Mike, you are at risk of leaving too much money after you die, and it may not be until you reach age 70, 75 or 80 when you realize it. You could think, “I have all this money, and only so much time and energy left. If I had known, I would have done more.”
Lucky for you Mike, you are already thinking about it. Now, it is time for you to engage in some serious play and run some “what ifs” with the projection model you created. Experiment by finding the maximum you can spend each year until your deaths, and then do the same thing again but to the end of your expected health span, when you are too old to enjoy yourself.
When the money runs out in the model you created, find out the value of your house and farm. Would you sell these to support your retired lifestyle? How much money, if any, do you want to leave your beneficiaries? Play with a few different combinations to see what spending patterns are possible.
Don’t worry about how you will draw any funds, taxes or other planning strategies. Just get a good sense of what is possible for you.
Then you will know how much you can spend each year. It’s up to you to decide how you are going to spend or gift your money, which is easier said than done.
Don’t worry if you can’t identify future plans. Instead, make this year a good one, and do the same next year. If you string together a good year after another and after another, and so on, over your lifetime, you will have lived a full and rich life, with no regrets. Once you have a good sense of how you want to live in your retirement, that’s when you can apply tax and planning strategies.
How to model out retirement income
Mike for some people, the risk of dying with too much money is all-too real. For all the emphasis Canadians place on investments and on tax and planning strategies, there’s very little on the important thing: maximizing life satisfaction.
Using the model as I have described will give you a glimpse into your future, so you can make confident spending decisions today. Updating the model annually will keep your assumptions honest, keep you on track and allow you to enjoy yourself without feeling guilty spending your money.
