How much money is good for retirement
- Thread starter Radio_Shack
- Start date
CURRENT SITUATION FOR ANALYSIS:It's called the Theory of Integration, and you're right (for the most part). Overall, taxes are not "less"; it's just that you will pay it in two installments (corporate and personal).
As for retained earnings, yes, you can pay dividends from retained earnings. But, how will you take those dividends? Presumably, you will want to take it in cash? Humour me and compare your retained earnings balance to your cash and investments balance? I'll bet they are not the same. In fact, unless you're a farmer, your retained earnings balance is probably very different from the cash you have on hand at any given time.
Retained earnings at current age is about $520k, Cash in various low risk investments+TFSAs maxed (GIC 2.6% 3 yrs) is about $600k, RRSPs is about $600k and house is worth about $900k.
Still have 8 yrs to work at about $100k saved per year, some in Retained earnings and some in cash (GICs), about 50-50%. House is paid off 8 years ago.
This may be above average portfolio/net worth, not sure, as I don't know what others have saved.
I know the RRSP will be taxed to death, that's expected I guess.
We likely will downsize the house in 8 yrs and pocket some of the difference of that as well.
Anyways, sounds like we are on the right track.
CURRENT SITUATION FOR ANALYSIS:
Retained earnings at current age is about $520k, Cash in various low risk investments+TFSAs maxed (GIC 2.6% 3 yrs) is about $600k, RRSPs is about $600k and house is worth about $900k.
Still have 8 yrs to work at about $100k saved per year, some in Retained earnings and some in cash (GICs), about 50-50%. House is paid off 8 years ago.
This may be above average portfolio/net worth, not sure, as I don't know what others have saved.
I know the RRSP will be taxed to death, that's expected I guess.
We likely will downsize the house in 8 yrs and pocket some of the difference of that as well.
Anyways, sounds like we are on the right track.
Go to your bank and ask to take out a loan using your retained earnings as collateral. Let me know what they say.
P.s. if you're getting this advice from an accountant, get a new accountant. He doesn't know his ass from block of cheese.
I retired last year at 53 from my Gov. job with a $82,318 inflation adjusted pension (70% of average pay). Now stop wasting time on the internet and go back to work to pay for my pension!
I am aware that is a very hard question to answer but given a few factors is there some calculator out there that can ping the #'s down a bit:
1) Assume retirement starting at 60 (in about 8 yrs from now)
2) Assume Normal yearly expenses around $60k/yr + 20k/Yr travel budget/yr = $80k/yr withdrawels from #3
3) Drawing from RRSPs + Cash investments + Business Retain earnings + TFSA cash + any Govt pension (There will be some investmnets interest, perhaps $20k/yr)
4) Assume live til 84? That's a hard one.
5) No mortgage or other debt
6) Keep hobbying under control, maybe once a month.
The strategy appears to be to pull money from the Non-Registered accounts first and defer withdrawel from the Registered Accounts as long as possible.
So given those few factors we need about 24 years of money x 80k/yr = $1.92Million + inflationary items, lets say $2Million?
Does that sound about right or is there other things I am missing?
Just a few things.
I retired a few years ago so have a little first hand observations.
If you have enough income to not be in survival mode, the Canadian government will claw back CPP. Do not count on it.
Registered Accounts are a bit of a sucker deal. Every year the base income tax costs go up for taxed people. Every year for as long as I can remember you get taxed more. So unless you assume your income will be going up, you can assume you will pay more in taxes the longer you keep your RSP. Cash them out early. (If you cannot mode the income from your non-registered accounts you need an adviser).
Growth in income from most investments will be absorbed by inflation, so be cautious.
People told me that my yearly spend would go down since I no longer had employment costs. They failed to realize that I would have a lot more free time to fill. So predicting my spend was a challenge. I guess it is an individual exercise. If an evening out with great good / wine and a good live show is a normal part of your life, you need more than a stay at home and mow the lawn type guy.
In my case, I found that my net spend went up a bit.
Best of luck. Retirement can be fun.
RS, Regarding your "RSP will be taxed to death" comment...
If you are relatively confident in living to 84, then consider taking money out of your RSPs begining at retirement and NOT starting to take your CPP until age 70 - that will increase your monthly CPP amount by almost 50%.
Even with good health, as individuals age, they spend less money as they travel less, eat less, and party less - - - and BTW, if you are hobbying once a month at age 84, I do NOT want to see the video!
If you are relatively confident in living to 84, then consider taking money out of your RSPs begining at retirement and NOT starting to take your CPP until age 70 - that will increase your monthly CPP amount by almost 50%.
Even with good health, as individuals age, they spend less money as they travel less, eat less, and party less - - - and BTW, if you are hobbying once a month at age 84, I do NOT want to see the video!
Entering retirement has too many options these days.There is no real answer to this question.You ask 1000 people and you get 1000 differant answers.To many variables.
Fuck. You.I retired last year at 53 from my Gov. job with a $82,318 inflation adjusted pension (70% of average pay). Now stop wasting time on the internet and go back to work to pay for my pension!
I bet your mortgage is paid off too. Man, that a lotta cash for mongering.
Exactly.There is no real answer to this question.You ask 1000 people and you get 1000 differant answers.To many variables.
That said between SS, pension and 401 (that is BOOMING thanks to Obama producing REAL ECONOMIC PERFORMANCE) I'm actually making more in retirement than when working....thank you Obama!....:thumb:
Just got a brand new vehicle and have plenty of coin to hobby....:biggrin1:
Why do I need a loan? I could provide some loans maybe but far from needing a loan and why do I care if Retained earnings is not considered collateral? Already have non registered cash of $600k and a paid off house worth $900k as I stated and likely will increase another $400k in 8 years for non registered cash.Go to your bank and ask to take out a loan using your retained earnings as collateral. Let me know what they say.
P.s. if you're getting this advice from an accountant, get a new accountant. He doesn't know his ass from block of cheese.
Maybe I misunderstood what you are saying.
I didn't say that you need a loan.Why do I need a loan? I could provide some loans maybe but far from needing a loan and why do I care if Retained earnings is not considered collateral? Already have non registered cash of $600k and a paid off house worth $900k as I stated and likely will increase another $400k in 8 years for non registered cash.
Maybe I misunderstood what you are saying.
My point is that retained earnings is not an asset. It's not real. It's an accounting creation that exists to balance accounts. When you say "take out retained earnings", what you really mean is that you want to cash out of the business (or take surplus cash). Just because you have positive retained earnings doesn't mean that you have surplus cash (or surplus assets in general).
