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Locked: Is my plan for retirement at 45 sound? (the Rolen Plan)

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  • Mar 15th, 2019 1:11 pm
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Feb 13, 2019
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Is my plan for retirement at 45 sound? (the Rolen Plan)

We are currently in our early 30s, we don't have extraordinarily high income but we live very frugally. I make a salary around $90,000. Wife works part time and only makes $20,000 (likely less or maybe no income at all over the next decade). Our TFSAs are at about $200,000 and our RRSPs are at about $100,000, both are maxed out. We are still living with my parents, but planning to purchase a small house soon. We just had our first child and want 2-3 more.

My plan is:
- Continue to contribute to TFSAs until the bitter end. Perhaps even borrow money from our children in our old age instead of ever withdrawing them, so as to obtain the maximum benefit from them.
- Continue to contribute the max to RRSPs until around age 45.
- Our remaining income outside of RRSPs and TFSAs contributions will pay off our mortgage, max out RESPs, and cover our living expenses.
- At age 45, we will both stop working and start drawing the maximum we can from our RRSPs without incurring any taxes (approx $30,000/year).
- We will have our RRSPs fully withdrawn around age 65.
- At that time, we will receive the maximum benefits of OAS, GIS, etc as we'll have no income. We can draw as much as we want from our TFSAs to supplement it.
- We aren't too worried about CPP, it will be low due to our early retirement but who cares as we'll receive the other benefits instead.

Thoughts?

I realize there is little margin for error here, but we could also work past 45 if needed. And this also doesn't factor in any inheritance that we're likely to receive.

One thing that could really botch this plan is if OAS, GIS were done away with due to the prominence of TFSAs. TFSAs could also be done away with or changed in a way to botch this plan.
Last edited by rolenEDM on Feb 17th, 2019 11:45 pm, edited 1 time in total.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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Deal Addict
Jan 16, 2016
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You forgot the option where you’re spending money on your children. Do you think they’ll live with you til you die? Or you won’t save money for their education? I’d revisit this plan if I were you.
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May 25, 2011
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4 children, some of them entering their teenage years, and only an income of $30,000/year.

Are you assuming a fully paid off house and maxed out RESPs? I’m pretty frugal, but I’d have a hard time meeting your goals. If the wife works a little once the kids are in school, it becomes a tad bit more realistic, but it’s going to be tough one.
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Altera wrote: You forgot the option where you’re spending money on your children. Do you think they’ll live with you til you die? Or you won’t save money for their education? I’d revisit this plan if I were you.
We will contribute to RESPs, but I will also advise my children that university is a waste of time unless they're going into a small range of professions. Most everything else they can better learn from their parents (who will have ample time for them), the internet, text books, or real world experience.

I will mention that I estimate our income after RRSP deductions and taxes to be approximately $60,000/year prior to retirement. We'll have the following yearly expenses: mortgage ($20,000), TFSA contributions ($12,000), RESP contributions ($5,000). That leaves $23,000 for living expenses. Our historical living expenses prior to kids have been approximately $20,000, so it will be tight (with additional housing costs) but doable. There are a lot of areas we can cut costs. Especially if we don't have to work and have time to do maximum couponing, price matching, etc.

After retirement, if we have $30,000 in income. Minus TFSA contributions, that leaves only $18,000 for living expenses. That will be even tighter but our expenses will be lower without the costs associated with working (eg. commuting). Our kids are definitely not going to grow up in the lap of luxury, but it will be good for them. Another thing I haven't factored into any of this is child tax credits or programs to help low income children.

This is the general plan. We'll crunch numbers again closer to retirement age. If we have to work an extra year or two to have a slightly higher income, that is a possibility.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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Apr 29, 2012
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rolenEDM wrote:
- At age 45, we will both stop working and start drawing the maximum we can from our RRSPs without incurring any taxes (approx $30,000/year).
1st, wish you all the best in your journey. Sounds plausible. Several blogs out there claim to do it. Derek Foster wrote a fairly popular book on it.
But as to your RRSP comment, maybe I'm reading it wrong, maybe my information is out of date. Any earlier withdraw is subject to tax. You either pay upfront in the form of withholding tax or at April when you file. The only exception is borrowing from your RRSP to buy a house.
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Feb 16, 2018
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rolenEDM wrote: We will contribute to RESPs, but I will also advise my children that university is a waste of time unless they're going into a small range of professions. Most everything else they can better learn from their parents (who will have ample time for them), the internet, text books, or real world experience.

