Plan
The Plan section is where you can experiment with things you can control (see Retirement Planning) and see the effect immediately in your Charts and in your Projection Summary.
Life Events
This section displays your age as of your birthday this year, allows you to specify a Retirement Age and, if you choose, an Age at Death.
When a Retirement Age is specified, the spreadsheet assumes you retire at the end of the month when you have your birthday. Your salary and deductions are pro-rated for the number of months worked, your RRSP contributions stop and RRSP withdrawals and any workplace pensions commence. If you are working part-time past retirement, specify any future income as overrides in the 1 Advanced or 2 Advanced worksheets.
Although your Age at Death is not something you can control, you can run some projections. Specify an Age at Death and the spreadsheet assumes you die at the end of that calendar year. The spreadsheet runs projections for 50 years from now or until the surviving spouse dies, whichever comes first. The Age at Death of the surviving spouse sets the Final Year in the Projection Summary. Upon the death of the first spouse, the spreadsheet transfers all assets tax free to the surviving spouse, the surviving spouse receives the CPP survivor's pension, any Defined Benefit Pension survivor's amount and the proceeds of any applicable insurance policies.
A Downsize of principal residence and/or budget (see below) is also considered to be a Life Event.
Budget
Annual Budget: Enter your total annual spending for the current year excluding charitable donations, taxes, loan payments, and RRSP contributions. The spreadsheet will increase this amount by inflation every year.
Charitable Donations (%): Donations to registered charities are specified as a percentage on top of the Annual Budget. The actual dollar amount for the current year is shown to the right and is partially offset by charitable tax credits. Be generous!
Emergency Fund (# years): Specify the number of years of expenses you would like to keep as an emergency fund. Expenses include your annual budget, charitable donations, taxes, RRSP contributions and other expenses that you specify. The actual amount for the current year is shown to the right - in this case 0.5 years or six months of expenses is $53,250. Emergency funds are kept in your savings account. The spreadsheet will only use these funds as a last resort.
Inflation: Enter the expected average annual rate of inflation for the foreseeable future. CRA's inflation adjustment for the previous year is shown to the right. The spreadsheet uses your value to increase salary, budget, value of principal residence, CPP, OAS, RRSP contributions and withdrawals (for some strategies) and tax brackets. You can override specific years by entering values in the Shared Advanced worksheet.
Downsize Residence and/or Budget
The amounts below are specified in current year dollars for ease of estimating and budgeting. The spreadsheet converts your values to future year dollars when the downsize(s) occur using the inflation rate that you specify.
The spreadsheet allows for two principal residence and/or budget downsize events. There is considerable flexibility to cover many scenarios. One potential scenario is to move from the family home into a smaller owned residence or condominium and then into a seniors' residence later in life when more care is needed.
Year: Enter the year to sell your principal residence and buy a new one or rent and/or reduce your annual budget. Leave empty if not planning to downsize your residence or budget. The downsize is assumed to happen at the start of the year. These are shown as Life Events on the charts.
Price of New Residence: Enter the amount to spend on a new residence in current year dollars. Enter 0 if you are selling but do not intend to purchase a new residence. Leave empty if you are only downsizing your budget.
Closing Costs: Enter the expected amount of real estate commissions, land transfer tax, moving and legal expenses in current year dollars.
New Budget: Enter the expected amount of your new budget in current year dollars. Your new budget should reflect changes in living expenses (i.e. rent, reduced utilities, maintenance costs etc.).
Mortgage
Interest Rate: Enter the annual interest rate for your mortgage.
# of Payments per Year: Enter the number of mortgage payments you make in a year. (12=monthly, 24=semi-monthly, 26=bi-weekly, 52=weekly)
Payment Amount: Enter the amount (if any) of each mortgage payment. This is applied to the mortgage specified in the Data Entry worksheet.
Reverse Mortgage
The amounts below are specified in current year dollars for ease of estimating and budgeting. The spreadsheet converts your values to future year dollars when the reverse mortgage starts using the inflation rate that you specify.
When you and your spouse are age 55+, you may be able to take out a reverse mortgage against your principal residence. With a reverse mortgage you can receive up to 55% of your principal residence equity as a single payment and/or multiple payments. Although interest is charged, you are not required to repay the mortgage until your home is sold or you and your spouse pass away, whichever happens first.
Start Year: Enter the year you want to start the reverse mortgage. The spreadsheet assumes the mortgage starts at the beginning of the year. Both spouses must be age 55+ to obtain a reverse mortgage.
Interest Rate: Enter the annual interest rate payable on your reverse mortgage. Rates on reverse mortgages are typically double that of a conventional mortgage.
One Time Payment Amount: Enter the amount of a one time payment you would like to receive in current year dollars.
# of Payments per Year: Enter the number of recurring reverse mortgage payments you expect to receive in a year. (1=annual, 2=semi-annually, 4=quarterly, 12=monthly)
Recurring Payment Amount: Enter the amount of each recurring payment you expect to receive from the reverse mortgage in current year dollars. Leave empty for no recurring payments.
# of Recurring Payments: Enter the total number of recurring payments you expect to receive from the reverse mortgage. Leave empty for no recurring payments.
Note that the one time and recurring payments may not exceed 55% of the equity in your home. The spreadsheet performs this calculation and will warn you if your payment requests exceed the limit.
Note: It is not necessary to set any of the values in the following sections if you are planning to use the Basic Optimizers as the optimizers will set them for you. You can also experiment by changing the values yourself and seeing the effect in your Projection Summary and Charts.
Pensions
If you have the financial flexibility to do so, and depending on your expected lifespan, delaying the start of CPP or QPP and OAS are strategies that can provide a larger source of guaranteed income and increase your net estate value or allow you to spend more. Set your expected lifespan and experiment with different ages observing the effect in the Projection Summary.
Registered Retirement Funds (RRSP/RRIF, LIRA/LIF)
The spreadsheet requires some direction from you with respect to your retirement fund contributions and withdrawals. Rather than specifying amounts for each year, the spreadsheet has you specify a suggested starting amount and a strategy for calculating future amounts. See Contribution and Withdrawal Strategies for more detail. Enter your amounts in the Suggested Contribution and Suggested Withdrawal fields. The spreadsheet respects contribution limits, minimum and maximum withdrawal limits and account balances so it may not be able to satisfy your request. The actual calculated contributions or withdrawals for the current year are can be found on the Snapshot Worksheet. In this example, the people are not retired yet so there is no RRSP/RRIF or LIF withdrawal in the current year. The Suggested Withdrawal is projected into the future when retirement starts.
Tax Strategies
Pension Splitting and CPP Sharing are two tax saving strategies that the spreadsheet can model. Experiment by turning these on and off and observing the effect in the Projection Summary.
Use Spouse's Age for RRIF is a strategy which may benefit spouses with an age difference who wish to maintain their RRSP/RRIF balances as long as possible. Experiment by turning this on and off and observing the effect in the Projection Summary.