Sample retirement plan prepared with. The Canadian Retirement Planner s Software. For information visit

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1 RETIREMENT PLAN PROVINCE OF ONTARIO AS AT JANUARY 1, 2012 PREPARED BY DAVID GOBEIL, CA, CFP NOVEMBER 14, 2011 VERSION DRAFT Sample retirement plan prepared with The Canadian Retirement Planner s Software For information visit

2 Janice and Ray Osmond 123 Main Street Anywhere, Canada Dear Janice and Ray, Personal Financial Planner's Comments This Retirement Plan has been prepared solely for your use in arranging your financial affairs to progress towards meeting your retirement objectives. The purpose of the retirement plan is to determine how you can use your financial resources to meet your retirement objectives, which are: to maintain your standard of living as measured by lifestyle expenditures of $100,000 per year in current dollars plus some inflation protection; and to enable the surviving spouse to be able to maintain his/her standard of living. Based upon the assumptions in the plan, you should be able to maintain lifestyle expenditures of $100,000 per year in current dollars plus inflation protection of 2% with a cushion of over $700,000. However, as illustrated in the Schedule of Alternative Expenditures, if inflation increase to just 3%, you cushion disappears. Based upon the assumptions in the plan, the surviving spouse should be able to maintain his/her standard of living. However, you will have to prepare and implement an estate plan that provides for a smooth transfer of assets: using named beneficiary designations, joint ownership and bequests as appropriate. The projections included in the plan are based upon certain principles for the use of tax-paid capital, tax-free savings accounts and registered retirement savings plan. The amounts of withdrawals and contributions in the projections are based upon these principles and I suggest that you use these amounts to guide your conversion of funds into income and your investment of excess funds. Retirement planning is an ongoing process and you will have to update your plan on a regular basis as investment returns, income taxes and your expenses change. I suggest that you revise your plan annually. I have prepared this Retirement Plan, which includes projections of post-retirement incomes from information and assumptions supplied by you. The assumptions used are not certain to occur and other events not reflected in the assumptions may occur. If events do not occur as assumed, the actual results achieved may vary significantly from the projected outcome. You will appreciate that tax-planning advice is based upon interpretation of the law including the general antiavoidance rule and experience with the revenue authorities. Accordingly, the conclusions reached and views expressed are often matters of opinion, rather than certainty. Yours very truly, David David Gobeil, CA, CFP November 14, 2011 Page 2

3 INDEX 1. Action Plan 2. Retirement Objectives 3. Assumptions about the Future 4. Alternative Levels of Expenditures 5. Graphs of Income Projections 6. Summary Income Projections 7. Detailed Income Projections 8. Income Tax Projections 9. Strategies to Meet Your Objectives This retirement plan has been prepared for: Date of Birth Age Janice October 22, Ray April 14, Action Plan The actions identified to meet your objectives are: From Section # Action 7 Use the amounts of withdrawals in the projections to guide your conversion of funds into income. 7 Use the amounts of contributions in the projections to guide your investment of excess funds. 8 When preparing your income tax returns, compare the calculations on your return to those in the income tax projections and investigate any significant differences. 9 Update your plan on an annual basis as investment returns, income taxes and your expenses change. 2. Retirement Objectives The purpose of the retirement plan is to determine how you can use your financial resources to meet your retirement objectives, which are: to maintain your standard of living as measured by lifestyle expenditures of $100,000 per year in current dollars plus some inflation protection; and to enable the surviving spouse to be able to maintain his/her standard of living. November 14, 2011 Page 3

4 3. Assumptions about the Future The assumptions upon which the plan has been prepared follow. ASSUMPTIONS FOR RETIREMENT PLAN AS AT JANUARY 1, 2012 RAY JANICE Dates of birth and years of retirement Date of birth April 14, 1956 October 22, 1955 Age at January 1, 2012 (years//days) 55//261 56//71 Number of years of retirement Age at end of retirement planning period 90//261 90//71 Employer pensions Date at which pension payments commence April 14, 2016 January 1, 2012 Age at which pension payments commence 59//365 56//71 Annual pension income at that age $67,250 $29,200 Bridging supplement to age 65 $9,000 $0 Indexation of pension income (if any) 0.00 % 1.00 % Survivor's benefit % % Government pensions (in current dollars) Date CPP/QPP payments commence April 15, 2016 October 23, 2015 Age at which pension payments commence 60//0 60//1 Maximum retirement benefit at 65 years of age $11,799 $11,799 Adjustment for early of late commencement % % CPP/QPP retirement benefits in current dollars $7,693 $7,834 Age at which OAS payments commence 65//000 65//000 Month that Old Age Security payments commence May 31, 2021 November 1, 2020 Old Age Security in current dollars $6,442 $6,442 Tax-Free Savings Accounts $0 $0 Investment return on TFSAs 5.00 % 5.00 % Carryforward of TFSA contribution room from last year $15,000 $15,000 Survivor's benefit % % Registered Retirement Savings Plans $595,700 $34,000 Investment return on RRSPs 5.00 % 5.00 % Carryforward of RRSP contribution room from last year $0 $0 Survivor's benefit % % Tax-Paid Capital $29,500 $23,200 Adjusted cost base of current savings at retirement $26,500 $20,000 Survivor's benefit % % Allocation of tax-paid capital to equity investments % % Rate of eligible dividends on equities 1.00 % 1.00 % Rate of other income on equities 1.00 % 1.00 % Rate of appreciation of equities 4.00 % 4.00 % Rate of turnover of equities % % November 14, 2011 Page 4

