The accumulation phase is a major focus within the financial independence retire early (FIRE) movement. People focus on how they can accumulate enough assets to reach financial independence and eventually retire early. But the accumulation phase has a few basic principles – live within your means, widen your spending-saving gap, avoid lifestyle inflation, and invest your money in appreciating assets like index ETFs or dividend growth stocks.
The decumulation phase, unfortunately, doesn’t get as much attention. People quickly glance over topics like the 4% safe withdrawal rule and which tax advantage account(s) to withdraw first. The usual approach is that people think they will figure out the decumulation phase later.
I have been spending more and more time writing about the decumulation phase lately. Since we are planning to live off dividends from our dividend portfolio in 2025 or earlier, I want to start planning the decumulation phase a bit. Or at a minimum, have some plans with our early withdrawal strategies.
Technically we can be financially independent but decided to prolong our FI journey. We are very fortunate and blessed to have such an option. I feel it is important for me to share our knowledge and help other people to improve their finances through this blog. In addition, helping and improving our communities through charity work is just as vital.
- Our Early Withdrawal Strategies – How to keep more money
- Early Withdrawal Strategies – A reader’s discussion
- Revisit our financial independence assumptions
A lot of our early withdrawal strategies are developed based on what I have read online and running simulations in Excel spreadsheets. But doing simulations and considering things like a sustainable portfolio, government benefits (i.e., CPP and OAS), defined benefit pension, tax efficiency, estate planning, etc. can get very tricky.
There are many retirement calculators available online (heck I have a spreadsheet one). One would input the balance of their TFSA, RRSP, taxable accounts, other assets, a “desired” retirement income, and a retirement age. The retirement calculator then gives you a generic statement of whether you’ll be ready to retire or not.
But these online retirement calculators are all very vanilla and way too simplistic, mine included. There’s nothing on how to draw down your portfolio in a tax-efficient way, the best account order you should withdraw money from (i.e., taxable, RRSP, or TFSA first). Furthermore, if you are like us and plan to live off dividends and create a future legacy by passing down the investment portfolio, the online retirement calculators can’t plan for that.
Fortunately, smart folks at Cashflows & Portfolios started an awesome, low-cost Retirement Projections service for Canadians.
Cashflows & Portfolios – Retirement Projections
Most readers are probably not familiar with Cashflows & Portfolios because it’s a relatively new site. But the founding members are two very well-known bloggers from the Canadian personal finance blogosphere, Mark from My Own Advisor, and Joe (aka FrugalTrader) who founded Million Dollar Journey.
I have been reading Mark and Joe’s writings for over ten years now (probably longer). They are a big reason why I started this blog and an inspiration to me. Both Mark and Joe are in their 40’s, manage their own investment portfolios, and deploy the same hybrid investing strategy of index ETFs and dividend growth stocks as we do.
Mark and Joe started Cashflows & Portfolios and their Retirement Projections service because they feel they can help Canadians in a major way. They are currently using professional financial projections software for their own retirement projections – and with their extensive DIY investing expertise, success as DIY investors, they are offering their time and knowledge to help others.
According to Mark and Joe, there is a huge gap between fee-only planners who can advise people and those people who simply want extra personal confidence in their retirement drawdown approaches. In Canada, most fee-only advisors or planners charge $1,500 to $8,000 for any complete financial plan. On top of that, many advisors want your money to manage: some would charge another 1% or more annually to manage your investment portfolio. Those costs can add up.
With Cashflows & Portfolios’ Retirement Projections service, Mark and Joe will not be offering any advice but they can offer a very comprehensive personal report by taking your inputs, your assumptions, running your tailored projections, and delivering a report customized to your needs and goals.
I was very intrigued when Mark and Joe reached out to me about this service. Although I have done my fair share of spreadsheet simulations I was very intrigued about their service not to mention I wanted a fresh set of eyes to take a look at our numbers. So I was quick to agree to be a client and try out their Retirement Projections service.
What I really liked about Cashflows & Portfolios’ Retirement Projections service is that Mark and Joe asked me a lot of questions and took in a lot of numbers – based on what I needed. They were very open to my concerns, any questions, and specific requests of running multiple scenarios based on different incomes, retirement ages, and whether to leave an estate or not. We went back and forth many times for assumptions and clarifications. This made me feel like it was going to be a comprehensive tailored report – and it was.
Mark and Joe provided me with their service and a couple of reports free of charge as a way for me to try it out and write this article, but I would not hesitate to sign up for their Platinum Membership given the overall value delivered – which includes time with them whereby you can ask them anything!
Cashflows & Portfolios – Membership Options
There are three different Casfhlows & Portfolios membership options – Bronze, Gold, and Platinum. To get your detailed and personalized report and retirement projections, you need to sign up for either the Gold or Platinum membership. The Platinum membership costs only a fraction more than Gold, but the value it provides is both a retirement stress-test (with any historical returns) AND a 1-hour phone/online call with Mark and Joe to ask any questions about your report or beyond.
