Personal Finance

Living off investments

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[OP]
Deal Addict
Sep 14, 2012
1854 posts
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Montreal, QC

Living off investments

For those people living off investments (perhaps retired), is it "better" to withdraw the entire annual amount in a lump sum from the investment account(s) or is it "better" to withdraw the amount monthly?

I have an idea of how much I "need" to live "comfortably" based on my current salary and wonder whether at retirement, it is "better" to withdraw the amount in a lump sum or whether to take it monthly.

The benefit that I can see with a lump sum withdrawal is that it simplifies income tax calculations/reporting at filing in April of each year.

The benefit that I can see with monthly withdrawals is that one gets possible continued growth/dividend/income from the investments as opposed to having it in a safer high interest savings account from a lump sum withdrawal.

I have enough self control that even if I were to withdraw the entire amount as a lump sum at the beginning or mid-year point, I would be able to control how much I spend each month.

Am I missing anything? Comments?
61 replies
Deal Fanatic
Jan 19, 2017
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3133 upvotes
lmcjipo wrote: For those people living off investments (perhaps retired), is it "better" to withdraw the entire annual amount in a lump sum from the investment account(s) or is it "better" to withdraw the amount monthly?

I have an idea of how much I "need" to live "comfortably" based on my current salary and wonder whether at retirement, it is "better" to withdraw the amount in a lump sum or whether to take it monthly.

The benefit that I can see with a lump sum withdrawal is that it simplifies income tax calculations/reporting at filing in April of each year.

The benefit that I can see with monthly withdrawals is that one gets possible continued growth/dividend/income from the investments as opposed to having it in a safer high interest savings account from a lump sum withdrawal.

I have enough self control that even if I were to withdraw the entire amount as a lump sum at the beginning or mid-year point, I would be able to control how much I spend each month.

Am I missing anything? Comments?
If the investment is in a registered acct(i.e. RRSP or RRIF), there may be withdrawl fee each time. If that is true, yes take a lump sum at the beginning of the year and invest in a non registered acct for the same investment and sell the investment as you need for living expenses. If it is in a non registered acct already, then there is no need to take a lump sum out to put in a saving acct. if you are worry about selling when the market is down, then sell enough investment for 3 to 6 months living expenses.
[OP]
Deal Addict
Sep 14, 2012
1854 posts
1328 upvotes
Montreal, QC
ml88888888 wrote: If the investment is in a registered acct(i.e. RRSP or RRIF), there may be withdrawl fee each time. If that is true, yes take a lump sum at the beginning of the year and invest in a non registered acct for the same investment and sell the investment as you need for living expenses. If it is in a non registered acct already, then there is no need to take a lump sum out to put in a saving acct. if you are worry about selling when the market is down, then sell enough investment for 3 to 6 months living expenses.
Thanks for the reply.

It won't be from a registered retirement type account (RRSP, RRIF, LIRA, LIF) but will be from a non-registered account.
Deal Expert
Aug 2, 2001
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One strategy to add a little more safety to your investments is to have a couple of years worth of expenses in a low risk investment, then if there is a downturn you have a two year timeframe to draw down without having to sell investments at a great loss. Kind of like a bond ladder. This does depend on your risk tolerance, for some they have a higher tolerance to risk and this would not be appealing. But for others this gives them comfort in knowing they have enough to cover a downturn that lasts several years without selling at a big loss.
[OP]
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Sep 14, 2012
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TrevorK wrote: One strategy to add a little more safety to your investments is to have a couple of years worth of expenses in a low risk investment, then if there is a downturn you have a two year timeframe to draw down without having to sell investments at a great loss. Kind of like a bond ladder. This does depend on your risk tolerance, for some they have a higher tolerance to risk and this would not be appealing. But for others this gives them comfort in knowing they have enough to cover a downturn that lasts several years without selling at a big loss.
Thanks for the comment.

My current investments are not what I would consider very risky; there is risk involved but I would say that my portfolio takes a "balanced" approach.

Even though it slightly complicates the calculations during income tax time, for my non-retirement type accounts (non-RIF/RSP and non-LIF/LIRA), I'm considering 2 withdrawals approximately 6 months apart.

