Using TFSAs

Question:

I input a value for my TFSA but for some reason it is not showing up on the asset accumulation table. Could not figure out why. Any suggestions, could I have a wrong setting somewhere?

As a follow up to my earlier question, in the file# below for some reason the TFSA balance and earnings are not showing up on the detailed accumulations table even though I input a 15k balance.

Answer:

Please set the savings plan allocation to max allowable TFSA, but the model does not direct excess cash flow to TFSA, but rather to the broader non-registered bucket. Is there something I am doing wrong?

You have to select TFSA as a source of retirement income on the Options page. I made this change to your file and now the TFSA numbers are showing in the results.

I looked at your file. For all years where you'll more than your goal, the excess is from non-registered investment income. So since the excess is not spent, there is no money to go to the TFSA.

The option to direct contributions in the TFSA is before retirement. After retirement, if there is an excess of income, it will be deposited in the TFSA if there is room available. If the excess is from non-registered investment income, the after-tax value stays invested in the non-registered account.

By: RetireWare / Equisoft On 11:30 AM

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Monte Carlo Odds

Questions:

I modified the LIF payment, I had accidentally added the excess payment twice. which brings the LIF payment down several thousand dollars.

I still have the massive contradictory outcome of a 44 probability (Monte Carlo) and a $223,813 in her LIF at death.

Answers:

If you look at the second chart on the Income Forecast tab of the "View" page, you'll see that because LIF withdrawals are restricted by the maximum, the client cannot meet the retirement income goal from CPP, OAS and LIF.

Either you have to reduce the goal or find another source of income to make up the small shortfall each year.

The only cases where the Monte Carlo simulations succeed are those with very high returns and the high asset balances permit higher maximum  withdrawals that together with CPP and OAS meet the goal. That's why the probability is low.

By: RetireWare / Equisoft On 11:25 AM

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What happens in year of death

Question:

It would be helpful to understand in some detail what the Retireware processing and assumptions are for the year of death. This is particularly so in the case of death of one spouse years before the other in a joint plan. I haven't come across this documented anywhere, and am having some difficulty interpreting our plan results.

There seem to be a range of options in the real world, particularly for the registered funds, which can be transferred to the surviving spouse without taxation.

I guess one approach for the program, the most conservative case, is to handle the death of one individual as an independent event - the remaining balance of registered funds are liquidated and the full value taxed, and the non-registered investments are liquidated and the realized capital gains taxed. The total resulting after tax value can then be handled in a variety of ways.

Then if by will and/or legal requirement some or all of that remainder is left to the surviving spouse, then that amount can be explicitly added by the user (ie me) back into the estate of surviving spouse as special case income.

In any event once I better understand what the program is assuming then I can do whatever is necessary to handle the numbers as per the will and estate plan.

Answer:

It's as you describe, on the first death, registered and locked-in funds flow tax-free to the surviving spouse. For non-registered funds and property other than the personal residence, the after-tax value goes to the surviving spouse. So it's assuming that the spouse leaves everything to his/her surviving spouse. There is no option in the program to allocate a portion of the estate currently.

By: RetireWare / Equisoft On 11:20 AM

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DIY Version

Questions:

Looking for retirement planning software for personal use, but with a level of sophistication. Does your software:

• Perform detailed tax calculations based on the Canadian Income Tax Act?
• Support income by type (earned income, investment income – dividend [Cdn and foreign], CG, CPP, OAS, etc)
• Track assets over multiple investment accounts – registered, non-registered etc.
• Allow for multiple family members (husband/wife) and track them separately (especially for tax purposes)

Answers:

Yes, the tax calculations are accurate. The type of investment income calculated depends on your asset allocation. Based on this, the program allocates investment income among interest, dividends and realized and unrealized capital gains.

Your assets are divided according to type: registered, locked-in, TFSA and non-registered. You cannot enter each account separately (for example, if you have two RRSPs).

The program calculates other types of income such as pensions, CPP, OAS. However, it does not show separately the various types of investment income year by year, only as a whole.
You can do a combined plan for you and your spouse.

