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  1. #1

    Retirement plan for your critique

    Looking for opinions on the feasibility of the following idea for a somewhat early retirement.

    Background:
    1. We are a couple, same age (52), both working and making about the same income.
    2. We've one child who's off to university in 2 years (most of the cost covered by RESP investments; rest they will pay).
    3. House in GTA is paid off and worth north of 1MM (about 1.3MM right now based on what's happening on our street)
    4. No pensions, just savings (pretty much all RRSP/LIRA and a some TFSA, no non-reg) - about 1.5MM (55%/45% Equity/FI in broad ETFs and GIC ladder).

    The plan for retirement is along these lines:
    1. Retire in 3 or 4 years (around age 55 or 56): savings stop at that point
    2. We don't like the traffic and crowds in the GTA and want to downsize in retirement to a smaller community
    3. So we sell the house when we retire or thereabouts, pulling out ~ 400k in the process (balance to fund the new house).
    4. Live off of the (tax free) 400k cash for 5 or 6 years or so
    5. CPP starts at 60: the two of us should get 13k total
    6. Savings grow until age 60 or 61 when we need to start withdrawals: we are hoping they can grow to a minimum of about 2MM by then
    7. To clear a reasonably comfortable 6k per month after tax, factoring in CPP, we figure we need to withdraw 72k per year, or 3.6%.

    Now we'd prefer not to have a withdrawal rate as high as 3.6%, but we figure we could get that down closer to 3% by stretching out the 400k taken from the house sale proceeds, or increasing the amount we take out of the house sale proceeds, or working a bit longer if required.

    So there seems to be some flexibility, which is good. And we always wanted to retire away from the GTA anyway, so why not take advantage of all that home equity to support an early retirement?

    Who know what will happen with house prices and the markets over the next 3 or 4 years or so, but I am hopeful at least on the housing side that the price differential between the GTA and our target area will continue to allow us to pull out a very healthy amount to fund this plan!

  2. #2
    My first thought was - I'm wondering what the size of the RRSP/RRIF will be when you turn 72 and the 5.28% mandatory withdrawal begins. This will attract a lot of tax. Have you considered drawing down the RRSP each year when you retire at ~ age 55 while you have no other taxable income - at least an amount that keeps you in the lower tax bracket?

  3. #3
    Thanks, and yes - we were thinking along those lines: for tax efficiency we could pull out into TFSA and non-reg, just hadn't done the math yet to figure out how much that is going to be. Effectively they remain untouched as part of our savings, we just shuffle things around for maximum effect!

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