4. The difficulty of maintaining a frugal lifestyle when others do not should not be underestimated. You, your wife or your kids may rebel at a later point.

Good luck! Your posts have me thinking!

]]> By: louieP http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-48107 louieP Mon, 25 Oct 2010 14:01:13 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-48107 what's the definition of, in Chart1, Total Income and Est.Spending? and why is Est. Spending no increasing per inflation over time?. Thanks Louie what’s the definition of, in Chart1,
Total Income and Est.Spending?
and why is Est. Spending no increasing per inflation over time?.

Thanks
Louie

]]> By: Perry http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-47977 Perry Fri, 22 Oct 2010 18:30:14 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-47977 Great blog. There are many good reasons for simple (thrifty) living. I would suggest that you should think of this as a career transition, perhaps to self-employment, rather than "retirement." Finding a job(s) that you want to do and also pays is ideal. I'd greatly appreciate if you detail the meaning of each of your columns in your spreadsheet. The source of the numbers especially in the Balance section is not clear to me. Great blog. There are many good reasons for simple (thrifty) living.

I would suggest that you should think of this as a career transition, perhaps to self-employment, rather than “retirement.” Finding a job(s) that you want to do and also pays is ideal.

I’d greatly appreciate if you detail the meaning of each of your columns in your spreadsheet. The source of the numbers especially in the Balance section is not clear to me.

]]> By: Canadian Dream: Free at 45 » Blog Archives » Semi-Retired Scenario http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-21349 Canadian Dream: Free at 45 » Blog Archives » Semi-Retired Scenario Mon, 16 Mar 2009 12:12:27 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-21349 [...] at the end of my last set of retirement calculations I mentioned I had several other scenarios that I wanted to run.  So far I only finished the [...] [...] at the end of my last set of retirement calculations I mentioned I had several other scenarios that I wanted to run.  So far I only finished the [...]

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-20276 Canadian Dream Wed, 18 Feb 2009 11:50:11 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-20276 Katie, All calculations are done in today's dollars hence inflation is already accounted for (see Part I). Each person is different on how much they need. For example, even with a mortgage I don't think I've ever spent more than $40,000 in a year, so $30,000 should be lots for me. CM, Good point. I'll add that one to my list. Mintycake, Sure. I can look at your numbers if you want. Send me an email via the contact form. Breanne, Thanks for sharing. It's good to know you can live on a lower amount even in Calgary. Thanks everyone, Tim Katie,

All calculations are done in today’s dollars hence inflation is already accounted for (see Part I). Each person is different on how much they need. For example, even with a mortgage I don’t think I’ve ever spent more than $40,000 in a year, so $30,000 should be lots for me.

CM,

Good point. I’ll add that one to my list.

Mintycake,

Sure. I can look at your numbers if you want. Send me an email via the contact form.

Breanne,

Thanks for sharing. It’s good to know you can live on a lower amount even in Calgary.

Thanks everyone,
Tim

]]> By: Katie http://blog.canadian-dream-free-at-45.com/2009/02/13/retirement-calculations-part-v/comment-page-1/#comment-20082 Katie Sat, 14 Feb 2009 04:45:34 +0000 http://blog.canadian-dream-free-at-45.com/?p=627#comment-20082 I looked over your chart - I also have been building my own charts for my retirement. However, based on my expenses today and factoring in inflation (something that I did not see in your spreadsheet), and find it very unreasonable to think that you could retire on $30,000/year for life. I looked over your chart – I also have been building my own charts for my retirement. However, based on my expenses today and factoring in inflation (something that I did not see in your spreadsheet), and find it very unreasonable to think that you could retire on $30,000/year for life.

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