Continuing from Retiring Early – Part 1(Expenses), and Part 2 (Income), we will trek on with Part 3 – my conclusions regarding retiring early. This article will focus primarily on the savings required to meet our retirement goals at certain pre-defined ages that make sense for us.

Here are some tables summarizing our income, expenses, and required savings per year (assume RRSP withdrawals/taxation) if we retired:

@ age 45: Savings Required: $1,133,000

Age CPP OAS Pension Pre-Tax Income After-Tax Income Expenses Savings Req After tax Savings Req
45-51 0 0 0 0 0 $44,616 $44,616 $60,000
52-59 0 0 $20,016 $20,016 $17,427 $44,616 $27,189 $33,500
60-64 $6,996 0 $20,016 $27,012 $22,722 $44,616 $21,894 $26,000
65-85 $6,996 $11,784 $20,016 $38,796 $31,021 $44,616 $13,595 $15,000

@ age 52: Savings Required: $359,780

Age CPP OAS Pension Pre-Tax Income After Tax Income Expenses Savings Req After Tax Savings Req
52-59 0 0 $32,702 $32,702 $26,856 $44,616 $17,760 $21,000
60-64 6996 0 $32,702 $39,698 $31,596 $44,616 $13,020 $14,500
65-85 $6,996 $11,784 $20,016 $38,796 $31,021 $44,616 $13,595 $5,680

@ age 55: Savings Required: $149,194

Age CPP OAS Pension Pre-Tax Income After-Tax Income Expenses Savings Req After Tax Savings Req
55-59 0 0 $39,600 $39,600 $31,533 $44,616 $13,083 $15,000
60-64 $6,996 0 $39,600 $46,596 $35,914 $44,616 $8,702 $8,900
65-85 $6,996 $11,784 $39,600 $58,380 $43,202 $44,616 $1,414 $1,414

The problem with retirement projections is that it makes too many assumptions. Who knows if my wife will continue working until retirement, or if OAS will exist, or even if the tax brackets will be the same. I guess we just work with what we know at the current moment and adjust as we need to. I also only have a 10% contingency built in. Some of you may be more comfortable with a 20% contingency fund.

One tax issue I didn't deal with is converting the RRSP to an RRIF once I turn 69. An RRIF has an increasing withdrawal schedule starting at the age of 69 (4.69%). This can lead to large taxation hit IF you have a large RRSP remaining at this point. If I follow this plan and die broke, the RRSP balance will not be too large in any of the scenarios described above and the tax will be minimalized.

In Summary: If we were to retire: @ age 45, we would need a Savings of $1,133,000. @ age 52, we would need a Savings of $359,780. @ age 55, we would need a Savings of $149,494.

Assumes that our savings during retirement grows at the rate of inflation (extremely conservative) AND that we'll die broke.

Another bold assumption is that OAS will by FULLY intact when I reach 65. If OAS gets canned (or reduced) by the government sometime in the future, that would add an additional $235,680 ($11,794 x 20 yrs) to my required savings + income taxes charged to the additional savings. A large hit indeed.

Considering that I'm going to have $1 million in net worth by the time I'm 35, this whole retire early thing should be no problem right? ;)

Hope you enjoyed the early retirement series. I learned a lot by writing this series and hopefully you picked up a few things also. Let me know if you have any questions.

Have a good weekend!

Other Articles in the Series:

Part 1: Early Retirement – The Expenses

Part 2: Early Retirement – The Income


  1. Canadian Dream on February 16, 2007 at 9:43 am


    I had a few questions yesterday, but I waited to see if you addressed them today.

    1) Do you really need $6000/year for travel when you are 80? Studies have shown that your spending drops off as you shift from an active early retirement to a slower pace as you get older.

    2) I’m confused by the mention that CPP is included in your wife’s pension. If that’s so how can you take CPP at age 52 when early CPP only starts at 60?

    3)Are you assuming that the entire $60,000 retirement income is being taxed in one person’s hands? I don’t think you used the pension split, the pension credit and also a 65+ age credit as well. Basically I think you really overestimated your tax bill.

    I think that’s enough questions for now.


  2. Mike on February 16, 2007 at 10:02 am

    I’m so dumb – after reviewing your plans I realized that I can keep all my figures in today’s dollars (ie expenses, OAS) and just remove the inflation from the investment return. I think I used to know that but I forgot.
    Now I have to redo my retirement spreadsheet – this will make it quite a bit simpler I thinks. What estimates do you use for your returns and inflation?
    Great posts by the way.

  3. Mike on February 16, 2007 at 10:04 am

    CD – how much is the 65+ age credit?

