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I don't expect spelling perfection in a discussion forum, but if you are going to create your own website I suggest you get an editor who can spell:
"retirer"
"Bugeting"
"cliping"
"grocerie"

Of course you can retire on $500,000 if you can live on $20-30K per year.
 

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A single 59 year-old retiree with 500K in the bank, a 5% return, 2% inflation, full CPP/OAS, dying broke at 95... can look to get by on just over $30K per year (after tax/after inflation)

Unless you have an expensive drug habit, $30K is do-able for some, IMHO.
 

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I think it would depend on your lifestyle expectations. If you have a paid for home, that would help. But lots of working Canadians get by on less than 30,000 after tax, so it is doable.
 

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Don't forget that CPP and OAS (and/or GIS) will add up to $15,000 or so of inflation-adjusted lifetime income in retirement: so if you truly only needed $30K, you could save only $250K and have $30K in retirement (presuming you get full CPP).
 

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$500K for a retired 59 yr-old will net $30.1K $250K will net $21.8K This includes full CPP&OAS. Maybe the discrepancy comes from taxation. Remember, I am talking about RRSP and the $30K is an after tax number.

If the nest egg quoted was outside the RRSP (nonreg say) and the income was gross instead of net.... it would make a difference.
 

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Sorry: all the figures I gave were pre-tax values. I should have specified that.

Looking at this a different way, a retirement income plan which takes into account the probabilities of survival a 59-year-old male with $500K in pre-tax assets withdrawing $20K in pre-tax withdrawals from a portfolio which is 50/50 bonds/stocks has a 92% chance of sustainability.

Annuitizing a fraction of that wealth will increase the yearly spending without decreasing the sustainability (but decreasing the expected financial legacy). Annuitizing, for example, 30% (while maintaining the 50/50 stock allocation in the portfolio) increases the yearly spending to $25K at no effective decrease in sustainability.

Hence "pensionization" increases available spending at all ages. Delaying the decision to annuitize a fraction of wealth will increase the available yearly spending (as annuities become cheaper as you age, and 59 is not an optimal time to annuitize for this reason).

I realize I am typing out some pretty dense stuff here. However, these paragraphs sum in some ways the main ideas of my forthcoming book, called Pensionize Your Nest Egg. The underlying argument (demonstrated mathematically in the book at a layperson's level) is that pension annuities increase available retirement income spending while also increasing retirement income sustainability.
 

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Since there are two professionals (or former FA's) here, let me ask a question, somewhat related.

How many of your clients / former clients go for the die broke option? and how many push well beyond what they need? This thread really has me thinking I should pack it in a retire even sooner than I originally planned. ;)
 

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The issue for me is that there is a frontier, just like the investment return risk-reward frontier, between sustainable spending (when you are alive) and financial legacy (after you pass on).

Every retirement income plan can be plotted on that frontier, and retirees must decide where they want to sit on that (inescapable) frontier.

The optimal asset and product mix in retirement will be determined by the retirees preference for higher and sustainable spending in retirement vs. leaving a financial legacy after death.

Retirement timing and spending rates are even more basic considerations, which mostly hinge on your longevity risk aversion. If you don't care about dying broke (i.e., you are willing to go broke even before you die), you will spend more than someone who is worried about running out of money.

Personally I am not a fan of the "die-broke"/assume the client lives to age 95 retirement planning assumptions...because they are not rational. Most people will die before age 95, and it is not optimal to plan as though everyone will live to that age. From a financial economics point of view, this is a "wasteful" approach because it has the retiree underspending every year that he or she lives before death - unless they reach the improbable age of 95 or beyond. A more rational approach accounts for the entire distribution of mortality probabilities, and weights spending more heavily in earlier years. And (surprise!) involves pensions, but that's another (book-length) story.
 

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I ran into a chap at my FIL's funeral on Sunday. He is into his mid-90s. He purchased a pretty major life annuity way back during the financial crisis in the 80s (I think) when interest rates went nuts due to the OPEC oil crisis.

He, believe it or not, secured a 15% fixed rate for his annuity. You can imagine how the life insurance company that sold him that turkey feels!

Buying an annuity in these times of ultra low annuity rates is not quite so cut and dried.

As far as 'die-broke at 95' is concerned, my users (FAs) will choose anything from 85 to 105 depending on the situation, and the dying broke paradigm may not actually mean dying broke. They might instead specify a fixed amount to the estate..... "what is the maximum lifestyle (after tax) I can sustain which will ensure my estate will net exactly $200K if I die on my 90th birthday?"

The reason I prefer this statistic is that it relates to a number (lifestyle) which means something I can control/measure/budget for. The 92% sustainability statistic is difficult to quantify for the average individual.

Pick your poison.... sustainability or die-broke lifestyle.
 