5 RAY Lifestyle Expenditures At retirement in current dollars $100,000 Inflation expected - Consumer Price Index 3.00 % Inflation protection during retirement 2.00 % When age of Ray at January 1 is 80 change the inflation protection to 1.00 % JANICE Principal Residence Current value of principal residence $220,000 Ownership interests of spouses % % Annual rate of appreciation expected 3.00 % Value at first year of retirement $220,000 Year of sale of principal residence 2028 Proceeds of sale $353,035 Change in lifestyle expenditures in the year of sale - in current dollars $13,710 - in future dollars $22,001 OTHER CAPITAL PROPERTY Description of property Cottage Year of sale of property 2020 Current value of property $50,000 Annual rate of appreciation expected 5.00 % Proceeds of sale $73,873 Taxable capital gain (allowable loss) $23,000 Non-taxable proceeds of sale $50,873 PURCHASE OF REGISTERED ANNUITIES Year of purchase 2019 Cost of annuity withdrawn from RRSP/RRIF $15,000 Amount of annual income $950 Indexation of income (if any) 2.00 % Survivor's benefit for life annuity (if any) % PURCHASE OF PRESCRIBED ANNUITIES Year of purchase 2012 Cost of the prescribed annuity $25,000 Taxable amount of annual income $1,000 Non-taxable amount of annual income $1,250 Last year for payment if term annuity 2036 Survivor's benefit for life annuity (if any) % November 14, 2011 Page 5

6 LOCKED-IN RETIREMENT ACCOUNTS (LIRAs) RAY JANICE Current savings in LIRAs, LIFs and LRIFs $20,000 Investment return on LIRAs, LIFs and LRIFs 5.00 % Savings in LIRAs at first year of retirement $20,000 On death are the funds still locked-in? No Mature Locked-in Retirement Accounts as Life LIF Income Fund or Locked-in Retirement Income Fund Option 1 - Life Income Fund (LIF) Interest rate for maximum withdrawal (CANSIM) 5.00 % Do you wish to withdraw the maximum amount? Yes Date at which to start maximum withdrawal (if any) January 1, 2012 Age at which to start maximum withdrawal 55//261 Age at which to annuitize (if any) 81 Number of years over which to amortize savings 12 Amount of income per $1,000 of savings $ Survivor's benefit for capital or annuity % INCOME TAX CREDITS Disability tax credit Yes No Age at which disability tax credit commences 70 Amount in current dollars for donations tax credit $800 Indexation of amount for donations tax credit (if any) 2.00 % 4. Alternative Levels of Expenditures Based upon the assumptions, alternative levels of lifestyle expenditures and rates of protection from inflation have been considered to assess their impact upon your expenditures during retirement. The accompanying schedule shows their effect upon your funds and savings. ALTERNATIVE AMOUNTS OF LIFESTYLE EXPENDITURES AS AT JANUARY 1, 2012 Scenario 1 Lifestyle expenditures at retirement $100,000 Inflation protection until Ray's age % Cumulative shortfall in retirement funds $0 Available capital at end of the planning period $1,091,757 Scenario 2 Lifestyle expenditures at retirement $100,000 Inflation protection until Ray's age % Cumulative shortfall in retirement funds $502,506 Available capital at end of the planning period $0 Scenario 3 Lifestyle expenditures at retirement $110,000 Inflation protection until Ray's age % Cumulative shortfall in retirement funds $67,564 Available capital at end of the planning period $0 November 14, 2011 Page 6

7 5. Graphs of Income Projections The graphs show the sources and uses of funds, and the savings remaining at the start of each year. November 14, 2011 Page 7

