Welcome to Novella Wealth's YouTube Channel Hi I'm Kinson I'm Edmond In one of our earlier videos We analyzed how much it would cost to retire in Vancouver We were asked by one of our viewers That what if s/he only has $250,000
Would that be enough to retire? We will try to answer your question in this video Our channel is all about life and financial tips in Canada If you find this kind of information useful Then subscribe to our channel for more If you have any questions at all Let us know in the comment section below And we may just make a video to answer your question! Edmond, let's get started with answering our viewer's question today! Sure Edmond, I remember you made a video before about The monthly costs for various levels of retirement lifestyles in Canada One viewer asked us in that video If he only has $250,000, is that enough to retire now When we help our clients with their retirement plans There are many different factors that have to be considered It's not just about how much money you have Like in this case, $250,000 But also our lifestyles and expectations are important as well These factors have a huge impact on retirement planning Another factor is our Life expectancy Putting these factors and estimates into our software program We can calculate how much money is available to the client when he retires and his tax liability at retirement and if he has any assets in estate In addition, when we retire The amount of government retirement benefits we can receive is also a key factor Yes, it's important. Assuming this viewer has lived here in Canada all his life And has worked for 40 years And assuming his income was above average Since he also lived here for 40 years He is eligible to receive OAS (Old Age Security) Based on the average rate in Canada for The Canada Pension Plan (CPP) He could receive about 50% to 60% of the full amount Though in our experience, many of our clients are actually able to receive more than 70% of the full amount. Some of them are even eligible to receive the full amount This is from our experience working in the industry We will use these numbers as estimates to help you calculate So there are a lot of government benefits that you can receive
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besides the original asset of $250,000 Yes, so the question is how to manage your own money When and how to withdraw Plus the government benefits We can actually have a decent retirement life And when I see this viewer's comment merely says $250,000 There's not enough other information about his situation So we will have to make some assumptions.
Like let's say he will retire at the average Canadian retirement age Which starts at age 65 Let's also assume he's been in Canada for a long time And is eligible for both CPP and OAS Edmond, can you help with the calculation? Sure. For CPP, the later you take it the more the amount So we will assume he will receive 70% of the full CPP amount OAS would be the full amount And I assume the $250,000 is invested somewhere Assuming a rate of return of about 5% per year So let's distribute that as $200,000 in RRSP account And the balance of $50,000 in his TFSA account We also have to take inflation into account Let's assume that inflation is 2.5%. It's been in the range of about 2-2.5% for the last 30 years Let's see how we can withdraw the money out and use it Let's go back to the CRA website There is data analysis that shows The life expectancy of a male is about 85 years Let's take this life expectancy That's $250,000 to use until the age of 85 With that, he can get about $30,000 a year to use Edmond just did some simple calculations This person can get about $30,000 a year So how should this money be distributed throughout the years? When he first start his retirement He still has the energy to travel and go out So we can allocate more money at the beginning years In this example He can have $34,000 per year for the first 10 years This amount has already taken inflation into account So in the coming years He will actually receive more retirement income And will this translates to $34,000 of today's value But in 10 years from now When the viewer reaches the age of 75-85 We will give him about $29,000 per year But also you need to remember that We recommend that he postpones the age of taking CPP to 70 so the first five years will be relying on his own savings mainly So at the beginning He will withdraw about $26,000 out of RRSP every year He will withdraw less from RRSP at age 70 when he starts taking CPP After the reduction He will receive about $11,000 per year Of course, this number is not always the same When the cash flow is still a little short We'll get a little bit out from TFSA Sometimes you have to play with the numbers a little bit Because we need to try to make sure that he can pays the least amount of tax You can see that the OAS and RRSP will be
the main sources of income in the beginning With a small part from TFSA When there is not enough income to cover When he starts taking CPP at age 70 You will see a slow decrease in assets But there's not a lot of tax owed We try to keep it at a steady level You don't have to pay thousands of dollars more in taxes all of a sudden His RRSP will be used up by the time he reaches 85 By then he would still have $28,000 left in his TFSA So "Mr. Retire" retired with $250,000 Receives 70% of CPP and in addition has OAS Will be sufficient for retirement Truthfully speaking In fact, for many of our clients,
$250,000 is just liquidity Many times there's more than just $250,000 Is that right, Kinson? Yes, when we talk to our clients, They all think that cash is asset But what they don't remember is that they also own property Or investment properties and rental properties These can be turned into liquid assets Clients who talked with us We can help them manage their finances Increase their cash flow for life So based on our calculations,
Mr. Retire only has about $2,800 per month for living expenses $2800 doesn't feel like much But of the clients we've had There are also many people who live on only $2,800 a month Okay, so here comes the latest update from Mr. Retire Guess what? He has a spouse So here's a challenge for you See how you can help him re-do his retirement plan calculations Sure, we can add a spouse to the example above We first need to establish that This couple has a total of $250,000 together Not $250,000 each In terms of distribution We will assume that Mr. Retire holds the entire $250,000
for simplicity sake Assuming they knew each other when they were young 40 years of working and living in Canada Same conditions as before We need to calculate their retirement from age 65 until their life expectancy, respectively They will receive approximately $50,000 per year in retirement income And as I said earlier They've just retired and they want to enjoy themselves more They can receive more retirement income So they can go travel to different places Enjoy the world So they will have $54,000 dollars a year for the first 10 years By the time both of them are 75 years old They will then receive $45,000 per year This has taken into account inflation For the RRSP, it is also the same as described earlier They will receive more from it in the first 5 years Because they haven't taken CPP amounts yet They will defer that until age 70 so they can receive more later in age This situation is similar to the case for when it's Mr. Retire himself only What is the difference then you ask? Mrs. Retire will pass away later than Mr. Retire Because statistically, Canadian women live a few years longer than men on average Mrs. Retire would live to age 88 Edmond, after your analysis just now Mr. and Mrs. Retire would get a pretty decent retirement income Yes In the second example They all live to their life expectancy When about all their money will be used up But definitely, there's enough money for retirement In fact, from our years of experience Actually there are many people Whether young or retired Their retirement plan or financial plan There is never one that's exactly the same Mr. Retire may also have other assets to be used in case of need There could be different plans That could make the whole retirement planning different So we would recommend Mr. and Mrs. Retire To make an appointment with us to tailor a plan Have a more accurate number to prepare for their desired retirement I also want to mention Retirement planning doesn't start at 65 Many of our clients are already planning in their 30s and 40s to build the retirement they want for themselves Whether you're 30 years old today or not 40 years old or 50 years old Or like Mr. and Mrs. Retire, you're 65 years old It doesn't matter We can definitely help you do a retirement plan Extrapolate how much money you have for retirement When you're watching this video You may wonder if you're in a better situation than Mr. and Mrs. Retire We would like to offer the first 10 people who sign up using this code today We will help you calculate using our software And we can analyze for you using your situation and numbers This will be a limited time offer If you want to make a reservation with us Book a free consultation time using the link in the description below or scan the QR code That's it for today We hope to see you soon And help you with your retirement plan Remember to subscribe, like, comment and share our videos before you go! We will see you next time