I will mention that I estimate our income after RRSP deductions and taxes to be approximately $60,000/year prior to retirement. We'll have the following yearly expenses: mortgage ($20,000), TFSA contributions ($12,000), RESP contributions ($5,000). That leaves $23,000 for living expenses. Our historical living expenses prior to kids have been approximately $20,000, so it will be tight (with additional housing costs) but doable.

After retirement, if we have $30,000 in income minus TFSA contributions that leaves only $18,000 for living expenses. That will be even tighter but our expenses will be lower without the costs associated with working (eg. commuting). Our kids are definitely not going to grow up in the lap of luxury, but it will be good for them. Another thing I haven't factored into any of this is child tax credits or programs to help low income children.

I really don't think it's doable tbh. I haven't crunched your numbers but at a glance it doesn't seem realistic .My wife and I have 3 kids, bring in a higher income than you and have a little bit more saved up. We also have 2 properties (ones a rental) with about 850k in equity between the 2 of them. I couldn't imagine retiring anytime soon because of the 3 kids. I have crunched the numbers for our situation and It is doable for us now I believe but we would have to drastically reduce our lifestyle to make it work hence it's a no go. We are comfortable but we don't live in luxury. If one of us didn't get a paycheck for the next few months we wouldn't be scrambling for anything.

I also like you believe University is a waste of time these days unless you are planning on going into a very small select group of professions. Lawyer, Dr, Vet etc but it's the day to day living costs that make it unrealistic for us, not the university costs.

And fwiw, my wife and my oldest daughter who is 17 both call me cheap, I call myself frugal.

Our kids are not living in the lap of luxury either. For example My daughter just turned 17 and finally got her own phone (Iphone 7) which was a Christmas present which was the first time it wasn't a 5-6 year old hand me down from my wife or me. Neither my wife or I have data on our phones because we don't need it and don't want to pay for it. Anytime anyone finds out we don't have data on our phones people look at us like we are nuts. But the kids cost really add up over time. Meanwhile I take my youngest kids to school and see these grade 7 and grade 8's with the latest Iphone. It's a tad ridiculous IMO
Last edited by HghSsociety on Feb 17th, 2019 3:17 pm, edited 2 times in total.
[OP]
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Feb 13, 2019
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rfduser199 wrote: 1st, wish you all the best in your journey. Sounds plausible. Several blogs out there claim to do it. Derek Foster wrote a fairly popular book on it.
But as to your RRSP comment, maybe I'm reading it wrong, maybe my information is out of date. Any earlier withdraw is subject to tax. You either pay upfront in the form of withholding tax or at April when you file. The only exception is borrowing from your RRSP to buy a house.
Thanks for the pointer, I will research about Derek Foster.

As for withholding tax, it would be refunded at the end of the year so essentially you would pay no income tax as long as the amount you withdraw from your RRSP is below the personal exemption. Currently that amount is just under $12,000, so we could draw $24,000 from RRSPs per year without paying any tax. I figured it should be up to $15,000 each ($30,000 total) in 15 years, but then again cost of living will also increase.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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Aug 2, 2001
16218 posts
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I personally think your retirement plan relies heavily on the social safety net we have in place now. The big risk I see is that the safety net changes and what you have planned for is no longer possible.

Raising a family of 3-4 kids on $30,000 is doable if the current social programming stays in place. You'll receive huge CCB benefits, you will qualify for many low income programs (free admission to all municipal facilities I would assume), and much more. But if some of these changes (e.g. revert to the old UCB of $120/mo for each child) your plan then carries more risk.

It would seem your TFSA could be used to mitigate this risk, but I think it's definitely a risk worth acknowledging in your plan.
Member
May 25, 2011
204 posts
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BC
Quick question. How are you going to get your RESPs to a point where it’ll pay out $600,000 over 20 years? You have just over a decade left of saving. You currently have $100,000 but you’re maxed out.

Wife will be low/no income, so there won’t be much more contribution room on her end.

