I don't expect to retire - I'm going to work until I die
- Shakespeare
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When I retired I lost at least $30K in expenses: income tax, CPP, EI, pension deduction, RRSP contribution, commuting expenses, and saving for retirement. In consequence, I actually have a greater disposable income than pre-retirement.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
After our first year of retirement, I can observe that our restaurant bills increase proportionally with the amount of golf we are playingnadreck wrote:After our first 6 months of semi-retirement I can observe that our restaurant bills increase proportionally with the amount of work we are doing. If we have free time we like cooking, if not then more often then not we are being paid which offsets the restaurant costs.treetops wrote:Only lifestyle adjustment has been (much) fewer restaurant lunches and dinners
Yes, we lived in Yellowknife before semi retiring and owned a house in Calgary. When you factor the difference in what we paid in rent up there from what expenses we recovered on our house here with a person living in it that we trusted you get about $10,000. As well as about a 25% higher expense rate for $6000 in groceries and household items a year would be a little over $1000, and extra trips to Calgary because of our property here at least $2000 a year. A phone line in both places, more expensive cable in Yellowknife than here, gasoline costs and vehicle maintenance costs that were higher, those together would add up to another $2000. Then more subtle expenses that we are not capturing in our analysis of our Quicken history.AltaRed wrote:That is a substantial drop in expenses. I cannot imagine where all that would come from. I am not sure spouse and I could see more than $5000 or so change in expenses and we've been doing some estimating of the change when we retire in the next year. Care to share somewhat where that $15-20k was?
Love within our lives! Live within our means! Invest in what we believe!
- Norbert Schlenker
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On another tangent entirely. Full of good lines but I especially enjoyed
Beith, NewsweekPeople have this fear that they’re going to change when they get older. It’s this whole cliché of the grumpy old man. What I learned is that you don’t become grumpy when you get old. You were grumpy. [But] when you’re 30 and you’re grumpy, people call you a jerk. Once you cross 65, you’re grumpy. People that are optimistic and happy become fairly happy, optimistic older people.
Nothing can protect people who want to buy the Brooklyn Bridge.
I really don't think a %'age of your working income is an accurate way of stating what you'll need later?.. Maybe I just haven't talked to enough people about it like some of the Pro's out there have. Anyway, what I did was I kept track of what my expenses were...(have for many yrs), and I adjust it whenever I feel it needs it ... inflation and more wants.
Car/Gas/Oil...... $7,000
Utilities.............$4,000
City/Educat Tax.$3,200
Income Tax .....$11,000 (for 2)
Food/Clothes.....$9,000
Medical etc .......$5,000
Insurance car/home $2,000
Leisure..............$14,000...****
Total..................$55,200
As you can see the $14,000 is like a float.
bill
Car/Gas/Oil...... $7,000
Utilities.............$4,000
City/Educat Tax.$3,200
Income Tax .....$11,000 (for 2)
Food/Clothes.....$9,000
Medical etc .......$5,000
Insurance car/home $2,000
Leisure..............$14,000...****
Total..................$55,200
As you can see the $14,000 is like a float.
bill
Steves,steves wrote:Believe it or not, if you and your wife were both 65 and she had full CPP coming, you would manage quite well with just $300K (150/150) in savings.
Still, we continue to hear this $1 million mantra..... I don't get it.
CPP/OAS for a couple receiving max would be about $31k but it would be indexed, which is a plus.
$300k of investment would generate about $12k, (Using 4% draw to allow for inflation and so capital will last through retirement)
With this scenario, total annual income before taxes would be $43k. Because of income splitting taxes would be low but net would be below $40k.
It depends on lifestyle and expenses, but a couple could live on this, but it would not leave much for major expenses - For example - new car or new roof on house or heaven forbid, a funeral (Relative was recently hit with this - Cost about $13k!). For this reason, I would think that about $50-55 would be a better target.
If the couple's CPP is less (say $700 pm), their total CPP/OAS would be about $20k. Lets say they would like another $40k before tax from investments. If they use the 4% draw often discussed in the past, they would need $1Million in investments.
This may help understand where the $1MM "mantra" comes from.
- Norbert Schlenker
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Not all posters here qualify for full OAS / CPP.steves wrote:Believe it or not, if you and your wife were both 65 and she had full CPP coming, you would manage quite well with just $300K (150/150) in savings.
Still, we continue to hear this $1 million mantra..... I don't get it.
Some are caught by the residency rule. Some had lower earnings during more years than the exemption allowed for CPP.
Probably a minority of 2-person senior families have both OAS and CPP maxed out for both spouses.
I, for one, would get 80% of OAS (by residency rule) and maybe 15-20% CPP (by my own decision on how to draw income). My wife would have 5 percentage points less in CPP, for similar reasons.
