Total Return or Distribution Income in Retirement

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cannew
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Re: Total Return or Distribution Income in Retirement

Post by cannew »

There's one other consideration that is overlooked. The possibility of one needing full time care because of bad health, dementia or alzheimer’s. These can occur early or late in life, but the cost of providing the full time care will likely be $60k, $80k per year or even more. Being able to live off income now enables us to cover those cost should they be needed later. If we then need to sell capital we won't be seriously affected even if the market has crashed.
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Re: Total Return or Distribution Income in Retirement

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cannew wrote: 09 May 2017 17:49 There's one other consideration that is overlooked. The possibility of one needing full time care because of bad health, dementia or alzheimer’s. These can occur early or late in life, but the cost of providing the full time care will likely be $60k, $80k per year or even more.
I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
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Re: Total Return or Distribution Income in Retirement

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Arby wrote: 09 May 2017 21:22 I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
yes but that situation is usually only until accepted by a home. In the case of MIL#1, it was 3 weeks.
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Re: Total Return or Distribution Income in Retirement

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This subject has been discussed many times. It doesn't matter how one's retirement income comes in, or how it is accessed. The key is to have a plan, perhaps Variable Percentage Method, with a healthy reserve set aside, for end-of-life, etc. There is a point in time where a vast majority of 'patients' will be better off in a 24/7 facility than private care. I cannot imagine being essentially held hostage in my own home with 24/7 care....with no one to talk to except my caregivers. Different strokes for different folks of course.
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Re: Total Return or Distribution Income in Retirement

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cannew wrote: 09 May 2017 17:49 Being able to live off income now enables us to cover those cost should they be needed later. If we then need to sell capital we won't be seriously affected even if the market has crashed.
:roll:
AltaRed wrote: 10 May 2017 11:51 It doesn't matter how one's retirement income comes in, or how it is accessed. The key is to have a plan, perhaps Variable Percentage Method, with a healthy reserve set aside, for end-of-life, etc.
:thumbsup:
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Re: Total Return or Distribution Income in Retirement

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Pointless digressions and people desperately seeking to confirm their own bias (including the OP with the misuse of the article) rather than learning anything or espousing anything useful: the hallmark of most discussions here.

Out of all of this text, I'm just curious what the hell this means:
AltaRed wrote: 28 Apr 2017 15:20The joy of retirement is spend/donate/gift one's financial blessings while alive. No beneficiary really gives much of a shit after you are dead.
If you are benefiting from a "financial blessing" why wouldn't you "give much of a shit" if the person who gave it to you is dead?
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Re: Total Return or Distribution Income in Retirement

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Descartes wrote: 10 May 2017 15:54 Pointless digressions and people desperately seeking to confirm their own bias (including the OP with the misuse of the article) rather than learning anything or espousing anything useful: the hallmark of most discussions here.

Out of all of this text, I'm just curious what the hell this means:
AltaRed wrote: 28 Apr 2017 15:20The joy of retirement is spend/donate/gift one's financial blessings while alive. No beneficiary really gives much of a shit after you are dead.
If you are benefiting from a "financial blessing" why wouldn't you "give much of a shit" if the person who gave it to you is dead?
Well thanks for stopping by to straighten us all out.
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Re: Total Return or Distribution Income in Retirement

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Descartes wrote: 10 May 2017 15:54 Pointless digressions and people desperately seeking to confirm their own bias (including the OP with the misuse of the article) rather than learning anything or espousing anything useful: the hallmark of most discussions here.

Out of all of this text, I'm just curious what the hell this means:
AltaRed wrote: 28 Apr 2017 15:20The joy of retirement is spend/donate/gift one's financial blessings while alive. No beneficiary really gives much of a shit after you are dead.
If you are benefiting from a "financial blessing" why wouldn't you "give much of a shit" if the person who gave it to you is dead?
The joy of giving (and receiving) means most between living individuals, rather than receiving a big cheque after the benefactor is dead.

Examples: I appreciated a 5 digit gift from my mother some years back in which I could thank her and discuss with her what my plans would be with the funds. She and I both got pleasure out of that. Two years ago she died and I was one of the beneficiaries of a 6 digit sum. It didn't mean nearly as much to me and I donated it all (to my children/her grandchildren). Similarly, I have passed on funds to my sons over the past several years with similar expressions of appreciation and what they would do with it, and I have made charitable donations to personal causes.

I have seem too many examples of beneficiaries of a 'financial blessing' not giving much of a shit from an estate, and indeed squabbling about who got how much and why. It is not how I want to be remembered. Building a big legacy for the sake of a legacy is not all it is cut out to be. Hence have a plan to deplete (to some level) one's net worth (including capital) while alive.

I see claims about spending only 'distribution income' from investments as the ideal retirement withdrawal mechanisam, and by definition letting capital appreciate ad infinitum, an unfulfilling and perhaps selfish way to go through retirement. A total return approach would seem to be more productive. If that is seen as a digression from the content of this thread...well, that is a personal choice.
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ghariton
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Re: Total Return or Distribution Income in Retirement

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AltaRed wrote: 10 May 2017 16:25The joy of giving (and receiving) means most between living individuals, rather than receiving a big cheque after the benefactor is dead.
Agree.

The other point is that, for most people, getting some extra money is most helpful when they are just starting out and loaded with debt or making bad choices because they are so financially pressed. By contrast, getting the money when they are in their mid-fifties (say) and already established, is nice but not nearly as effective.

