Top Free Retirement Calculators
Asset accumulation, generally speaking, is straightforward:
- Save money.
- Invest your money in mostly equities/stocks.
- Keep your fees low.
- Stay invested.
- Repeat 1, 2, 3 and 4.
Wake up wealthy over time. I mean, it’s almost…that simple.
Asset decumulation can be an entirely different matter – which is where some top free retirement calculators (and related sites) might help you out!
Read on to learn about resources that I like and have used in the past, in today’s post.
Top Free Retirement Calculators
There are many reasons why asset decumulation or retirement drawdown planning is challenging for many. Here are some top issues that come to mind that I’m starting to navigate and resolve in my own financial independence plan:
- The need to convert large sums of money into reliable and ideally, growing income streams to fight inflation.
- Changing economics (i.e., dirt-low interest rates where bonds will struggle with higher inflation).
- The desire to minimize taxation.
- The need to fight longevity risk.
Related Reading: Why would anyone own bonds right now?
Then there are some personal, specific questions to answer/consider:
- When to tap/access personal investment accounts such as your TFSA, RRSP or taxable account.
- When to take your workplace pension (if you are lucky enough to have one).
- When to convert your RRSP to a RRIF (Registered Retirement Income Fund).
- How any part-income income might supplement retirement drawdown efforts.
- When to take CPP benefts.
- When to take OAS benefits.
- When to convert your LIRA to a LIF (Life Income Fund).
- How long could your money last with X% withdrawal rate, with Y% inflation rate, with Z% taxation rate.
- And more and more and more….
In a world of increasing financial uncertainty, this makes the process of retirement drawdown planning and re-planning critical to stress-test your assumptions (long before retirement begins!) and to model the art of possible…
In planning for any retirement, even 5-10 years out is smart before you pull the trigger, I would recommend you continue to embrace key wealth-building blocks that got you this far:
- amount of savings that remains invested in equities/stocks for growth, and
- time invested.
Added together, money saved and time invested can continue to work its magic for your wealth-building favour.
Be very mindful however in any semi-retirement or retirement planning of the following wealth-killers:
- fees are forever (i.e., money manaegement fees paid to an advisor),
- taxation, and last but not least,
- higher inflation.
Any one of these things or all of these things combined can destory your wealth.
Before we get to some of my favourite, top free retirement calculators and related sites, here are some portfolio drawdown orders to consider:
Portfolio drawdown orders to consider
Depending on when you plan to retire or semi-retire like I might, the tax consequences involved, and much more, you can probably appreciate the drawdown order could be very different amongst retirees.
Here are some key ideas/sequences to consider:
1. Non-registered (N), RRSPs (R), TFSAs (T) = (NRT)
This sequence might work well if you have built up a modest taxable account value by your 50s or 60s and you might have higher income needs and wants in retirement.
To fight longevity risk, the idea behind NRT is you exhaust your non-registered account first, allowing tax-deferred money (RRSP) and tax-free investments (TFSA) to grow and compound away.
NRT works well to fight longevity risk because by depleting some personal assets you can opt to defer inflation-protected government benefits. Why? A reminder:
Canada Pension Plan (CPP):
- If you start before age 65, payments will decrease by 0.6% each month (or by 7.2% per year), up to a maximum reduction of 36% if you start at age 60.
- If you start after age 65, payments will increase by 0.7% each month (or by 8.4% per year), up to a maximum income boost of 42% if you start at age 70.
More reading: When to take your CPP benefit.
Old Age Security (OAS):
Your OAS pension can start as early as the month following your 65th birthday.
- If you choose to defer collecting your OAS pension to age 70, each month you defer your benefit increases by 0.6% for a total income boost of 36% over the age 65 amount.
I believe for most Canadians, it makes sense to take OAS at age 65 and if you are going to defer any government benefits, defer CPP to age 70 for the additional income boost.
Another reason not to defer OAS (vs. CPP) is there are no survivor benefits for OAS. This means take the money at age 65, and leverage any income-splitting options with other assets to reduce OAS clawbacks and maximize after-tax retirement income.
2. RRSPs (R), Non-registered (N), TFSAs (T) = (RNT)
In this RNT sequence, that essentially involves a slow drawdown of RRSP assets in your 50s and 60s first, you can smooth out taxes given any RRSP withdrawals are taxed as income. While the RRSP assets accruing in the plan are not taxed, you’re absolutely hit on taxes when money is withdrawn. In the year RRSP owners turn age 71, they must convert the plan to a RRIF or be taxed on the entire amount. Ouch.
The benefit of the slow RRSP withdrawals using an RNT order over many years, before age 71 conversion, is you can generate some aforementioned income splitting opportunities while being tax savvy with other personal accounts – keeping your TFSA “until the end”. (If you are the recipient of a pension and are 65 or older, you may split income from your RRSP, RRIF, life annuity, and other qualifying payments.) The challenge in preserving your RRSP/RRIF assets well into your 70s and 80s, if that some seniors could be subject to OAS clawbacks depending on their income level, paying more taxation that really ever necessary.
You may enjoy reading this post: Overlooking retirement income and planning considerations.
OK, enough on drawdowns and much more content to share on that subject over time for you!
Here we go, my top free retirement calculators to use and play around with.
I’m still working through my complete retirement drawdown plan but I do have some great ideas to keep my mind busy 🙂 I have no doubt I’ll write more about these over time and I would be happy to help you out.
Until then, I’m sticking with my asset accumulation plan and I suggest you do as well.
Are you a fan of FIRE? Try the FIRECalc early retirement tool.
When could you retire? Try out networthify.com.
How much do you need in the bank to retire on $5,000 per month starting at age 50?
How much do you need to retire at age 55 with higher inflation for next 40 years?
Don’t forget…I can help!
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