8 6. Summary Income Projections Post-retirement income projections are included in the accompanying schedules. The target income is adjusted for the protection you require from inflation and the funds available indicate whether or not there is any shortage of income and savings. The following schedule includes a summary of your income projections for the first six years of retirement. You can also have these schedules for your entire planned period of retirement if you wish. PROJECTIONS OF RETIREMENT AS AT JANUARY 1, Retirement Funds / Ages 55 & & & & & & 61 Employment & business income $15,000 $63,250 $0 $0 $0 $0 Pension incomes 29,200 29,492 29,787 30,085 81, ,939 Canada (Quebec) Pension Plan ,427 14,590 18,001 Funds from RRSPs, RRIFs & LIRAs 37,018 32,024 97, ,226 35,642 9,003 Income from tax-paid capital 4, Taxable annuity incomes 1,000 1,000 1,000 1,000 1,000 1,000 Taxable income 86, , , , , ,943 Income taxes (12,747) (25,016) (25,503) (30,867) (25,458) (25,785) Funds from tax-paid capital 53, Adjustments for tax-paid capital (3,724) Non-taxable annuity income 1,250 1,250 1,250 1,250 1,250 1,250 Purchase and sale of assets (25,000) Retirement funds $100,000 $102,000 $104,039 $106,121 $108,243 $110,408 Assets at beginning of year Tax-free savings accounts $0 $0 $0 $0 $0 $0 Other tax-paid capital 52, RRSPs & RRIFs 629, , , , , ,447 Locked-In retirement accounts 20,000 19,808 19,605 19,390 19,162 18,921 Other assets 270, , , , , ,854 Total $972,400 $923,353 $932,176 $874,203 $807,330 $806,222 Target retirement Income Retirement funds $100,000 $102,000 $104,039 $106,121 $108,243 $110,408 After-tax shortfall Target retirement Income $100,000 $102,000 $104,039 $106,121 $108,243 $110,408 Income Taxes Federal tax on taxable income $13,210 $21,678 $22,054 $25,016 $22,593 $22,945 Tax credits (4,003) (3,761) (3,863) (3,968) (4,377) (4,490) Total federal tax 9,207 17,917 18,191 21,048 18,216 18,455 Provincial tax on taxable income 4,740 8,240 8,373 9,790 8,548 8,670 Provincial tax credits (1,200) (1,141) (1,173) (1,205) (1,306) (1,340) Provincial surtax , Total provincial tax 3,540 7,099 7,312 9,819 7,242 7,330 Total $12,747 $25,016 $25,503 $30,867 $25,458 $25,785 November 14, 2011 Page 8

9 7. Detailed Income Projections The following schedules include detailed income projections for the first six years of retirement. You can have these schedules for your entire planned period of retirement if you wish. PROJECTIONS OF RETIREMENT INCOMES AS AT JANUARY 1, Retirement funds from Ray / Age Employment & business income $0 $48,250 $0 $0 $0 $0 Pension incomes ,833 76,250 Canada (Quebec) Pension Plan ,773 8,919 Other funds from RRSPs & RRIFs 35,855 12,468 77, ,057 34,472 7,830 Minimum LRIF/LIF withdrawal or annuity Excess withdrawal from LRIF/LIF Income from tax-paid capital 2, Taxable annuity income 1,000 1,000 1,000 1,000 1,000 1,000 Taxable income 40,167 62,883 79, ,226 93,248 95,172 Pension income split with spouse 3, (25,417) (27,701) Adjusted taxable income 43,239 62,883 79, ,226 67,831 67,471 Income taxes (6,220) (12,547) (17,597) (27,168) (13,075) (12,734) Funds from (to) tax-paid capital 30, Adjustments for tax-paid capital (1,849) Non-taxable annuity income 1,250 1,250 1,250 1,250 1,250 1,250 Purchase/sale of assets & bequests (25,000) Retirement funds $41,504 $51,586 $63,058 $78,308 $56,006 $55,987 Assets of Ray at beginning of year Tax-free savings accounts $0 $0 $0 $0 $0 $0 Other tax-paid capital 29, RRSPs & RRIFs 595, , , , , ,447 Locked-In retirement accounts 20,000 19,808 19,605 19,390 19,162 18,921 Other assets 105, , , , , ,574 $750,200 $717,703 $738,487 $693,903 $621,621 $614,942 Retirement funds from Janice / Age Employment & business income $15,000 $15,000 $0 $0 $0 $0 Pension incomes 29,200 29,492 29,787 30,085 30,386 30,689 Canada (Quebec) Pension Plan ,427 8,817 9,082 Other funds from RRSPs & RRIFs 0 18,391 19, Income from tax-paid capital 2, Taxable income 46,311 62,883 48,887 31,512 39,203 39,771 Pension income split with spouse (3,072) ,417 27,701 Adjusted taxable income 43,239 62,883 48,887 31,512 64,620 67,472 Income taxes (6,527) (12,469) (7,906) (3,699) (12,383) (13,051) Funds from (to) tax-paid capital 23, Adjustments for tax-paid capital (1,875) Retirement funds $58,496 $50,414 $40,981 $27,813 $52,237 $54,421 Assets of Janice at beginning of year Tax-free savings accounts $0 $0 $0 $0 $0 $0 Other tax-paid capital 23, RRSPs & RRIFs 34,000 35,700 18, Other assets 165, , , , , ,280 $222,200 $205,650 $193,689 $180,300 $185,709 $191,280 Retirement funds from Ray $41,504 $51,586 $63,058 $78,308 $56,006 $55,987 Retirement funds from Janice 58,496 50,414 40,981 27,813 52,237 54,421 After-tax shortfall (surplus) Target Retirement Income $100,000 $102,000 $104,039 $106,121 $108,243 $110,408 November 14, 2011 Page 9