  4. FrugalTrader on February 16, 2007 at 10:33 am

    Mr. Dream:

    1). Like I’ve mentioned on your blog, I like to stick to the side of caution. If I don’t travel when I’m 80, I’m sure that my medical expenses will make up for it. I’m not too familiar with what health insurance covers, and perhaps my premiums will be outrageous by that time.

    2.) I wasn’t very clear in my postings. CPP is built into my wifes pension once she turns 60. Before 60, the pension will pay her a “bridge benefit”, @ 60, CPP will replace the bridge benefit.

    3.) The taxation issues are tricky. My wife will claim the pension, and the RRSP will be in my name. So typically, all savings will be taxed under my name. But as we get older, you are right, as we decrease our savings dependancy, and rely more on the pension, we should be able to reduce our tax bill by splitting the pension. Again though, I like to over estimate a little. :)

    Mike: I based my returns and inflation based on Swimming with the sharks. That is returns that are approximately equal inflation.

  5. Mike on February 16, 2007 at 11:17 am

    Wow, having returns = inflation is pretty conservative. That doesn’t work for me because I don’t have any pension and I need net returns on my rrsp otherwise I won’t be retiring until I’m 70.
    By the way – rrsp income can be split as well – I think you might have to convert to a rif first though.

  6. Canadian Dream on February 16, 2007 at 11:29 am


    See the following for all the tax credits.


    Yes I know the tax credit/pension splitting calculations can get a bit evil. I get around this a bit by having an income so low in retirment that I’ll be hard pressed to pay almost any tax with a little planning.

    But overall, its a lot nicer being able see that retirement at age 45 for you is a real possiblity?

    O, one last comment. You will not die broke. You will still have CPP and OAS coming in until your last breath.


  7. FrugalTrader on February 16, 2007 at 11:55 am

    Mike: Yes, you are right, realistically, I would expect 3%-5% return after inflation within my RRSP during retirement.

  8. WisdomFromMyWife on February 16, 2007 at 12:25 pm

    I was reading your articles about retirement. I think it is a great article. People should always think about early retirement because they never know what could happen in their lives. Some people are forced to retire early whether they want to or not.

    I take a different approach to retirement from other people. Other people think how do I survive if I’m not working. Their thinking is that I will survive by depleting my savings, and when my savings run out, that’s it I got to die.
    My approach is how do I sustain myself indefinitely without working. So my main goal is to generate enough money, and then have my money work for me to generate enough cash flow to cover my expenses. So to retire early, I work toward that goal of replacing my income with other forms of income.

    Read my article:

  9. FrugalTrader on February 16, 2007 at 12:37 pm

    Great point Hubby, I agree completely.

    I ran that retiring early exercise like I did because that’s how “Why Swim with the Sharks” would have done it. In reality however, in order for me to feel comfortabble retiring, I would have enough “cashflow” to retire on, not just savings. My calculations only accounted for retirement savings, but not income from rental properties, non-registered dividends etc that I expect that i’m going to have @ retirement. HOWEVER, in order for cashflow by itself to sustain my expenses, you will need a fairly large net worth. Say my dividend stocks averages 4%, in order for me to cover $50k/year, I would need $1,250,000 worth of dividend paying stocks (not counting capital appreciation).

    Perhaps i’ll write another article on the cashflow method in the future. :)

  10. FrugalTrader on February 16, 2007 at 1:30 pm

    Another quick note, “Why Swim with the sharks” uses SAVINGS instead of cash flow because they recommend that you DIE broke. If you use the cash flow model, you’ll die with a huge pile of money left.


  11. Mike on February 16, 2007 at 2:17 pm

    If you use the cash flow model can’t you start selling some of the stocks and start depleting the portfolio as well? ie live off the divs until a certain age then start selling some of the stocks?

  12. FrugalTrader on February 16, 2007 at 3:23 pm

    Mike: Yes, you could do that. There is one consideration though, once you start dipping into your capital, your dividend payments will decrease thus increasing the capital reduction every year. If we were to compare this to my posted model for early retirement, I would need to adjust my savings required by the return greater than inflation.


  13. Claudia on March 21, 2007 at 11:14 pm

    Interesting post — lots of food for thought!

    One quick comment, though: Your CPP payments are based on how many years you work, so they are likely to be lower if you retire at 45 than if you retire at 52 or 55. (There’s a calculator at

  14. FrugalTrader on March 22, 2007 at 8:55 am

    Claudia: Thanks for the heads up. Although it doesn’t look like it, when I did my calculations, I did account for the reduction of CPP due to retiring early (along with the 15% allowance).