Through our discussions, I received some pricing details from Mark and Joe. I was pleasantly surprised to learn the Gold and Platinum memberships were MUCH cheaper than any $1,500 entry price listed above (i.e., it was in the very affordable 3-figure range). The duo at Cashflows & Portfolios want their members to be 100% happy so they try to be very responsive – answering any questions thoroughly and promptly.
Cashflows & Portfolios Retirement Projections Review
Please note, Mark and Joe offered me their retirement projections service for free so I could try it and write an honest and personal review.
My quick take is the Cashflows & Portfolios Retirement Projections service is an awesome value that Canadians should definitely consider.
Here’s my detailed review.
Cashflows & Portfolios offer their projections services for individuals but they generally recommend that you do a projection with a spouse or partner (if you have one), if you want a more comprehensive family report. This allows them to provide better accuracy for any reports returned including tax optimization between couples or partners. Since Mrs. T and I have joint accounts and we treat our finances as one big account, we ran the projections together.
Originally I thought everything would be done via emails but I was pleasantly surprised the confidential financial information is shared via an encrypted online form. I also signed a liability waiver which basically states that any information shared with me is for my personal educational purposes only, it is not professional advice or recommendations. Everything is essentially my decision. It’s pretty standard stuff and similar to the disclaimer I have for my own coaching service.
The online form asks for personal information like:
- Date of birth (although you don’t have to use this – you can be approximate)
- Employment income (again, you can approximate as you wish)
- Business income
- Other income
- Savings account balance
- Taxable account balance and asset allocation
- RRSP/RRIF balance and asset allocation
- LIRA/LIF balance and asset allocation
- TFSA balance and asset allocation
- Annual TFSA and RRSP/RRIF contribution
- TFSA and RRSP contribution room remaining
- Real asset (i.e. houses)
- Life insurance details
- Your intended retirement age
- When you intend to take CPP and OAS
- Defined benefit pension
- Other retirement income
What I liked is Mrs. T. and I could use approximate values – for anything we wanted to. This was our report and Mark and Joe reminded me that anything I didn’t want to share, I didn’t have to. There was an input form I needed to complete and I was provided multiple opportunities to add as many comments or questions as I wanted to.
After filling out the form, Cashflows & Portfolios took my data provided, calculated my projections, and delivered a personal, comprehensive report based on the scenario of my choice within 7-10 business days like they said they would. In fact, I got a few reports based on a long list of questions and various options!
I asked for retirement projections based on these three scenarios:
- Can we be financially independent by 2025 with $60k per year after-tax income from our investment portfolio?
- How much we can spend in 2025 if we utilize both dividend income and portfolio withdrawal and deplete our investment accounts to almost $0 while leaving our house to the estate?
- What happens if we continue contributing TFSAs and RRSPs until age 55 and retire then. What would our retirement look like?
All of these scenarios assume that Mrs. and I will continue working part-time and earn $25k a year (we don’t plan to just retire and sit on the beach and drink pina colada all day).
I was very interested to see whether we are on track to start living off dividends by 2025. I was also very curious to see what our retirement income would look like if we were to make withdrawals from the portfolio and if account withdrawal orders would make any difference.
The rates used in the projections were 2% inflation, 6.5% investment return (for 100% equity that is), 1.5% cash interest, and 2% house appreciation. Mark and Joe reviewed these values with me and then performed the calculations. Those projections were tightly aligned to the 2021 returns recommended by FP Canada Standards Council. Alternatively, they can change any values you wish – another reminder to me this was my personal, customized report that includes any rates of return, inflation or other values I feel strongly about.
The reports that I received had net worth and income in nominal dollars up to age 100. I really like that the reports showed different sources of income, both taxable and non-taxable, and estimated taxes year-over-year.
So, what are the projections for the three scenarios I listed above?
For Scenario 1, I was pleased to find out in my report that we can “retire” in 2025 with $60k after-tax annual spending, take out CPP at age 70 and OAS at age 65, and result in a final estate value of $29.5M after-tax at age 100. In today’s dollars, that’s roughly $8.6M. This is absolutely fabulous! It also gives me assurance that I just might be able to write a cheque for $1M and donate to a charity one day.
Please note, for this scenario, we are not only living off dividends. We will withdraw a small amount of money from our portfolio each year. The most optimized withdrawal order for us in this scenario was non-registered first, RRSP second, then finally TFSA.
Now, those are big numbers so I should share a few things since I asked for this scenario. One, I assumed we never sold our house. So, living in Vancouver, that house value is going to appreciate quite a bit over the next 60 years based on my assumptions. Two, we never spent a penny from either of our TFSAs even to age 100. I’m not sure how realistic that is. There’s a very good chance that we’d be touching both TFSAs before then.
Having said that, Mrs. T and I feel extremely blessed that we are doing well financially and that we are tracking toward our financial independence plan. Given many people are facing financial difficulties, especially during this difficult global pandemic, we feel that we need to provide a helping hand whenever possible by donating money and time to local charities. You may want to consider donating securities to charities to maximize tax benefits.