When it becomes necessary to start withdrawing from my retirement type accounts, I'll do this as a single amount per year (minimum amounts dictated by the government)
Deal Addict
Feb 4, 2019
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BC
Personally I'm still a few years away from it but I'm strongly leaning towards one withdrawal per year because I like the simplicity of it.

I suspect there is no one best solution for everyone, it depends on the individual's situation and preferences. My partner is about to transition into living off her (mostly non-registered) investments and still figuring out details like this. I expect in the first few years she will probably adapt/change things as she goes.
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Jun 8, 2004
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lmcjipo wrote: Thanks for the comment.

My current investments are not what I would consider very risky; there is risk involved but I would say that my portfolio takes a "balanced" approach.

Even though it slightly complicates the calculations during income tax time, for my non-retirement type accounts (non-RIF/RSP and non-LIF/LIRA), I'm considering 2 withdrawals approximately 6 months apart.

When it becomes necessary to start withdrawing from my retirement type accounts, I'll do this as a single amount per year (minimum amounts dictated by the government)
If you have a fairly large amount in your registered accounts, you may want to first review whether if it is a better idea to start melting down your RRSPs first, before drawing down on your non-registered investments. There is another thread on here about melting down RRSPs, and another thread on here or eleswhere that talks about the strategy of the order in which accounts are drawn.

In my case, I have enough dividends from my non-registered accounts that I didn't need to draw down my RRSP's, but then I determined it was actually better to draw down and live off my RRSPs (spreading the tax hit from the RRSP income out over many years) first (putting any excess drawn out into my non-registered and/or TFSA accounts), and then draw on my non-registered accounts, and leave the TFSA accounts untouched and drawn down last or left to my estate. When the time comes, my LIRA will be probably be drawn down at max amount each depending on the projected tax calculations each year.
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Feb 4, 2019
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cba123 wrote: If you have a fairly large amount in your registered accounts, you may want to first review whether if it is a better idea to start melting down your RRSPs first, before drawing down on your non-registered investments. There is another thread on here about melting down RRSPs, and another thread on here or eleswhere that talks about the strategy of the order in which accounts are drawn.

In my case, I have enough dividends from my non-registered accounts that I didn't need to draw down my RRSP's, but then I determined it was actually better to draw down and live off my RRSPs (spreading the tax hit from the RRSP income out over many years) first (putting any excess drawn out into my non-registered and/or TFSA accounts), and then draw on my non-registered accounts, and leave the TFSA accounts untouched and drawn down last or left to my estate. When the time comes, my LIRA will be probably be drawn down at max amount each depending on the projected tax calculations each year.
This is a good point to keep in mind. I literally mapped out 50 years of withdrawals from non-reg, TFSA and RRSP accounts in a spreadsheet to find a tax-efficient strategy and I'll basically be spreading RRSP withdrawals out over the entire time. Parallel to that, drain non-reg, and keep TFSA untouched (even add to it) as long as possible to let it compound tax-free. It's pretty fun playing with the numbers too ;-)
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Dec 12, 2009
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rhw123 wrote: This is a good point to keep in mind. I literally mapped out 50 years of withdrawals from non-reg, TFSA and RRSP accounts in a spreadsheet to find a tax-efficient strategy and I'll basically be spreading RRSP withdrawals out over the entire time. Parallel to that, drain non-reg, and keep TFSA untouched (even add to it) as long as possible to let it compound tax-free. It's pretty fun playing with the numbers too ;-)
I use the cascades decumulation tool to map out the annual withdrawals. As far as lump sum vs multiple smaller withdrawals, this is almost like a market timing question. It is impossible to have a right answer until after the fact. I would say flexible approach rather than fixed is the way to go. Do what feels right at the time. Decumulation by its very definition requires an element of flexibility. If the investments have done well, it is an opportunity to take a little more.
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[OP]
Deal Addict
Sep 14, 2012
1854 posts
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Montreal, QC
will888 wrote: I use the cascades decumulation tool to map out the annual withdrawals. As far as lump sum vs multiple smaller withdrawals, this is almost like a market timing question. It is impossible to have a right answer until after the fact. I would say flexible approach rather than fixed is the way to go. Do what feels right at the time. Decumulation by its very definition requires an element of flexibility. If the investments have done well, it is an opportunity to take a little more.
For me, the lump sum vs multiple smaller withdrawals isn't really due to the market and wanting to withdraw the amount when I'm not at a loss since I consider anything above the book value to not be at a loss even though let's say hypothetically, in the month of January my investment account was worth $100k and in July it was worth $95k which means a drop in value on paper of $5k in 6 months, if I were to withdraw $10k in July, yes it would "bother" me that I didn't withdraw it when it was higher in January but I wouldn't be pre-occupied by it unless we are talking like the value in January was $100k and in July, it was $70k (a drop of $30k on paper in ~6 months on paper).