    For example, retirement @ 45:
    Earnings years: 60 – 18 = 42years
    15% of lowest years deducted = 42 – 6 = 36
    sum of earnings (from age 18-45)/36 = ~$40k
    According to the calculator: CPP @ 60 = $6,996/year

    Ah, I did make a small mistake. If I retire @ 50 or older, my CPP payments @ 60 will increase slightly from $6,996 to $7,260 / year.

  15. cihanlee on March 29, 2007 at 1:38 pm

    I would say, having 1 million in your bank account by the time you are 35 shouldn’t be a major problem. Just don’t forget, pay your self first (the wealthy barber, the power of compound interest), and let the money work for you, not you working for money (rich dad, poor dad), also get in when the market it down not when its up (one up the wall street). So I would say, just consult a financial adviser and set up a long term goal, and make sure you stick to that. And hopefully you will retire when you are 45. Good luck.

  16. […] Conclusions. […]

  17. […] 3: Early Retirement – […]

  18. […] 3: Early Retirement – […]

  19. George on February 9, 2008 at 2:01 pm

    One thing that isn’t identified as a source of income in your projections is employment during retirement. While it might seem strange to think of working while you’re retired, the reality is that most retirees want to have some type of job to occupy at least a portion of their time.

    Many of the retirees that I encounter have some form of part-time employment. They don’t work because they need the money (in many cases they clearly don’t) – they just value having the social interaction and connectedness that comes with having a job. In some cases the jobs are very periodic (i.e. working as a polling clerk at an election) or they’re more regular (i.e. a p/t bus driver).

    It’s fairly easy to work very little and still bring home between 5-10k/year. This provides some nice padding to your retirement income, and jobs are always more enjoyable if you know that you could walk away from them at any time if you don’t like them anymore.

  20. Duncan on March 24, 2008 at 8:10 pm

    There’s a great book by a fellow by the name of Derek Foster who retired at the age of 34! He’s a Canadian and retired on much less than one might think possible. His website is This isn’t an ad for his site, I’m just someone who read his book and found it quite interesting.

  21. JR on April 6, 2008 at 9:38 am

    Probably being older than most of you that post here, at 44 I retired from the work force, initially to do nothing. It wasn’t planned, I was not terminated, I was healthy, I got up one morning as usual as said “THATS IT”. It lasted 4-years then I went back into the workforce to work for a firm with a salary.

    Just remember to get to retirement (BTW it never happens by definition), the approaches & there are many:

    planning, family comes first, you the person (mental & physical welbeing), money last. Age has nothing to do with it, and if you peg an age you may hurt yourself and your family tring to do it.

    During the 4-years out, I spent time with my young family since we did not have kids till we were 30 & 40 years of age (wife and I are born the same year & married at 20), and for those of you that have teens, you know that these are the difficult years.

    What did we do for the 4-years, well…

    The travel bit was already done betwen 20 – 30 (the DINK period), so that was out, as was the fact I had worked during my 30’s that involved world-wide travel, and did not want to get on another plane ever.

    The first 6-months was the problem, since I hadn’t planned the 44 retirement, even though I was in good health. I retired because I was working too damn hard saving for retirement.

    The mortgage was paid off, we had a secured line of credit on the house (funny, I never heard the term HELOC back then), also, I had $150K in RRSP, wife had $50k, she had not worked after the first was born 14 years earlier.

    The first 6-months was like I had lost my best friend,I missed the drudge, the people and the sleepless nights thinking about work and the problems (I was calling people I had worked with every day)… now I had a different set of issues.

    The next 6-months (house & garden things all fixed up), I began to go to every free 2-hr seminar out there & selectively began taking courses in tax planning, stock & options trading, fixing houses, REI, even updating and acquiring new computer skills. To this day, a free money related seminar, I go to it.

    Little did I know back then XP office would be so wonderful.

    By year two, (this is where we really learned the frugal life style) we are eating into the RRSP to keep us sustained (what else are they for I said), I started to seriously look at passive income (defined as money that comes in without working for it), never ventured into MLM’s, and I suggest people look seriously before doing so.

    I never gamble, I never play the lottery (odds are against me – Murphy’s law is me), I dont smoke and as an occassional drinker, a 6-pack last us 2-months.

    As an early retiree, you’d be surprised how your work life, education (academic or vocational skills), career & your experiences up to that point suddenly start to come alive and you begin to think of adapting this to money making and tax saving strategies… you have lots of thinking time in retirement (important point)

    Before you ask, yes, I am still healthy, at 61 I still get a paycheque from my small sized employer (a pubco)… absolutely no pressure (when you have minimul pressure you perform much better) and love every day of it (gets me out of my wifes hair and her kitchen), but in fact could make more money on all kinds of passive income.