If you subscribe, you will get a refund within the first 30 days if it does not meet your needs. In order to get your refund, simply email support@retireware.com.

By: RetireWare / Equisoft On 11:17 AM

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Start RRIF Withdrawals at Age 62

Question:

I changed my plan to retire later when I'll be 62 years old. Now it's showing a RRIF withdrawal from age 62. I thought this was illegal - I don't even have a RRIF. Please can you tell me how to sort this out? Previously it was showing withdrawals first from non-reg funds.

I've already set the option under Source of Income under Registered to start withdrawals as late as possible to save on taxes.

Answer:

You can open a RRIF at any age. Check on the Options page to ensure that you selected to start RRIF withdrawals as late as possible. It's on the first tab.

On the Financial Information page on the Registered tab, you have selected purchasing an annuity from a life insurance company under RRSP Options. Is this your intent? If so, the RRSP balance is used to purchase a lifetime income. So it will not work to defer the RRSP. You'd have to change it back to RRIF and it should then only be accessed when you're 71.

By: RetireWare / Equisoft On 11:05 AM

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Question:

When completing annual updates and considering inflation, is it necessary to increase the income objective, CPP and indexed pensions to the current payment amount?

Considering a joint retirement plan with different time horizons, how are the assets of the person with the shorter time horizon treated?  Are they treated as a spousal roll over or deemed disposed of?

I notice that TFSA assets appear to be disposed of. Is there a way to have them transfer to the survivor?

Answer:

Assets are rolled over to the spouse if the plan combines the financial information of spouses. If there's life insurance, you can direct it either to the spouse or a beneficiary on the Financial Information page.

First update the date of financial information on the Forecast page. If the income objective is in terms of a dollar amount, the program will project it from the date of financial information to the retirement year, so there's no need to update it.

For the CPP, if you entered a monthly amount, and indexed pensions, you should update it to the current amounts.

By: RetireWare / Equisoft On 11:22 AM

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Update Wizard

Question:

One question on the “Update” feature.  I haven’t used it yet but just trying to figure out what happens when you use it.  So say you update all the financial information and any changes that might need to be done with assumptions, etc.,  does the program then use those numbers and the date (for example if I updated the financial info for Feb 28th, next week)  and project the year end results for this year based on 10 months of returns / expenses?

If you use the update feature I assume it changes the “date of financial information” to the current month.  If you just go in and make changes to the data then it will be using the previous date for calculations unless you manually change the “date of financial information”.

Basically the update feature seems to be an automated feature that adjusts the date for calculations and allows you to update the financial information.  If you need to do more than that then you can go into the other sections to do that.

So it will use 10 months of data for projection for year 1 when I use March as my start date for instance?

Answer:

What you said is correct. The Update Wizard groups all main and changing inputs in one location (mostly asset values), and updates the date of calculation automatically.

If you use the Detailed or Quick retirement calculations, you must change the date manually.

If you go through the Update Wizard, you can always go to the main program at any time and change the date back if you wish. It is not cast in stone. However, it's best to align the date with the date of the most current account balances.

The projection for year one is for 10 months, and all other years are twelve months, except the last. The last year, i.e. grimly called "year of death", is from January 1 to the birthday month.

By: RetireWare / Equisoft On 5:03 PM

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Pre-retirement Planning

Question:

I do not plan to retire for another 10 years. So does the software allow me to input my current income details (indexed for inflation) and asset (residence, RRSPs, investment portfolio) and liability balances as well as current expense budget (indexed for inflation) to see how I am trending to reach my retirement goals

Answer:

Yes you enter your income before retirement and it will increase each year in line with a wage increase assumption. You can also enter all assets and liabilities (in particular mortgage balances on properties and remaining term).

For the budget, you can complete a pre-retirement budget and a post-retirement budget separately. Your post-retirement budget will be used for setting your retirement income goals (and is indexed as well to retirement and each year thereafter).

By: RetireWare / Equisoft On 11:59 AM

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RESP

Question:

I have a client who would like to input their RESP assets and also build into their plan the expense they will incur to put their two children through university so that the financial impact of this is built into their retirement plan.

