Answering from a Canadian perspective:
I haven't seen this touched on, so thought I might bring it up.
Can you count on the funds within your retirement accounts to make up your 4% withdrawal? Essentially pulling from the non retirement accounts first and leaving the retirement ones untouched until you have withdrawn all others. Has anyone constructed any models on how to best position this?
I definitely included all investment funds when modeling withdrawal strategies, this included:
Taxable account
RRSP (Tax deferred retirement account)
LIRA (Tax deferred locked-in retirement account)*
TFSA (Tax free saving account)
There's also government pension/support:
Canada Pension Plan (option of reduced pension @ 60, full pension @ 65, enhanced pension if deferred to as late as 70)
Old Age Security (available @ 66.5 yo for me) This is income tested.
*well, locked in from a maximum annual withdrawal perspective - As this is governed by provincial pension rules, I can access the funds now as I am >50yo.
I can see it being a lot more intricate in how its managed and set up, but could be great for getting the most out of your pension allowance.
Agree
I've done some modelling on when to start withdrawing from various tax advantaged accounts, and on when to start collecting CPP. I'll be drawing from the taxable account until 2020, then begin withdrawals from RRSP and LIRA, commencing CPP @ age 64 and OAS at age 66.5.
I expect to keep adding $10k/year to TFSA - it's my longevity insurance, or the bulk of my kids inheritance.
Because of the number and importance of assumptions that have to be made (tax rates, changes to government support, inflation, returns) modeling only takes you so far.
In fact, I haven't even attempted to model sequence of return risk - just accepted that cfiresim and Firecalc both say 100% success with ~50% safety margin for expected spending level. Essentially what I have modeled is the trade-off between deferring income, paying taxes and avoiding having benefits clawed back. Also looked at pension income splitting opportunities with my spouse, but that may be a Canadian only issue.
I should have automated more of the spreadsheet.
I know in the US you have the ROTH conversion, this is unavailable in the UK, but if we considered it this way, the conversion wouldn't be required.
Yeah, Canada doesn't have any age based (or any) withdrawal penalties, so YAY don't have to deal with this!
Al