    My first idea in my armchair was to trying to figure out and to master paying minimul tax (legally of course)this was a life goal, since I saw this as adding at least 25% extra income to my salary, which I called a bonus from the tax man every spring.


    This response is my personal life and will probably run two or more additions.

  22. Susan R on April 9, 2008 at 3:59 am

    hey JR, I really enjoyed reading your story. Looking forward to the next episode.

    I can completely identify with the stages of your retirement at 44. I am 41, haven’t ‘worked’ for quite a while and am now at the stage of saying, whoa! I gotta start figuring out this tax thing and how to really make my assets work for me!

    Plus, I completely agree with the creativity that comes to you when you have time on your hands and a goal to live free how you want to live. You are bang on when you say that your previous experiences come right back into play as you start to chart a new course. It’s kind of like doing a make believe thing like a kid, but it’s real.

    Great to read your post JR.

  23. JR on April 9, 2008 at 3:09 pm


    Everyone has his/her own idea or version of retirement, and it could happen several times in a persons life.

    Our American cousins are great at plugging the retirement thing, by showing you can quit your job or get passive income by many of the get rich quick approaches, TV Infomercials, stock trading, real-estate, fix & flip, affiliate programs etc, its mind boggling.

    But being a Canuck first and an immigrant by nature, in reality, sitting around a pool drinking, lying under palm trees, flashy cars, flashy clothes and hair, exotic scenery etc is not my idea of retirement.

    At 44, I thought that I was getting forever out of the rat race (60’s term) so that I could spend quality time with my family. No planning went into the quitting, money was never considered an important factor (after all, I considered myself still young) and in being an immigrant I always remembered that I came here with $0.

    I refer to all of the goobly-gob of the investment world as ‘analysis paralysis’. We have the guys on wall street who make big bonuses, fund mangers, analysts, advisors, CFP, FA’s, investment brokers, trading accounts, discount brokers and everyone has a stock tip. It amazes me that so many people have read so many books on the subject, contribute to blogs, make so many observations and reviews and critique the death out of everything, and still no one is really retired.

    Each person is an individual. You just cannot copy someone’s lifestyle or investment strategy and make it your own.

    Ask this to many of the folks that try to sell you something to get rich … if it is too good to true or you recommend this or you still charge for doing this, then why are you not retired?

    Appreciate the value of giving and doing and those that do for you or you for them

    I do believe at a point in everyone’s life that folks should give something back. It could be volunteering, mentoring, writing a book, lecture circuit (some guys make good money doing this), teaching, charity (hate to give money away) finding a cure for something, or using their knowledge to make other people rich & famous.

    I must point out that I dislike people that try to sell me something, anything where I part with my money and where there is nothing in return.

    I believe that during a life cycle everyone should diverse & divest and do one of each of.

    Start the life plan as early as possible
    Don’t be greedy, time is always on your side, crawl before you walk
    Have a mentor, someone that has done some of the things that you want to do, someone that can share their knowledge.
    Retire early, at least once and be prepared to renter the workforce. Even if you are retired, you still have a master somewhere in your midst.
    Always use the OPM rule for your own gain
    Find what your investment comfort level is
    One REI
    Pay yourself first
    Plan to pay minimal tax
    Try RRSP’s at least once
    Recurring income from positive cash flow, otherwise, do not invest

    Be prepared for a fall, anything can happen, quickly get up and start again.

    In between 44 – 48 we did live on the life savings that included RRSP’s

    Re-educated myself in life, academic and vocational skills, and I continue to do this by spending at least 20-minutes per day (on average) learning something new.

    I quickly found out that my physical and mental health and wellbeing became the number one resource, family second, money last

    Adapted to a way of living and learned to be as frugal as scrooge and to this day practice the same golden rule.

    I worked part time cleaning carpets, worked on a chip truck, joint ventured with a guy that had a roadside sausage & soda stand, taught one class of night school and did the volunteer bit along the way.

    I returned to the workforce after contacting the people in the industry that I worked for before quitting to give me any kind of part time work they had available. These jobs included sweeping floors and toilets, doing dirty manual work, photocopying, mail room, data entry … the list goes on.

    From this, I learned what gratifies people & understood more other folks point of views & needs, what made them tick, how they ran their lives, what objectives or plans they had to retirement … I asked zillions of questions, that had the makings of a book (never written)

    After a couple of years of doing this I was offered a proper (me laughing) job as a team leader in a processing operation in a factory … but did I need it!

