How much do you need to Retire – Version 3 – Part V

Alright after four long days we finally pull off this information together to see if I can retire at 45 (at least in theory). For your reference here are links to the rest of series:

Part I – Finding out your spending in retirement
Part II – Government Benefits
Part III – Company Pensions
Part IV – Retirement and Taxable Accounts

First a quick review of the numbers and when I expect to start collecting them.

From 45 to 60:
Here I only plan to use my taxable investment accounts, RRSP accounts and that $2000/year dividends I mentioned.

From 60 to 65:
At this stage we expect to collect CPP ($6660/year) and start to use my pension money ($2344/year) and keep using the RRSP, taxable accounts and dividends.

From 65+:
I’ll be keep using my CPP, pension money, RRSP, dividends and OAS ($12,054/year).

In order to make this clear I put together a spreadsheet to show how the money is being used at each stage. The far right column is what is required from the taxable accounts and RRSP each year.

So now to make this all work I need to simulate a draw down of the money in the RRSP’s and taxable accounts. To keep this fairly simple I’m going to merge the RRSP into one pool of money and assume I can split the withdrawal amounts proportionally between the accounts (ie: the RRSP pool is bigger so it will cover more of the expenses). I dig out that same calculator I’ve been using all week and enter the following for the first stage ages 45 to 60:

RRSP (45 to 60)

Start at $224,652
Saving rate of -$1189.87/month (this is just that 58% of the $24,618/year in the spreadsheet)
At 4.0% for 15 years (I reduced the return to reflect a more conservative portfolio)
Results in $116,118.71

Taxable Account (45 to 60)

Start at $163,228
Saving rate of -$861.63/month (this is just that 42% of the $24,618/year in the spreadsheet)
At 4.0% for 15 years
Results in $85,085.25

Ok so far so good, but I still need to keep using this accounts from ages 60 to 65:

RRSP (60 to 65)

Start at $116,118.71
Saving rate of -$754.67/month (this is just that 58% of the $15,614/year in the spreadsheet)
At 4.0% for 5 years
Results in $91,746.70

Taxable Account (60 to 65)

Start at $85,085.25
Saving rate of -$546.49/month (this is just that 42% of the $24,618/year in the spreadsheet)
At 4.0% for 5 years
Results in $67,657.07

Well that isn’t bad so far, but now I’m on to the really long haul ages 65 to 90:

RRSP (65 to 90)

Start at $91,746.70
Saving rate of -$172.07/month (this is just that 58% of the $3560/year in the spreadsheet)
At 4.0% for 25 years
Results in $160,512.73

Taxable Account (65 to 90)

Start at $67,657.07
Saving rate of -$124.60/month (this is just that 42% of the $3560/year in the spreadsheet)
At 4.0% for 25 years
Results in $119,544.86

What?!?! How did my numbers increase? Simple I wasn’t pulling off enough money to out pace the interest. So that means I have excess money in my retirement calculations. So obviously I have a bigger buffer than I thought even with my 1% reduction in investment performance. As a point of interest I tried lowering the interest rate to see if I could run out of money on the taxable account in that last run of time (65 to 90). So at 0.5% interest I would still have over $36,000 at age 90. Basically as it stands I can’t run out of money regardless of how long I live. It also provides a nice buffer in case the government decides to cut back the OAS program on me.

Yet there is a hole in the above calculations. I forgot to account for my $90,000 vacation fund back in Part I. Yet I haven’t used any money from down sizing a house and my total savings here isn’t my total free cash flow for the year (I could still save more). So in either case I feel I have enough back up plans to cover myself (for those who are truly curious you could recalculate the above with an extra $3000 a year expense from ages 45 to 75 to see if I could do with any additional savings).

So how much is it going to cost me to retire at age 45? Well recall all of these calculations are in today’s dollars so at age 45 I should own my house and have around $475,000.  So much for that million dollar price tag people keep going on about.

Have a great weekend everyone and let me know if I missed anything in the above.

12 thoughts on “How much do you need to Retire – Version 3 – Part V”

  1. Hi CD,

    Seems like you’ve done your homework but your numbers assume that both you and your spouse live to 90, and a significant portion of your retirement money comes from OAS, CPP and your pension with only 7.5% of your required income from dividends. Have you accounted for the cost of extra insurance to ensure that you can maintain your $26,618 annual income in the event that either you or your spouse doesn’t make it to 90?


  2. The question that comes to mind is WHY retire at 45 on a perpetual modest income of $26,000? Unless you really, really hate working you’d probably either keep working a few more years (say 50) and be able to retire on a much more generous income stream, or keep working part-time at something you enjoy, bringing in some additional income.