On your income of $90,000, you can contribute $16,200 a year. Not sure how early into your thirties you are, but assuming 15 years that would amount to an additional $243,000 in contributions.

What interest rate are you assuming? I know that compounding can be significant, and you’ll be collecting interest as you dwindle down your account, but I’m just curious what kind of math you’ve done.
[OP]
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Feb 13, 2019
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HghSsociety wrote: I really don't think it's doable tbh. I haven't crunched your numbers but at a glance it doesn't seem realistic .My wife and I have 3 kids, bring in a higher income than you and have a little bit more saved up. We also have 2 properties (ones a rental) with about 850k in equity between the 2 of them. I couldn't imagine retiring anytime soon because of the 3 kids. I have crunched the numbers for our situation and It is doable for us now I believe but we would have to drastically reduce our lifestyle to make it work hence it's a no go. We are comfortable but we don't live in luxury. If one of us didn't get a paycheck for the next few months we wouldn't be scrambling for anything.

I also like you believe University is a waste of time these days unless you are planning on going into a very small select group of professions. Lawyer, Dr, Vet etc but it's the day to day living costs that make it unrealistic for us, not the university costs.

And fwiw, my wife and my oldest daughter who is 17 both call me cheap, I call myself frugal.

Our kids are not living in the lap of luxury either. For example My daughter just turned 17 and finally got her own phone (Iphone 7) which was a Christmas present which was the first time it wasn't a 5-6 year old hand me down from my wife or me. Neither my wife or I have data on our phones because we don't need it and don't want to pay for it. Anytime anyone finds out we don't have data on our phones people look at us like we are nuts. But the kids cost really add up over time. Meanwhile I take my youngest kids to school and see these grade 7 and grade 8's with the latest Iphone. It's a tad ridiculous IMO
Thanks for sharing your story. You sound very frugal and I agree it's totally ridiculous what people give their kids. I have a sister who grew up in a million dollar home, was spoiled rotten, and turned out so terribly she ended up disowned. I grew up in very modest conditions and turned out OK. I firmly believe that growing up with little builds character and makes people better.

People get accustomed to living conditions and it's understandable you wouldn't want to take a reduction. In our case we're already living on the extreme end of frugality so we don't have much to lose. I would be OK with living near povery as long as I was comfortable we wouldn't end up in actual poverty. Retiring early is risky in that it would be difficult to get back into the work force later on if needed.

At any rate, this is a tentative plan that we will continue to assess over the next 15 years. Maybe I'm about to find out that feeding and clothing my own kids as they are born and grow up is more expensive than I imagined. :-)
TrevorK wrote: I personally think your retirement plan relies heavily on the social safety net we have in place now. The big risk I see is that the safety net changes and what you have planned for is no longer possible.

Raising a family of 3-4 kids on $30,000 is doable if the current social programming stays in place. You'll receive huge CCB benefits, you will qualify for many low income programs (free admission to all municipal facilities I would assume), and much more. But if some of these changes (e.g. revert to the old UCB of $120/mo for each child) your plan then carries more risk.

It would seem your TFSA could be used to mitigate this risk, but I think it's definitely a risk worth acknowledging in your plan.
I agree, this is the largest risk to my plan. My biggest concern is that legislation would change precisely because of TFSAs that would force us to draw our TFSA as our primary income in retirement rather than living off social credits in our retirement. It actually seems likely that would happen. I am not as concerned about the CCB as Canada seems to love subsidizing low income immigrants to have lots of babies, but that could possibly change too.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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Feb 13, 2019
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Edmonton, AB
TylerK wrote: Quick question. How are you going to get your RESPs to a point where it’ll pay out $600,000 over 20 years? You have just over a decade left of saving. You currently have $100,000 but you’re maxed out.

Wife will be low/no income, so there won’t be much more contribution room on her end.

On your income of $90,000, you can contribute $16,200 a year. Not sure how early into your thirties you are, but assuming 15 years that would amount to an additional $243,000 in contributions.

What interest rate are you assuming? I know that compounding can be significant, and you’ll be collecting interest as you dwindle down your account, but I’m just curious what kind of math you’ve done.
Good question! I actually hadn't done the math, just a napkin estimate, so I did it right now.