Steve,steves wrote: 10K from cpp, plus 5.6K oas plus 9.1K withdrawal from a $150K rrsp.
This will just run their rsps out at age 95 with a 6% ror and 2% inflation. Less tax of 2.5k leaves them with 22K each.
Do you really think that they could draw down their savings at 6.07% pa and have them last until they are 95??
I thought that the consensus from earlier discussions, was that 4% draw would provide reasonable probability of retiree not running out of money before they die. If you are right, I can start spending a lot more money!
How about an inflation rate of 2% for the next 30 years - Is that realistic?
Stupid question:This will just run their rsps out at age 95
What percentage of the general population lives to age 95? Or age 90, even?
I don't personally know a whole hell of a lot of people who lived past about 80.
My husband and I smoked for 35 years - neither one of us expects to live even that long.
Depending on what your expenses are, this is high. Our expenses run around $35K/annually. Our experience has been that around $700K will do it from age 45 with 3% inflation and 6% nominal total return. ISTM that what everyone misses is the significance of growing dividends. If you break the 6% total return into a 3% dividend yield and 3% price appreciation, dividend growth of 5% makes a significant impact on slowing capital depletion and reduces the impact of price fluctuation on withdrawals.Norbert Schlenker wrote:If you want to retire at 50 ...
The magic is to keep as much of your capital intact until you hit 65 and get the benefit of OAS and RRSP/CPP pensions.
Mike
In the earier posts, we were discussing a couple who were already at 65. (That's where we are). At this stage, their portfolio should be quite conservative in order to preserve capital - let's say 60/40 bonds/equity. With this ratio, it's difficult to achieve a yield of much over 4.5% in today's markets.Yielder wrote:Depending on what your expenses are, this is high. Our expenses run around $35K/annually. Our experience has been that around $700K will do it from age 45 with 3% inflation and 6% nominal total return. ISTM that what everyone misses is the significance of growing dividends. If you break the 6% total return into a 3% dividend yield and 3% price appreciation, dividend growth of 5% makes a significant impact on slowing capital depletion and reduces the impact of price fluctuation on withdrawals.Norbert Schlenker wrote:If you want to retire at 50 ...
The magic is to keep as much of your capital intact until you hit 65 and get the benefit of OAS and RRSP/CPP pensions.
Mike
On top of this, there may be some capital growth in good years, but value of portfolio could also drop in bad years. I would only count on the 4.5% for income.
Considering bond yields will hopefully increase if inflation increases, We could assume an inflation rate of say 2.5%.
Bylo's site ( http://www.bylo.org/saferetr.html) has references to several sites that discuss withdrawal rate. Gummy's site has a caculator (scroll down to the bottom) http://www.gummy-stuff.org/to_zero_explain.htm
If I enter 4.5% yield, 2.5% inflation, 4.5% draw, I get about 30 years before money runs out at age 95. So, if I have $30k in CPP/OAS and would like a total of $60k pa before taxes, then I need to have $666,666. This worked out better than I thought it would!
Not sure what our tax rate will be once we have to draw down registered funds. May need more than $60k in order to get $50k after tax which is about what we try to live on.
Yep. But anyone who has been accumulating div payers over the years is in a very good position. The income stream from the original investment is significantly larger than it was at the time of purchase. While the income stream from the fixed income portion is relatively fixed, the income stream from the equity portion increases. I don't think that any of the models take this into account.it's difficult to achieve a yield of much over 4.5% in today's markets.
- Norbert Schlenker
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Would you care to reconcile those numbers? Over a long period, wouldn't compounded price appreciation approximate compounded dividend growth?Yielder wrote:If you break the 6% total return into a 3% dividend yield and 3% price appreciation, dividend growth of 5%
Nothing can protect people who want to buy the Brooklyn Bridge.
- Shakespeare
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According to the Gordon Equation - which holds as long as the dividend yield is constant, i.e. the P/D doesn't change - the total return is the dividend rate plus the dividend growth rate. If the sum of those two parts is held constant, the effect of varying one is simply to redistribute gains between dividends and capital appreciation. What that means is that you must periodically reduce holdings in higher-growth stocks in order to get the cash flow.Over a long period, wouldn't compounded price appreciation approximate compounded dividend growth?
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
- Shakespeare
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- Joined: 15 Feb 2005 23:25
- Location: Calgary, AB
Why retiring early could prove fatal
Added: This reference is a better review of the paper: Early Retirement May Mean Earlier Death
Added: This reference is a better review of the paper: Early Retirement May Mean Earlier Death
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
From the second review:
Without such data, the findings are almost meaningless. It's entirely possible that poor health was the motivating factor for early retirement (or, at least, one of several factors).However, data were not available to assess directly whether poor health was a significant factor...