For Scenario 2, it was interesting to see that we can spend more – over $86k a year and still retire in 2025. Mark and Joe also stress-tested our portfolio using the worst historical 20-year returns (and repeating in the coming decades). If that scenario were to happen, then our max spending actually drops quite a bit from $86k per year to $63.7k/year after-tax. That stress-test was important to factor in given market history can repeat sometimes. The most optimized withdrawal order for Scenario 2 was non-registered first, TFSA second, then finally RRSP.
For Scenario 3 (if we continue contributing to our TFSAs and RRSPs until age 55), we will encounter “too much RRSP” and face OAS clawback.
Sidenote: Mark and Joe recently wrote about Can you have too much in your RRSP?
This scenario showed that to avoid a full OAS clawback, we should consider some early RRSP withdrawals (versus starting any forced RRSP/RRIF withdrawals when we turn age 71). If we were to spend $60k a year and retire at age 55, this would leave an estate valued over $15M (today’s dollars) at age 100. Now if we were to spend down our capital by age 100, our annual spending would jump to $179k/year after-tax. Again, in this scenario, for that large estate value, I should highlight we never sold our Vancouver home and we did not spend any TFSA assets for the coming 60 years.
My Scenario Summary
For all my scenarios (and I asked a lot of questions to try out the service and see what might be possible), it was comforting to see that we will be doing very well financially whatever we decide to do. We feel extremely fortunate and blessed. More than ever, I think Mrs. T and I need to provide more financial help to people in need and put more focus on philanthropy and making this world a better place.
Back to the reports. The projection reports include both charts and yearly data. The charts are great if you’re a visual person and want a visual summary. My favourite sections in the reports are Cash Flow Summary and Income Details.
The Cash Flow Summary lets you see some actual numbers by person. It tells you your after-tax spending, where the money is coming from (i.e., non-registered, TFSA, RRSP, CPP, OAS, other pensions, etc.), capital assets inflows and outflows, as well as marginal tax rate and effective tax rate.
The Income Details show where your income is coming from, whether it’s employment income, business income, government benefits, or capital assets. While we have never counted on OAS and CPP in our FIRE plans, it’s nice to see how much we can potentially receive in OAS and CPP when we are older than 65.
Even after the projection reports, I was able to ask Mark and Joe several questions and run the projections again by tweaking some numbers and assumptions. The iterative process with them was extremely helpful and valuable.
Cashflows and Portfolios Retirement Projections – My Thoughts
So what are my thoughts on the Cashflows & Portfolios Retirement Projections service?
Since there isn’t as much focus on the decumulation phase, even for the FIRE community, I am so happy that Mark and Joe are offering these great services to Canadians at very reasonable rates for folks at any retirement income level. Like I mentioned at the beginning of this post, I believe many people gravitate to safe withdrawal rates and other generalizations when it comes to retirement planning, and because of that, they don’t take the necessary time to look at all the combinations of what is possible for any retirement drawdown plan.
For me, it was very assuring and comforting to see these projections in real numbers and in detailed reports showing the tax rates. I know we are very fortunate and blessed to be doing so well financially. As we continue my FI journey, I think it is more and more important for Mrs. T and me to focus on philanthropy. I also want to help people in improving their finances and making their lives better via this blog.
I believe the service being offered is targeted mostly at those people that are close to retirement, planning for their retirement, or already retired but want to optimize any portfolio withdrawals. I also think this service is beneficial to anyone on their FIRE journey to get a more comprehensive picture of how things fit together including any future government benefits.
There’s really nothing to lose given Mark and Joe are offering a 100% no-risk money-back guarantee. There’s no time limit with this guarantee either. They are simply offering their time and knowledge to Canadians based on the work they are already doing with their own retirement and semi-retirement planning.
Cashflows & Portfolios Retirement Projections – Discount and Summary
If you ever want to see your personal drawdown strategy, or what your net worth, estate value or taxation might be in any retirement scenario – subscribe to the Cashflows & Portfolios free newsletter and contact Mark and Joe about their services. They post regular content on the site and if you become a member they even have a forum to interact with other clients.
They also highlight some retirement case studies now and then to share what is possible for any income earner at any age. All free content.
Here are some posts I’ve really enjoyed:
- Can this 60-something retire on a lower income?
- How much does this couple need to save to retire by age 50?
- When should you consider taking CPP in retirement? Read on here.
Mark and Joe are kind enough to offer all Tawcan.com readers a 15% discount on their Cashflow & Portfolios Retirement Projections services until Dec 31, 2021. To get the discount, all you have to do is to mention Tawcan, or Tawcan.com in the “How Did You Hear About Us” part of the form.
After this date, their services will be back to the regular pricing. Even without the 15% discount, I’d be happy to pay them because it’s money so well spent.
In summary, I think this is an awesome service for Canadian DIY investors. You’ll get unbiased, unfiltered reports based on your own assumptions, your own inputs, and your own personal plans about retirement. You’ll also get to pick the brains with two of the most established DIY investors and bloggers in Canada – with over 25 years of combined experience.
That was certainly the case for us.
Dear readers, did you find this review of Cashflows & Portfolios Retirement Projections useful? Regardless if you use their services, what are your decumulation plans? What are your early withdrawal strategies? Do they align with any of my dreams or thoughts for estate planning and passing any assets to the next generation?