Contribution and Withdrawal Strategies

Although the spreadsheet allows you to specify retirement fund contributions and withdrawals for each year, in practice this is cumbersome to do. Mark's Spreadsheet allows you to select from a number of strategies for RRSP contributions and registered retirement fund (RRSP, RRIF & LIF) withdrawals. You only need to select a strategy and enter a Target amount for the first year and the spreadsheet calculates the rest.

Important - The Target amounts are only suggestions to the spreadsheet for deposit and withdrawal amounts (or in the case of the Smooth Taxes strategy a net income). The spreadsheet must respect legislated contribution amounts, minimum and maximum withdrawals, account balances and pro-rating for partial years in addition to adjusting amounts annually for inflation as required. See the Snapshot Worksheet for actual deposit and withdrawal amounts for all accounts for any given year.

RRSP Contribution Strategies

Contribution strategies apply while you are still working and use the target amount subject to contribution limits. The following contribution strategies are available:

None: No contribution is made. The target amount is ignored.

Fixed: The target amount is contributed each year.

COLA: The target amount is contributed in the first year, then increased by inflation for each subsequent year. See also the Hybrid strategy.

Smooth Taxes: The target amount is an taxable income level increased by inflation each year. The optimizer tries to achieve this taxable income by using the RRSP contribution tax credit.

As Available: Contributes up to your RRSP limit using any surplus and funds from your non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are contributed to each person's RRSP in proportion to their contribution limits. The target amount is ignored.

Hybrid: Uses the lesser of the COLA and As Available methods. Use this method if your RRSP contributions are causing a draw from your emergency fund or overdraft account.

The Hybrid contribution strategy tends to perform the best for most projections. Another good option is the Smooth Taxes contribution strategy. Re-run the optimizer after changing contribution strategies.

Retirement Fund (RRSP, RRIF & LIF) Withdrawal Strategies

Withdrawal strategies apply when you are retired and use the amount you suggest subject to your registered retirement account balances and RRIF/LIF minimum withdrawals as required by law. From the ages 65 to 70, the Spreadsheet assumes that you put enough money in a RRIF to withdraw $2,000 per year to make use of the federal pension tax credit. The target amount is in current year dollars and includes any required RRIF and LIF withdrawal. The following withdrawal strategies are available:

Minimum: Only the required RRIF and LIF minimums are withdrawn. The target amount is ignored.

Fixed: The target amount is withdrawn each year.

COLA: The target amount is withdrawn in the first year, then increased by inflation for each subsequent year. See also the Hybrid strategy.

Smooth Taxes: The target amount is a taxable income increased by inflation each year. The optimizer tries to achieve this taxable income by withdrawing funds from your registered retirement accounts.

As Needed: Withdraws sufficient funds from your registered retirement accounts to meet expenses and maintain your emergency fund before withdrawing from the non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are withdrawn from each person's RRSP in proportion to their balances. The target amount is ignored.

Last Resort: Withdraws sufficient funds from your registered retirement accounts to meet expenses and maintain your emergency fund after withdrawing from the non-registered and TFSA accounts. If you are a couple, this strategy should be selected for both partners as funds are withdrawn from each person's registered retirement accounts in proportion to their balances. The target amount is ignored.

Hybrid: Uses the COLA method unless this would require withdrawing from your emergency fund, otherwise uses the Last Resort method. Use this method if you have sufficient funds in your registered retirement accounts but money is drawn from your overdraft account. 

The Hybrid withdrawal strategy tends to perform the best for most projections. Another good option is the Smooth Taxes withdrawal strategy. Re-run the optimizer after changing withdrawal strategies.

LIRA/LIFs

If you have a life income fund (LIF) there are minimum and maximum withdrawals required by law based on your age. The Spreadsheet withdraws RRIF and LIF required minimum amounts first, then any remaining amount from the target withdrawal is drawn from your LIF first (up to the maximum) and then the remainder from your RRSP or RRIF as applicable. When LIRA funds become unlocked, they are moved to your RRSP for more flexibility in withdrawing.