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:
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.
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.