    Well of course, why not, since I was equipped with new skills along with a couple of Graduate degrees, it helped lots, eventually taking on a managerial role, where I am at today. I am in control of my situation and loving every minute of it

    At 50, that was when the real investment plan came into being


  24. JR on April 10, 2008 at 1:30 pm

    conclusions from me:

    Notes to the reader: This is my life, not yours & this may not work for you.

    It’s all about what is achievable in a 15 – 20 year time period. My way not be your way. Personal lifestyles and circumstances in your life can and do change. In my case we still have two-freeloader kids (22 & 29) in our pockets (haven’t they learned anything) as well as taking care of my wife’s surviving parent who is 89 years old.

    To continue the journey, 50 and onwards:

    Having already successfully dabbled in second mortgages and REI in our 20’s it was time to get back into the swing, since I now get a regular paycheque. I have acquired a couple of new skills, such as property management, including actually doing something with my hands … plumbing, electrical wiring/basic electricity (I can wire a house with my eyes closed), 2 x 4 and nail gunner, plastering (wife is a great painter), we started looking for REI fixer uppers.

    Between 50 – 52 REI, the first one, was 25% down, fixer upper and flip 30% ROI net in 2 years

    52 – 58, Two more REI’s this time 100% leverage, sold out both & currently have only one

    At 55, I purchased an ATM cash machine from a company that takes care of the installation and maintenance as well as part of the transaction fee. I just kept loading the machine. Canadians just love their ATMs’. The ROI on this was averaging 30 % per year in the 3-years we owned it. I sold the ATM after 3-years to someone else to run it. The location of that original unit (now replaced) is still going well and the person who purchased the ATM from me now has 10 ATM’s and semi-retired.

    During this period, the turn of the millennium happened, and Oh-boy, was it a shaky time for stock market investing, getting my first and last ever first degree burns from it, all of it I blame on because the full fee stock broker I had, then again it is my fault. I recovered quickly from that $100k burn

    As of April 2008:

    My employer pays me a salary of which approximately $27k tax deducted at source, almost all tax back at year-end through the tax strategies that I have in place. Since I collect CPP, I do not pay it any longer at source. I receive no bonus or pension plan from my employer, they do put 5% of gross salary into my daily interest RRSP as well as providing a good group health medical plan.

    We have one REI in Oshawa cash flowing $1000/mth

    Wife and I have been collecting CPP since 60, currently $1100/mth

    Cash on hand average 25-30% of total liquid assets (don’t ask, its non of your business, just figure it out from my other posts)

    Total monthly household & living expenses is less than $1500/mth

    House is paid for, a full unused HELOC (hate that term), which has no use for at present

    Our personal investing method

    1) Using a 50/50 strategy on RRSP ‘s, on December 27, 50% of available max (topping up the employer contribution) is put into an RRSP daily interest savings, is then withdrawn on January 2 (10% withholding tax), that is either re-deposited into an RRSP or is used for SFTS.

    If not, RRSP has the rollover and funds are used or borrowed for the SFTS.

    2) At present, our SFTS are with Mineral Fields: 100% deductible + Fed & provincial credits to get back that tax at source (maximize the tax planning on this). Recapture is a wash next year even after the cee.

    3) Trading: On the big boards only, never TSX, TSX.V, OTC, CNQ or Pink sheets
    a) Personal investing is in stocks that pay dividends or Royalty trust that have monthly disbursements
    b) Stock trading approach and one method is to only do those that pay dividends, and which are optionable, going long and deep in the money. This allows me to hold, get good option money, protection on the downside and use the good option money to buy more stock to get more dividends/disbursements.

    Example: buy an underlying dividend security, lets say at $20, option long (ditm) at $10 or less, gets small premium over and above the differential. With the $10 back in my pocket, I would then buy more stock. Dividend is $1, pick up $2 on the option, nice ROI. Similar with Royalty trusts as PGH is one of my favorites, average price of $13. I have had 99% success on not being called on the option before expiration date unless it pops real good. If I am not called then I would generally close the contract just before the expiry date, unless called sooner… Then repeat.

    I will do this inside and outside of an RRSP, and have a numbered company set-up doing this also (for the kids’ my wife says).

    Wife and I both have term and universal life insurance.

    The plan next year is to liquidate all personal assets and move them legally into the numbered company, swapping cash for assets. Cash will go under the mattress or a safety deposit box, leaving us with no debt, no paper equity, no personal HELOC, a great credit rating and possibly no credits card … well maybe one.

    Do I plan to work beyond 65, the answer is no. I shall quit working for the man at 63:11months (another story) having made a deal with my employer to terminate me at that time (one year before 65) lol

    The goal (immigrant thinking) is to collect GIS at 65 and beyond, showing no income only CPP

    Thanks for reading this, those that did not fall asleep first.