Starting with $100,000 and adding $16,000 a year for 13 years, assuming a modest 3% interest rate, here are the yearly amounts we could withdraw from our RRSP to bring it down to zero over:
15 years (age 60): $33,861
20 years (age 65): $27,170

If we could achieve 4% interest rate, that would increase to:
15 years (age 60): $39,859
20 years (age 65): $32,609

Obviously there is some risk in this, we'd have to assess things in 13 years from now to see what kind of interest rates we actually achieved.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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May 25, 2011
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Okay. So you’re my age. I’m single and have no plans on having kids. If you divide your savings by 2, we are at similar starting points. My income is only $70,000, but I’m paid on a grid. In 8 years my income will be $102,000 notwithstanding any changes to the grid. I also have a defined benefit pension that I can access at 55.

Currently I save about 81% of my income. I’ve moved back home to save for a down payment. I plan to live a relatively frugal life over the next decade saving about the same percentage of my income, minus homeownership costs (mortgage, insurance, utilities, home maintenance fund, etc). The increase in income will lead to both increased savings and lifestyle.

I figure in 10 years I’ll have my mortgage paid off (or have assets that balance off the debt). I’ll be 42. Once that’s paid off more money will start going to savings. Even with my 81% savings rate, my $102,000/year income, my pension plan, and my lack of kids and wife, I don’t feel I’ll be anywhere near retirement at age 45. Props to you if you can do it!

I might be able to go early at 50, but I actually enjoy teaching. So I could see myself going to 55, getting a good pension, and maybe subbing part time.

Good luck with your plan. Will be interesting to see how it turns out. Maybe I’m underestimating myself.
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TylerK wrote: Okay. So you’re my age. I’m single and have no plans on having kids. If you divide your savings by 2, we are at similar starting points. My income is only $70,000, but I’m paid on a grid. In 8 years my income will be $102,000 notwithstanding any changes to the grid. I also have a defined benefit pension that I can access at 55.

Currently I save about 81% of my income. I’ve moved back home to save for a down payment. I plan to live a relatively frugal life over the next decade saving about the same percentage of my income, minus homeownership costs (mortgage, insurance, utilities, home maintenance fund, etc). The increase in income will lead to both increased savings and lifestyle.

I figure in 10 years I’ll have my mortgage paid off (or have assets that balance off the debt). I’ll be 42. Once that’s paid off more money will start going to savings. Even with my 81% savings rate, my $102,000/year income, my pension plan, and my lack of kids and wife, I don’t feel I’ll be anywhere near retirement at age 45. Props to you if you can do it!

I might be able to go early at 50, but I actually enjoy teaching. So I could see myself going to 55, getting a good pension, and maybe subbing part time.

Good luck with your plan. Will be interesting to see how it turns out. Maybe I’m underestimating myself.
Good luck to you as well. We are also living with my parents and we've saved $150,000 for a downpayment. Since we're in Alberta, our mortgage will probably be smaller than yours. I bet that accounts for most of the difference.

Personally I don't think I could have a fulfilling life without kids, which is why I decided I had to do it. Plus, I felt an obligation to my people and my race. Luckily I was able to find a woman worth procreating with.

As for retirement, I am actually generally opposed to it in principle. A lot of people seem to want to work hard to save up, retire, and then turn into vegetables. That seems rather stupid to me. I'd rather work part time throughout my life than do that. If I had a job I enjoyed and nothing better to do, I'd happily work into my 70s and 80s, and I know several people who do that. In my case, I work in the tech industry and I have personal projects I'd like to do, so once I retire that would be a major focus for me. I also think it may be interesting to try homeschooling my children in some advanced subjects (I have pretty low faith in schooling), and we have a bunch of lifestyle hobbies (farming, hunting, fishing) that I'd also indulge in and teach my children.
Older generations literally have no biological purpose to exist other than to help the younger generation.
I am the proud inventor of the Rolen Plan for early retirement.
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I’m actually in Calgary. Haven’t updated my profile.
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<< My plan is:
- Continue to contribute to TFSAs until the bitter end. Perhaps even borrow money from our children in our old age instead of ever withdrawing them, so as to obtain the maximum benefit from them.... >>

How are you obtaining any, let alone maximum, benefit from your TFSAs if you never withdraw ?

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