    For example, I could retire on a modest income now (at 46), but instead I’m considering either

    a) continuing to work in my current (or similar) position until 65 and retire on an income stream similar to my take-home pay, plus be able to leave an estate for my sons.

    b) start a business, which if it succeeded would make me “wealthy” by 60-65 (apparently you need at least $5m to be considered “rich” these days)

    c) change careers – eg. become a HS science teacher on lower pay, but with potentially less hours at work (time at home grading and preparing lesson plans doesn’t really seem like “work”).

  3. From 65 to 90…don’t you have to withdraw a certain amount from your rrsp every year? I guess it would be from the RRIF. But I think the number you’re going to withdraw is less than that. Or will you withdraw the prescribed amount and the investment gains offset it, therefore you’ve listed the ‘net’ withdrawal?

  4. MCM,

    No I haven’t accounted for an early death in the base case. Yet it would make an interesting exercise. Thanks for the idea.


    I do intend to “work” after retirement and I don’t hate my job at all. I like my job, but I just have so many other things I want to do in life than just engineering work. It won’t be a typical part time job in retirement, but rather small business like writing. So I’m expecting the income to fluxuate and provide extra to the above numbers. Also keep in mind I have a very low cost lifestyle. I would guess my base living cost would be around $1600/month in retirement.


    Good point. I should likely alter the above calculations to account for having to shift the RRSP to a RRIF by 71 which requires yearly withdrawls. Yet at the same time I can take the extra after tax money and put into a TFSA or taxable account to still provide some income. Thanks for the idea.


  5. The incessant fear-mongering of the financial services industry was earlier put to rest by my reading a great article in MoneySense magazine. It can be found at
    It has many of the same ideas as you’ve presented here. Thank you for this wonderful series. I’ve passed it on to friends and family. I now know that my wife and I will be well taken care of in retirement with our current financial plan, even if returns are dismal (ie. 3%) over the next many years and assuming that pharmacists continue to be in the high demand they are now! Keep up the great posting.

  6. Keep in mind you are assuming a constant rate of return each and every year which won’t happen so that could change the date when (if) you run out of money.

  7. CM,

    Good point. I might have a million net worth when I retire, but not a million in just savings.


    Thanks for the kind words and that link. Comments like that make all this work worth while.


    True. I’m using an average return. Some years it will be higher and others lower in real life. When that occurs could determine when the portfolio fails (ie: five years of low returns at the start could kill it in a hurry). So I will try to counter that by having part of the portfolio in cash to allow me to ride out some of the low years. Additionally there are fall back positions I can take. I can sell the house as I get older and use the cash to pay rent.

    I’m aware there are risks to this plan. Yet for me personally the reward of not having to work from 45 onward is worth that risk.


  8. Tim,

    It is very important that you do some Monte Carlo analysis on your plans. If you’ve never heard of it, it is a simple modeling methodology that takes into account the volitility of the market as well as the returns. Say the market returns 7% but in any year it can be either up big, down big, up a little, down a little, or flat. Hundreds or thousands of iterations are run with the annual return picked at random to account for the volitility. The end result is that some simulations will “pass” (not run out of money) and some will “fail” run out of money before you die. This tool gives you an accurate picture of the likelihood that your plan will succeed and is drastically better than the methods you have used. Also, I may have missed it, but you need to take into account inflation. Each year you should plan to withdraw a little more money to cover rising prices. By the time you are 90 it will take $98,321 to equal $26,000 at age 45. With a 4% “safe” withdraw rate that will require $2.46 million! That is how much it will cost to keep up the modest lifestyle you have envisioned in your old age. Your $475,000 nestegg with $26,000 in annual spending gives you only an 81.5% chance of success (according to FIREcalc – its not Monte Carlo but similar). To get to a 100% success ratio (assuming your pension, CPP, and OAS all pay out in full with no reduction in benefits) it took $575,000 in savings. To have a cushion to cover for a 50% reduction in the value of the OAS, CPP, and pension it would take $675,000. I would check out (historically based) and do some Monte Carlo analysis here:

    I wish you the best of luck but I know that I would not leave the work force without 100% odds.

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  10. One simple thing here that jumps to mind is that sometime between 65 and 90 it is extremely likely that you will need to be in a full-care environment such as an retirement/nursing home. The costs of such places can easily top $5000 a month. If you as a parent don’t have this cash on hand it’s going to be your kids who end up footing the bill, and that is really difficult for the kids to handle when they are trying to save/plan for their own retirement.

    Anyways, great blog, just came across it today.

  11. If you worked part time beginning at the age of 45, and made 26k per year, that would be like having a $500,000 acuity. Since you can live on this little amount of money, it makes sense. Then keep the 475,000 invested until you are 60, and start pulling out the RRIF and draw CPP.

    You will have more meaning to your life, more money and I would expect more healthy.

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