If it didn't complicate the tax filing with different sales with different book values for the same security, I would do it once a month but because it complicates it, I'm leaning on a single withdrawal or perhaps 2 withdrawals per year.

Whether I do a single withdrawal or two withdrawals per year, I have enough budgetary control as to not spend the money needlessly (I'm doing that now and I have a few months' salary in as liquid "investment" as possible which is a high interest savings account that I can access the funds within the same day at the ATM up my daily ATM withdrawal limits or within the following business day at one of the Big 5 brick & mortar banks that I deal with).
[OP]
Deal Addict
Sep 14, 2012
1854 posts
1328 upvotes
Montreal, QC
cba123 wrote: If you have a fairly large amount in your registered accounts, you may want to first review whether if it is a better idea to start melting down your RRSPs first, before drawing down on your non-registered investments. There is another thread on here about melting down RRSPs, and another thread on here or eleswhere that talks about the strategy of the order in which accounts are drawn.

In my case, I have enough dividends from my non-registered accounts that I didn't need to draw down my RRSP's, but then I determined it was actually better to draw down and live off my RRSPs (spreading the tax hit from the RRSP income out over many years) first (putting any excess drawn out into my non-registered and/or TFSA accounts), and then draw on my non-registered accounts, and leave the TFSA accounts untouched and drawn down last or left to my estate. When the time comes, my LIRA will be probably be drawn down at max amount each depending on the projected tax calculations each year.
It depends what you mean by a fairly large amount in my registered accounts. My registered retirements accounts (not referring to TFSA) amount to roughly 40% of my net investments and the locked in retirement accounts amounting to 15% of my net investments.

I plan on withdrawing from my TFSA last when it comes to withdrawing money from my investment accounts and there is no tax consequences on it (unlike with an RRSP/LIRA which are tax deferred).

I was considering converting some of my RRSP to a RIF to draw the minimum amount stated by the government but also want to benefit from the continued tax deferred growth and income.

I'm thinking if I withdraw $40k from my non-registered account, my gross income according to the government at tax filing time will be whatever interest, dividend, and capital gains that I made that year whereas if I withdraw $40k from my RRSP/RIF/LIF, this $40k is added to my gross income from interest & dividends (and no or hardly any capital gains) which will affect how much taxes I might have to pay at tax filing time in April. So taking out something like $30k from my non-registered account and taking out $10k from my RRSP/RIF/LIF (I'm just randomly throwing out numbers) would give me a minimum starting point of $10k in gross income with whatever amount I made from the year from my non-registered accounts.
[OP]
Deal Addict
Sep 14, 2012
1854 posts
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Montreal, QC
rhw123 wrote: Personally I'm still a few years away from it but I'm strongly leaning towards one withdrawal per year because I like the simplicity of it.
I'm of the same mindset (due to the simplicity of declaring and calculating a single withdrawal in income taxes).
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Feb 4, 2019
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will888 wrote: I use the cascades decumulation tool to map out the annual withdrawals.
I've seen you mention that tool a few times in different threads. Does the $85 one-time fee give you unlimited access indefinitely? That's a pretty good deal if it works as well as you say. Can you just buy access to the tool online without Cascades trying to sell you other products or services?
[OP]
Deal Addict
Sep 14, 2012
1854 posts
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Montreal, QC
rhw123 wrote: I've seen you mention that tool a few times in different threads. Does the $85 one-time fee give you unlimited access indefinitely? That's a pretty good deal if it works as well as you say. Can you just buy access to the tool online without Cascades trying to sell you other products or services?
I'm not the person that you quoted but based on my Google search, it is $85 for 30 days of unlimited modification and after 30 days, it is read only access