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Old people don't need much money. You can buy a house for 100k somewhere, 400k @4% is about 18k a year, isn't that plenty? Worst comes to worst you can do a reverse mortgage. You can also apply for property tax abatements. Don't you people plan on getting a pension?

I think the question should be: will i every retire from my spending addictions?

To that, i don't know.

ps. don't eat so much you'll live longer.
 

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You can buy a house for 100k somewhere, 400k @4% is about 18k a year, isn't that plenty?
For these numbers, you can live very well in PV MX. And there are rental places available in town for $600/mo if you don't want to buy. And you don't have to wait until you are 90. I know someone from Denver who did it when they were 57. And several others who have done it at varying ages.
 

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Retiring earlier rather than later is not a good idea. What are you going to DO for the next 45 years? If you're content with hanging out with the old guys at the mall, drinking coffee and watching TV for the next 45 years then sure, retire early. But if you want to do some travelling and fill your days with fun adventures then I would highly suggest NOT retiring early. Better to work longer now, than to have to work crap walmart greeter jobs later. Having too much money is never a problem.
 

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Since there are two professionals (or former FA's) here, let me ask a question, somewhat related.

How many of your clients / former clients go for the die broke option? and how many push well beyond what they need? This thread really has me thinking I should pack it in a retire even sooner than I originally planned. ;)
Manulife is doing some interesting research into this, they've got some NY PHd working on 'product allocation' instead of asset allocation. I touched on it briefly, it was interesting.

The idea is that upon retirement the goal is to maximize our return while minimizing our risk. On two extremes for example we invest completely in an annuity or equities. One gives us much lower return for high guarantees, the other potentially higher returns for lower guarantees.

They're trying to put some science and numbers on mixing product types (i.e. annuities, mutual funds) rather than asset types to achieve the right blend for individuals. No, I didn't read the science :). Probably a Manulife person could give more details, they have calculators and such to do this.
You should be able to retire somewhat comfortably abroad for sure. As for retiring in Canada with $500K, I don't think so.
Waaaaait a second. I can retire on less money, but only if I do so someplace tropical? That's not much of tough sell :).

I don't know if it's right or not, I do know it's an interesting idea. Maybe get some science injected into the voodoo that is asset allocation.
 

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Manulife is doing some interesting research into this, they've got some NY PHd working on 'product allocation' instead of asset allocation. I touched on it briefly, it was interesting.

The idea is that upon retirement the goal is to maximize our return while minimizing our risk. On two extremes for example we invest completely in an annuity or equities. One gives us much lower return for high guarantees, the other potentially higher returns for lower guarantees.

They're trying to put some science and numbers on mixing product types (i.e. annuities, mutual funds) rather than asset types to achieve the right blend for individuals. No, I didn't read the science :). Probably a Manulife person could give more details, they have calculators and such to do this.

Waaaaait a second. I can retire on less money, but only if I do so someplace tropical? That's not much of tough sell :).

I don't know if it's right or not, I do know it's an interesting idea. Maybe get some science injected into the voodoo that is asset allocation.
To maintain your Canadian health coverage you need to live here for 6 months plus a day each year. This (along with OAS) are the reasons snowbirds come back.
 

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To maintain your Canadian health coverage you need to live here for 6 months plus a day each year. This (along with OAS) are the reasons snowbirds come back.
I think the number of days away allowed in Ontario is 212 although that includes any day trips to the states.

Mexico has a national medicare system (IMSS) that you can qualify for as an expat resident. It also includes drugs. Cost is about $300 a year. A friend from California has diarized the process of applying for and using it.
 

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Retiring earlier rather than later is not a good idea. What are you going to DO for the next 45 years? If you're content with hanging out with the old guys at the mall, drinking coffee and watching TV for the next 45 years then sure, retire early. But if you want to do some travelling and fill your days with fun adventures then I would highly suggest NOT retiring early. Better to work longer now, than to have to work crap walmart greeter jobs later. Having too much money is never a problem.
Tend to agree with you as long as you don't end up hating your job. I retired at 56 with a fairly hefty amount. Travel at least 2 months a year out of the country, own 3 places (Toronto, cottage country, Alberta), debt free. Love to ski, mountain bike in Alberta. I would err on the "having more than I need" side rather than "this should be enough side" Having said that if you absolutely hate your job-maybe you have to retire for health sake.
 

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To maintain your Canadian health coverage you need to live here for 6 months plus a day each year. This (along with OAS) are the reasons snowbirds come back.
I know. Plus, Canada's about the best country in the world to live in.

Still, if you're OK living with little to no social safety net, and don't have any particular attachments to Canada, then you can live some nice places, dirt cheap. Not for me though. I *like* winter and outdoors :). Can't get that in most other places, not at any price.
 
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