[steve41]

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.

 

[steve41]

$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.

 

[steve41]

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.

 

[steve41]

OK...... how much extra do I need in my RRSP to offset the loss of both my CPP & OAS, assuming full entitlement. I make it $417 K..... taking income tax into account.

Starting with a $100K RRSP and based on 4% rate of return and 2% inflation, living in BC.

 

[steve41]

Steve since you love playing with the numbers how much do you need to have $20,000 a month revenue to retire at 55 and live to 90?

For a 4% nominal rate, 2% cpi, living in BC, diebroke age 90, with full CPP/OAS, you would need $9.7M in your RRSP. If the nest egg were 100% nonreg (taxed as interest), you would need $7.23M.

 

[steve41]

Downsized their home by $200K in 2020. Reduced both CPPs as per the data specified. Had her continue her pt job until 2020.

Car loan assumed 5 years at 4%.

Assumed a modest 2% rate (nominal) going forward, inflation 2%. Living in BC, dying broke at 95..... result? a combined after tax lifestyle of $55K annually, leaving an estate (proceeds of fam home) of $365K in today's $ at age 95.

$55K is shy of the $62K they were looking for, but not drastically so. If they upped the rate to 3% from 2% and reverse mortgaged, they would be just fine.

Mary's Plan

Mike's Plan