    Comments by me on this are now finished

  25. Susan R on April 11, 2008 at 12:32 am

    Hi JR,

    I will be re-reading your entries. I don’t know what an REI is, likewise GIS, Pink sheets, SFTS, etc. etc. so it wasn’t easy to understand your plan. That is totally okay though, gives me things to google and look into. I appreciate the information and the guide posts.

    I finished my ’06 taxes yesterday and will be paying a fairly large bill there. Next come my ’07 taxes, then ’05. Things are fairly out of control but after finally spending weeks and weeks figuring things out and DOING the taxes, it ends up that doing your taxes is about the best thing I can imagine for really identifying what you have, what you spend and where your money goes. I am determined to move forward with a plan. Like you obviously have done and continue to do.

    I guess I am fortunate to have the assets I do DESPITE my complete lack of attention to important matters.

    Thanks and keep being an example to everyone on how to be smart about the whole money thing.

  26. JR on April 11, 2008 at 5:34 am


    The intention wasn’t to be cryptic, but being a Canuck, I thought most Canucks reading my posts would understand the terminology

    REI: Real Estate Investment
    GIS: Guaranteed Income Supplement (government pension top up)
    SFTS: Super Flow Through Shares

    I read somewhere on here that you have sizable assets and income but I do not know what kind or how you derive income from them … would you like to tell us?

    You mentioned in that last post that you filed late taxes and have a large payable. Seems you may be in need of some help from a tax and financial advisor.

    Having a serious amount of assets and income can be more of a burden than having less of the same.

    I wonder if anyone posting here has won big on the lottery? Now that would be a huge tax planning problem to have to deal with in terms of how to deal with investing that kind of money and the tax planning on it … lol ..

    I have finished posting my MDJ on here, but thanks for your responses.

    I would like to read others MDJ, not just Frugals, possibly yours Susan … what about it, after all you said that you haven’t worked for some years and being so young?

  27. Cannon_fodder on April 11, 2008 at 1:01 pm


    A very interesting read… especially from someone who “has been there, done that”.

    I’m in my early 40’s and have never had a vacation > 10 days. Perhaps that is why I have a hard time believing I would be bored upon retiring early. I think of all of the things that I could learn, whether it is in the sciences (my lifelong passion) or about basic home renovation (I presume it is common for people who work with their heads to marvel at those who are skilled with their hands). My job permits me to work from home a lot so the office interaction, or lack thereof upon retirement, is not that important to me.

    So, I always find it interesting on those that have retired and then reenter the workforce not because of monetary concerns but for emotional or psychological well being.

    There were a couple of financial points you made which I didn’t understand and would appreciate some clarification.

    1. Why is it that you don’t reduce tax withheld at source considering your effective tax strategies virtually eliminate it?
    2. Would you please go into more detail re: the RRSP contribution at the end of the year and subsequent withdrawal at the beginning of the next and then subsequent purchase of STFS?

    I don’t know much about Flow Through Shares except that they can be extremely effective at reducing taxes but should not be purchased solely for that reason. I also didn’t understand the portion re: options – it sounded like you purchased the security and then sold a call option as a hedge but collected a premium for the option and the underlying securities dividend. It sounds very intriguing but (being the science person I am) I’d love to see the detailed math. Perhaps a guest post!

    Thanks again.

  28. Susan R on April 12, 2008 at 12:49 am

    Hi there, My story is that I’ve always expected to have money and I’m pretty loose about doing what suits me. I worked for the government for 2 years because I enjoyed the job but as soon as I started feeling hemmed in by work place politics, I left. People thought I was nuts for leaving the promotions, the good pay, the benefits and the retirement plan. That was a turning point for me. I was 26 and had to really ask myself, is this it? Why do I feel I am destined for more than this anyway? Maybe I should just get real and accept that I’m going to work for 30 years, pay a mortgage, own a car, go on a vacation and retire. Like everyone else around me seemed to accept. (At least at that workplace, not my friends who for whatever reason tended to be REAL oddballs, some extremely wealthy, some not at all wealthy, but all interesting).

    I moved to the Yukon Territory in the far north of Canada. The opportunities in the north are staggering really, at least coming from Ontario where things are pretty competitive. I mean, our Premier spent two years in a federal penitentiary for dealing heroin! True story. So basically, anybody can be any thing up here. I chose to go in on a gym with a man I met in Toronto. It was a flier and I thought, hey, if it doesn’t work out, I can move back and take up at the government again. They liked me there.