10 8. Income Tax Projections The following schedules include income tax projections for the first six years of retirement. You can also have these schedules for your entire planned period of retirement if you wish. PROJECTIONS OF RETIREMENT INCOMES AS AT JANUARY 1, Income Taxes for Ray / Age Taxable Income $40,167 $62,883 $79,405 $104,226 $93,248 $95,172 Pension Income Split with Spouse 3, (25,417) (27,701) Adjusted Taxable Income $43,239 $62,883 $79,405 $104,226 $67,831 $67,471 Federal Tax on Taxable Income $6,605 $10,839 $14,384 $20,289 $11,650 $11,472 Personal Tax Credit (1,579) (1,626) (1,675) (1,725) (1,777) (1,831) Pension Income Tax Credit (300) (300) (300) Donations Tax Credit (204) (209) (213) (218) (223) (228) Federal dividend tax credit (31) Total Federal Tax 4,491 9,004 12,496 18,346 9,350 9,113 Provincial Tax on Taxable Income 2,370 4,120 5,583 8,199 4,421 4,335 Provincial Personal Tax Credit (482) (497) (512) (527) (543) (559) Provincial Pension Income Tax Credit (67) (67) (67) Provincial Donations tax credit (79) (80) (82) (84) (86) (88) Provincial dividend tax credit (13) Basic Provincial Tax 1,729 3,543 4,989 7,588 3,725 3,621 First Provincial Surtax Second Provincial Surtax Total Provincial Tax 1,729 3,543 5,101 8,822 3,725 3,621 Total Income Tax $6,220 $12,547 $17,597 $27,168 $13,075 $12,734 Income Taxes for Janice / Age Taxable Income $46,311 $62,883 $48,887 $31,512 $39,203 $39,771 Pension Income Split with Spouse (3,072) ,417 27,701 Adjusted Taxable Income $43,239 $62,883 $48,887 $31,512 $64,620 $67,472 Federal Tax on Taxable Income $6,605 $10,839 $7,670 $4,727 $10,943 $11,473 Personal Tax Credit (1,579) (1,626) (1,675) (1,725) (1,777) (1,831) Pension Income Tax Credit (300) (300) (300) (300) (300) (300) Federal dividend tax credit (10) Total Federal Tax 4,716 8,913 5,695 2,702 8,866 9,342 Provincial Tax on Taxable Income 2,370 4,120 2,790 1,591 4,127 4,335 Provincial Personal Tax Credit (482) (497) (512) (527) (543) (559) Provincial Pension Income Tax Credit (67) (67) (67) (67) (67) (67) Provincial dividend tax credit (10) Basic Provincial Tax 1,811 3,556 2, ,517 3,709 Total Income Tax $6,527 $12,469 $7,906 $3,699 $12,383 $13,051 November 14, 2011 Page 10

11 9. Strategies to Meet Your Objectives The purpose of the retirement plan is to determine how you can use your financial resources to meet your retirement objectives, which are: to maintain your standard of living as measured by lifestyle expenditures of $100,000 per year in current dollars plus some inflation protection; and to enable the surviving spouse to be able to maintain his/her standard of living. Based upon the assumptions in the plan, you should be able to maintain lifestyle expenditures of $100,000 per year in current dollars plus inflation protection of 2% with a cushion of over $700,000. However, as illustrated in the Schedule of Alternative Expenditures, if inflation increase to just 3%, you cushion disappears. Based upon the assumptions in the plan, the surviving spouse should be able to maintain his/her standard of living. However, you will have to prepare and implement an estate plan that provides for a smooth transfer of assets: using named beneficiary designations, joint ownership and bequests as appropriate. The projections included in the plan are based upon certain principles for the use of tax-paid capital, tax-free savings accounts and registered retirement savings plan. The amounts of withdrawals and contributions in the projections are based upon these principles and I suggest that you use these amounts to guide your conversion of funds into income and your investment of excess funds. Retirement planning is an ongoing process and you will have to update your plan on a regular basis as investment returns, income taxes and your expenses change. I suggest that you revise your plan annually. The End November 14, 2011 Page 11