I suspect that, in some cases, people who have way too much money will hold off giving while alive, and bequeath the money instead, because that gives them a feeling of control. ... Or they may just be very insecure.

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Re: Total Return or Distribution Income in Retirement

Post by longinvest »

Personally, one thing I like about the idea of safely depleting the principal using a variable percentage withdrawal is that I will get to inject this money into the economy. It will allow me to reward hard-working people by buying their services and products that I enjoy, and to make gifts to people and organizations I like, instead of letting the capital rot into a brokerage account until my death.
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Re: Total Return or Distribution Income in Retirement

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I agree VPW has its substantial merits and I support it, but it is also important to many, including myself, to set aside some lump sum for that potentially dreaded end of life situation that could go on for a few years, not just a few months, of 24/7 care. Fortunately, I am lucky enough to probably keep my TFSA for that (or if I am lucky enough to just drop dead - a legacy), assuming of course we continue to get annual contribution room for years to come yet. Others will have different methodologies to get there.
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Re: Total Return or Distribution Income in Retirement

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AltaRed wrote: 10 May 2017 19:49 it is also important to many, including myself, to set aside some lump sum for that potentially dreaded end of life situation
Yes, of course. I totally agree with keeping some money aside for (late life) emergencies. I was expressing a preference for VPW over the "distribution income" (dividends-only) retirement approach, where the principal gets to indefinitely grow.

Note that choosing a higher last-withdrawal age, for VPW, is an elegant approach to avoid keeping a separate pot of emergency/bequest money.
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Re: Total Return or Distribution Income in Retirement

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In our case, mandatory RRIF income at age 72 is a watershed. I've mentioned before that prior to that we're living on CPP and non-registered income (maturing strips and dividends). Half that account will be gifted over the next 10 yrs and the balance at 72, leaving our CPP and RRIF's to fund the balance of our lives. TSFA's and principal residence are additional resources. Family history indicates I'll choose to exit the scene in my mid-80's rather than become dependent, but that decision is still 20 years in the future.
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Re: Total Return or Distribution Income in Retirement

Post by SQRT »

Arby wrote: 09 May 2017 21:22
cannew wrote: 09 May 2017 17:49 There's one other consideration that is overlooked. The possibility of one needing full time care because of bad health, dementia or alzheimer’s. These can occur early or late in life, but the cost of providing the full time care will likely be $60k, $80k per year or even more.
I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
Agree these are concerns but once you get to that stage there wouldn't be many other expenses left. In our case this level of expense would be less than our current total spend so not really an issue.
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Re: Total Return or Distribution Income in Retirement

Post by cannew »

SQRT wrote: 11 May 2017 03:32
Arby wrote: 09 May 2017 21:22
cannew wrote: 09 May 2017 17:49 There's one other consideration that is overlooked. The possibility of one needing full time care because of bad health, dementia or alzheimer’s. These can occur early or late in life, but the cost of providing the full time care will likely be $60k, $80k per year or even more.
I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
Agree these are concerns but once you get to that stage there wouldn't be many other expenses left. In our case this level of expense would be less than our current total spend so not really an issue.
So if only ones spouse needs the full time care and the cost is $80k to $150k plus the cost of the remaining ones expenses. Even if they only need $30k-$50k the total annual income needed will get fairly high.
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Re: Total Return or Distribution Income in Retirement

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kcowan wrote: 10 May 2017 10:29
Arby wrote: 09 May 2017 21:22 I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
yes but that situation is usually only until accepted by a home. In the case of MIL#1, it was 3 weeks.
We have resisted moving my mother to a LTC facility, and instead she has remained in her 1 bedroom apartment in a retirement home, with the assistance of private care. 24 hour private care was necessary for 2 months after her recovery from hospitalization, and for the past 4 months (and for the foreseeable future) she will require half day private care. Yes it is expensive, but in my experience, even the best long term care facilities are depressing places. Remaining in a retirement home with private care assistance is a better alternative if one can afford it.
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Re: Total Return or Distribution Income in Retirement

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cannew wrote: 11 May 2017 12:51 So if only ones spouse needs the full time care and the cost is $80k to $150k plus the cost of the remaining ones expenses. Even if they only need $30k-$50k the total annual income needed will get fairly high.
I think you mean 'cash flow', not 'income'. That's where capital withdrawal comes more into play. It is not that big of a deal since that phase of life is highly unlikely to last very long. Months mostly, perhaps a few years in some cases.
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Re: Total Return or Distribution Income in Retirement

Post by SQRT »

cannew wrote: 11 May 2017 12:51
SQRT wrote: 11 May 2017 03:32
Arby wrote: 09 May 2017 21:22

I agree. However if you're talking about 24 hour private care, your numbers are too low. The costs will probably be at least $150K per year.
Agree these are concerns but once you get to that stage there wouldn't be many other expenses left. In our case this level of expense would be less than our current total spend so not really an issue.
So if only ones spouse needs the full time care and the cost is $80k to $150k plus the cost of the remaining ones expenses. Even if they only need $30k-$50k the total annual income needed will get fairly high.
Agree. But these potential expenses are not very material to our current spend and can be covered by our current travel budget, so not really an issue for us. We are very lucky to be in this position and I can see how it could be an issue for others. My mother has funded a lot of her stay in a nursing home through the sale of her condo.
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