    The gym didn’t do great, way too much work for the money and you are ‘On’ 7 days a week, 18 hours a day whether you are in the gym or not. Living in a small town especially, it is difficult when a thousand people own your butt for 40 bucks a month. Members I mean. Stopping you in the grocery store to complain about a piece of gum in the water fountain the other day, etc.

    Anyway, the gym burned down. It was a bummer at first because it was just a shock to lose what you had been building up for 5 years. But then as always, another opportunity came along. A housing project this time.

    I played around in realestate basically. Buying things in really BAD neighbourhoods, like drug dealer neighbourhoods and places where people parked their loader in somebody else’s front yard and basically said, what’s your problem? So what if my loader’s in your front yard. This neighbourhood was so bad that my partners and I decided to buy the whole thing. It was a government rental place, 40% rented out and a nightmare for government workers to deal with. Us? We just kicked everyone out who was bad news. Yes some gave us problems but we won within a few months.

    Next we fixed the place up. Ends up the location is fantastic. Surprise, surprise. Of course it was! Just nobody would ever think of living there before. This place is in the geographic center of the city, right beside the college. Etc.

    So I made some money there. Then I bought 160 acres with 1 km of water front, 3 km from the city limits. It was cheap and the guy selling it was/is considered insane and dangerous. He still lives next door but I found him pretty entertaining – especially when he took me for a tour of his underground grow op. NO LONGER in operation, or I wouldn’t mention it!

    I have always had a healthy appetite for the wierd so I guess that has paid off.

    Got to run right now but I will write more. Believe it or not, I have to report back to a friend in Jamaica who has a dog sled team! He wants me to tell him what races are going on next year in the Yukon because he wants Red Stripe to sponsor his team! This is no joke, Danny Melville is his name and he has a team of mutts in Jamaica, who he obtained at the Jamaican SPCA.

    Well, I could go on but I’m too busy laughing thinking about it and I want to get back to him.

    Last thing about money, it gives you freedom and you can really have fun making it if you follow your heart and are not afraid. Revenue Canada is actually helping me out too. Believe it or not, I feel real good about figuring out what is going on, and I am only figuring it out because I have to do my taxes. Now suddenly I am extremely interested in figuring it ALL out. The possibilities are endless!

    I had a dream last night that I was back in high school and it was near the end of the year. I hadn’t gone to practically any classes all year. To the point where I didn’t even know what my classes were! But I spread everything I had out all over my parent’s dining room and got started on sorting it out. And it wasn’t that bad. I realized it wasn’t that hard and I was maybe going to be fine, I could do this.

    That is totally related to how great I feel about finally dealing with my taxes. They are only 3 years behind, (plus a little rental unit that I ‘forgot’ to claim for 10 years… it was originally my own place but I ended up renting it out.)

    I have fessed up everything to revenue Canada and they are actually being really good about it. No bad trips so far. If you go to them first and sincerely want to start with a clean slate again, they do cut you some slack and they do not treat you badly. That’s what I’m finding anyway.

    Bye for now all, Susan

    PS – I am soooo bad with acronyms that I actually had to stare at the screen wondering what MDJ stood for!! Then I realized it was staring ME right back in the face. So it’s nothing to do with you being archaic. It’s me.

  29. […] Dollar Journey has a three part series on retiring early. I’ve linked you to the third part here – because the first two are in the introduction. If […]

  30. Cannon_fodder on April 28, 2008 at 11:07 am

    Just stumbled upon this Monte Carlo java-based simulator Played with it a bit (highly recommend reading the FAQ and the documentation on how to use it). It is very powerful and allows me to put in additional income such as OAS and CPP (including receiving it early at 60) plus add income from tax deferred (RRSP), taxable (non-registered accounts) and tax free (TFSA) plans. I would say it is the best calculator I’ve seen and the price is perfect – free!

    A word of caution – I chose an investing style which they term as below average risk just so I could get to a 7.5% return even though my investment mix is close to above average risk. But, because this is a US-based calculator, I think their US historical returns are substantially greater than I would see with my portfolio even though it has a significant US/International exposure.

    Remember the “4% rule”? Turns out my scenario showed my initial withdrawal rate at 4.1% with a 92.9% success rate.

    FT – try plugging your info in and see if you get to the magical 90% success rate. What was interesting is that in some circumstances my success rate was greater if I put in a more conservative mix. I take that to mean that a more aggressive stance created more opportunities for it to fail due to volatility.

  31. FrugalTrader on April 28, 2008 at 11:29 am

    Thanks for the heads up CF. I will check out the calculator and perhaps even write something about it if it works out.

