Getting Started: Final Plan Projections

In the Final Plan Projections section, we bring together all the information from Discovery and Foundation and create a very detailed financial plan year by year.

All the detailed information you added in Discovery and Foundation will now be used to customize your financial plan.

In the Projections section we plan each year automatically, calculating income tax, government benefits, debt payments, saving and investment contributions, and more.

The Final Plan Projections table represents the detailed plan year by year.

Each year the platform will calculate if there is a surplus or a shortfall. The surplus/shortfall represents income, minus taxes, CPP/EI contributions, deductions, expenses, and debt payments.

If there is an annual surplus there will be an investment contribution planned.

If there is an annual shortfall there will be an investment withdrawal planned.

Although the platform does a lot of work for you, these calculated investment contributions and withdrawals can be changed by adding an override. This allows you to customize your financial plan for your unique situation and goals. Any value in Blue can be adjusted to a specific override value.

The platform will intelligently adjust this override based on account rules. For example, a contribution override could be adjusted based on contribution room available for TFSAs and RRSPs, or by the remaining account balance if making withdrawals. If accounts have been converted to RRIFs or LIFs, the overrides will also be adjusted for minimum RRIF withdrawals and both minimum and maximum LIF withdrawals.

Debt payments will be planned based on the minimum payments from Discovery plus any payments added in the Debt Payoff Plan in Foundation. Then, if there is extra cash flow available in a given year, the platform will automatically add extra payments when a debt has an interest rate above the interest rate threshold.

Charts:

At the top of the page, the charts represent the same information in the table but in a visual format. Using the charts, you can see how your plan will progress over time.

Spending Chart

The Spending chart represents both spending, debt payments, and savings and investment contributions. If there is a surplus or shortfall in the Spending chart this is a clue that attention needs to be paid to the plan in that particular year.

Income Chart

The Income chart represents your sources of income both now and in the future. The sources of income will change as you enter retirement and include CPP, OAS, and pensions for example. The income tax line represents your calculated income tax year by year including tax credits, deductions, and for couples, income splitting.

Net Worth Chart

The Net Worth chart represents both financial assets like TFSAs, RRSPs, and non-registered accounts and real assets like homes, cottages, and rental properties. Debt will also be shown in the net worth chart as well as your estimated net worth year by year.

Success Rate Chart

The Success rate chart represents all the different paths that your retirement plan could take. Unlike the Net Worth chart, which is built using an average rate of return, the Success Rate chart includes historical rates of return for equities, fixed-income, and inflation rates. Each line in the Success Rate chart is your withdrawal plan during one historical period of investment returns and inflation rates. The lower lines are periods like the Great Depression or high inflation of the 1970’s, both of which are challenging periods for investors and retirees. The upper lines are periods like the 1990’s with double digit investment returns each year.

The Success Rate chart represents the variability you could expect in retirement. A success rate above 80% is considered acceptable but still means that in 1 out of 5 historical periods an adjustment to spending would be required to avoid running out of money in retirement. But with an 80% success rate this also means that in 4 out of 5 historical periods the retirement plan will end with a surplus and an increase in spending could be possible in retirement. The success rate chart highlights the need for spending flexibility in retirement depending on investment returns and inflation rates you experience in the future.

Historical periods are a good test of a retirement plan but may not represent the range of investment returns we could expect in the future. If future investment returns are outside of what we’ve seen in the past, then additional changes may be necessary.

Lifetime Totals

Summarize key metrics from the current scenario:

Plan Funded Amount: Measures whether your income and assets are enough to meet your lifetime spending goals.
Success Rate: The percentage chance that your plan will succeed — meaning you won’t run out of money — even if investment returns or inflation vary from expectations.
Lifetime Spending: The total amount you expect to spend over the course of your plan, shown in today's dollars (adjusted for inflation).
Lifetime Investment Fees: The total investment management fees paid over your lifetime, based on your asset mix and fee structure, shown in today's dollars.
Lifetime Taxes: The total taxes paid during your lifetime, including income tax and any final estate taxes, shown in today's dollars.
After-Tax Estate Value: The projected value of your estate (net of taxes) left at the end of your plan.
Lifetime CPP, OAS, and GIS Benefits: The total amount of government benefits you expect to receive over your lifetime:

AI Strategies

The AI Strategies help you optimize your plan and experiment with what-if scenarios with a click of a button.

You can sort the recommended strategies by lifetime spending, estate value or success rate. Click the title of each column to select which you would like to use. In the image below we have selected estate value in descending order:

You can also sort by Area or Strategy by clicking those column headings.

You can enable a strategy by clicking on the 'enable' button. Some strategies do not allow you to toggle on and off, instead you must select another option in that category. For example, you cannot toggle off CPP starting at age 65, but you can select CPP starting at 70 instead.

The main AI strategies are detailed below:

Accumulation/Decumulation: controls the order accounts are contributed to or withdrawn from
CPP Start Age: controls when CPP benefits begin
OAS Start Age: controls when OAS benefits begin
Maximize TFSA: seeks to maximize TFSA in retirement using non-registered and/or RRSP funds
Modify Retirement Spending: shows the effect of increasing or decreasing spending on your plan
RRIF/LIF Conversion Time: controls when your RRSP/LIRA convert to RRIF/LIF and minimums begin
RRSP Meltdown: shows the effect of drawing targeted amounts from your RRSP in retirement
Survivor Scenario: shows the effect of shorter life expectancy on your plan

We recommend enabling only one AI strategy at a time and then clicking 'recalculate' before adding another AI strategy as they may reorder based on the recalculated plan.

Advanced Options

Advanced Options provides even more ability to customize your financial plan. Advanced Options includes all the beginning values used in your future projections. For example, starting balances for various accounts, assumed rates of return by account, AND for non-registered accounts, where the type of investment return will impact income tax calculation, it’s possible to adjust the percentage of return from capital gains, Canadian dividends, foreign dividends, and interest income can be entered.

Home, vacation property and rental property assumptions are also summarized in Advanced Options.

Advanced Options also includes assumptions for past tax taxable income, line 23600 on your tax return, which affects government benefit calculations in the following years. It also includes assumptions for the interest rate threshold for automated debt payoff.

Although changes can be made in Advanced Options, it is a best practice to make the change in Discovery or Foundation and allow data to flow into Final Plan Projections.