Answer:

First, on the File Manager page, go to the Applications tab and select 'Education Planning'. This will help determine the annual amounts that need to be saved toward education.

Then, go in the RetireWare file of your user, and on the Finances menu, select 'Budget Information'. You can Enter the planned annual savings and existing balance in Non-retirement Savings and Assets under RESP.

The savings will show in the income forecast and in the (pre-retirement) budget on the Review page. It may be a good idea to complete the information in 'Pre-retirement Expenses' to get a complete budget.

By: RetireWare / Equisoft On 11:45 AM

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Asset Mix Changing Over Time

Question:

I would like to have more detail about the change in Asset mix when I select 'Move gradually to conservative portfolio until 80'.

Answer:

The amount held in fixed income will increase gradually each year until it reaches the amount of the conservative profile. Thereafter it will be assumed that the funds are invested in accordance to the conservative profile. You will find the asset allocation of the conservative and all other profiles in the help files.

By: RetireWare / Equisoft On 11:43 AM

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Software Upgrade

RetireWare has been updated today with several new features that have been requested by users.

1. Excess funds to TFSA

In any year where there is excess income during retirement, i.e. income above the retirement income goal, the after -tax value of the excess funds are deposited in the TFSA account up to the available contribution room. Any excess then goes to the non-registered account.

Before this change, excess funds were deposited entirely in the non-registered account.

2. Showing spouse name on the "Spouse Bar"

When doing a plan combining the financial information of both spouses, a drop-down menu at the top of the page allows you to move from one spouse to the other for data entry and viewing results.

Now, the name entered on the General Information tab is showing for each spouse.

Before this change, the program used the generic identifiers "Spouse (1) " and "Spouse (2)".

3. Option to select age for RRIF and LIF accounts

On the Options page, you can select the age for starting withdrawals from the RRIF or LIF (locked-in) account.

4. Option to select amount payable from RRIF and LIF

Also on the Options page, you can select the type of payments from a RRIF (either the minimum or flat amount), or LIF (either the minimum, maximum or flat payment).

Note that with any of these options, the actual amount withdrawn in any year may be overridden by a higher payment if the selected amount falls below the minimum or more funds are required to meet the retirement income goal.

5. Option to purchase a smaller residence when disposing of principal residence

Finally, a common strategy is to downsize to a smaller residence at one point during retirement. With this new option, you can use part of the proceeds from the sale of the principal residence as a source of retirement income, and the remainder toward the purchase of a smaller residence.

By: RetireWare / Equisoft On 11:10 AM

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Plan for Both Spouses

Question:

I tried creating two files (for my wife and myself) and requested combined calculations in both files. 

However when I try and get a report it appears I am doing something wrong. 

After a calculation I see the projections are using my numbers but the reports I can see either ignore all of my wife's assets.

Answer:

If you select a combined calculation for both spouse, it creates a new file. It does not pick up another file created in the File Manager and make it the spouse file.

You enter your spouse's data by selecting to include your spouse in your plan in 'General Information' on the Forecast page.

By: RetireWare / Equisoft On 2:38 PM

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Updating Date of Calculation

Questions:

1. When I load my old file, which worked fine before, it says my retirement date is befoe the minimum date allowed? I picked same date from the calendar and got same message?

2. My Date of Financial Information also gives the same out-of-range message. I tried the calendar to pick the date and got the same message again.

3. When I run the calculation without changes to my data file it does not show any CPP income just OAS?

Answers:

1. It's because the program looks in the future. I know it may be an annoying feature, but the illustration starts from today and goes forward. Note that a date of retirement before the date of calculations is accepted.

2. Use today's date or a later date.

3. Even though you are retired, enter a value for income in Financial Information. By selecting 'Already retired' the program will calculate an estimate for the CPP based on your earnings level.

The CPP needs earnings to calculate an estimate unless you enter a monthly amount already in the course of payment.

By: RetireWare / Equisoft On 5:47 PM

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