  32. […] day but to have enough investment income to meet my monthly expenses.  I have calculated our projected retirement needs before and provided that we continue to life a frugal life with all of our debts paid off, we […]

  33. […] or Registered Retirement Income Fund, has been an acronym that has been thrown around in quite a few posts around here without explaining them fully.  This article will get into the basics on how […]

  34. cannon_fodder on January 12, 2009 at 12:15 pm

    From Post #14

    Claudia: Thanks for the heads up. Although it doesn’t look like it, when I did my calculations, I did account for the reduction of CPP due to retiring early (along with the 15% allowance).

    For example, retirement @ 45:
    Earnings years: 60 – 18 = 42years
    15% of lowest years deducted = 42 – 6 = 36
    sum of earnings (from age 18-45)/36 = ~$40k
    According to the calculator: CPP @ 60 = $6,996/year

    Ah, I did make a small mistake. If I retire @ 50 or older, my CPP payments @ 60 will increase slightly from $6,996 to $7,260 / year.


    I may not be following this correctly, but I don’t agree with this logic. Here is my thinking:

    You can’t take all of your annual earnings and then average them out to about $40k in today’s dollars from 18 until 45 at which point you retire. You have to look at each year separately since any amount over the cap ($46,300 in today’s dollars) can’t be used to supplement previous or future years.
    Thus, you would have 27 years of income vs. the expected 42 years (retire at 60 after working from the age of 18) or a little less than two thirds. (Taking the 15% of lowest earning years doesn’t matter since both the 27 years and the 42 years are affected by the same ratio.)

    Thus, wouldn’t you expect to receive only 2/3 of the $6,996? It doesn’t matter if in those 27 years you earn $1M/year since it is capped at $46,300 in today’s dollars – earning more doesn’t have an impact on years where you aren’t working. Now if you earned the maximum of $46,300 in today’s dollars in all of your working years (minus the 4 years or 15% of 27) you would get about 2/3 of the $8,688 by my way of thinking.

    I haven’t found anyone post a calculator which can help with this but I’m sure some financial planners like Ed Rempel could offer a professional opinion on this.

  35. Grumpy on March 18, 2009 at 4:59 pm

    I’m old and easily confused and have the attention span of a gnat but….

    wouldn’t the yearly income figures used in the 55+ area – specifically age 64

    disqualify you from recieving any payment from OAS at age 65 ? or greatly reduce those sums

    assuming of course it still exists

  36. FrugalTrader on March 18, 2009 at 6:25 pm

    Grumpy, OAS is reduced if you make more than approximately $64k/year during retirement (65+).

  37. Grumpy on March 19, 2009 at 4:23 am

    ah yes…was probably thinking GIS

    you don’t happen to know where I left my reading glasses ?

    “getting old ain’t for sissies”

  38. Dan on June 8, 2009 at 10:47 am

    -JR: I’m interested in investing through ATM machines. How did you start? You can email me at “sig_hup at”

  39. jack on April 1, 2010 at 3:29 am

    I am 40 and have 500,000 in a self administed rrsp and $100,000 cash and another $50,000 for a down payment for a house, I am married with one child, live in a shoe box which I rent, I currently make $60,000 ok here is the Dream I want to retire in 5 years and not have the wife work , will still work but do not to stress about bringing home the paycheque cause the work does not always guarentee $ on a steady bases. this is what I want income of $80,000 from the rrsp and the $100,000 cash . $80,000 will allow me to purchase a $500,000 home make the mortgage payments eat utilities etc have a holiday here and there and maybe save a wee bit. any tips out there is this possible or am i out to lunch

  40. cannon_fodder on April 4, 2010 at 1:35 am


    I would think conventional wisdom typically pegs a 4% withdrawal rate as having a fairly good possibility of allowing for your capital to remain intact for the long term. That would imply an income before tax of 4% x $600,000 = $24,000 today. Let’s say with exceptional growth and major contributions you somehow got to $1M you still would only be halfway there in 5 years. And that would be in inflation-depleted dollars. You should probably figure out what expenses may be new or increases in retirement and those which will be reduced or eliminated. Perhaps you won’t need nearly as much as $80k. Most people would try to retire with no mortgage which is not something you’ve put on the table.

  41. ABLE on July 19, 2011 at 9:03 pm

    How this math works if you are married and your spouse is, for example, 7 years younger than you? Is it different if the age difference is 2 or 5 years? What is affect of the gender? Statistically life expectancy for women is significantly more.

  42. Ajay Pruthi on December 24, 2014 at 7:23 am


    I am not able to understand, there is nothing mentioned in the article about investing.

    For your retirement, you need to invest money and it should grow multiple times. Just savings can`t help you achieve your retirement goals.

    There is nothing about inflation, rising health care costs etc.

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