https://cascadesfs.com/plan/#/createAcc ... Individual
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Dec 12, 2009
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rhw123 wrote: I've seen you mention that tool a few times in different threads. Does the $85 one-time fee give you unlimited access indefinitely? That's a pretty good deal if it works as well as you say. Can you just buy access to the tool online without Cascades trying to sell you other products or services?
I did not pay anything. I just use the free service. It does the job. What is really weird is that the email address you supposedly provide to set up the account results in no spam mail, not even an acknowledgement that you signed up. I figure you can make up any email using a character string that resembles an email address and it will work.
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lmcjipo wrote: For me, the lump sum vs multiple smaller withdrawals isn't really due to the market and wanting to withdraw the amount when I'm not at a loss since I consider anything above the book value to not be at a loss even though let's say hypothetically, in the month of January my investment account was worth $100k and in July it was worth $95k which means a drop in value on paper of $5k in 6 months, if I were to withdraw $10k in July, yes it would "bother" me that I didn't withdraw it when it was higher in January but I wouldn't be pre-occupied by it unless we are talking like the value in January was $100k and in July, it was $70k (a drop of $30k on paper in ~6 months on paper).

If it didn't complicate the tax filing with different sales with different book values for the same security, I would do it once a month but because it complicates it, I'm leaning on a single withdrawal or perhaps 2 withdrawals per year.

Whether I do a single withdrawal or two withdrawals per year, I have enough budgetary control as to not spend the money needlessly (I'm doing that now and I have a few months' salary in as liquid "investment" as possible which is a high interest savings account that I can access the funds within the same day at the ATM up my daily ATM withdrawal limits or within the following business day at one of the Big 5 brick & mortar banks that I deal with).
Don't let the tax tail wag the investment dog, lol. Anyway, the T5008 you get will have all the gains calculated for you. There should be no change in effort whether it is many smaller withdrawals or a few big ones.
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will888 wrote: I did not pay anything. I just use the free service. It does the job. What is really weird is that the email address you supposedly provide to set up the account results in no spam mail, not even an acknowledgement that you signed up. I figure you can make up any email using a character string that resembles an email address and it will work.
Do you have a link to this free service? Perhaps I'm not looking in the right place but I don't see it on https://cascadesfs.com/, I can only find something that costs $85 and requires entering credit card info.
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rhw123 wrote: Do you have a link to this free service? Perhaps I'm not looking in the right place but I don't see it on https://cascadesfs.com/, I can only find something that costs $85 and requires entering credit card info.
This is the link I used. They call it a demo with 45 day trial. The tools is fully functional in spite of it being a demo. I made an account but never ever receive any contact from Cascades. It took me about 3 weeks to complete a ton of scenarios and I saved the results for every calculation. I got the insights that I needed from the tool. I suggest the tool be used to gain insights and strategy rather than "exact" numbers.

https://www.cascadesfs.com/plan/#/creat ... scadesDemo

This is the white paper that led me to the demo link.

https://www.purefacts.com/hubfs/PureFac ... 0Paper.pdf
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May 28, 2012
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ONT
I would evaluate your monthly expenses to evaluate when best to take the withdrawal(s). My wife had to start LIF and RIF withdrawals last year, taking the payments just in December to allow a whole year's growth.

Earlier this year we moved to a condo with $700- monthly maintenance charges that we did not have before, so changed the LIF and RIF payments to monthly to cover them.
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Jan 31, 2007
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will888 wrote: I did not pay anything. I just use the free service. It does the job. What is really weird is that the email address you supposedly provide to set up the account results in no spam mail, not even an acknowledgement that you signed up. I figure you can make up any email using a character string that resembles an email address and it will work.
This tool is great. After I plug in all the numbers, the result is eye opening.
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