FAQ: What Does a Shortfall Mean on the Spending Chart and What Causes It to Appear?

A shortfall on the spending chart in the Adviice platform means that there is not enough available money or assets to meet your planned spending goals in retirement. This typically occurs when your withdrawals exceed the funds available in your accounts, leading to a deficit in the plan.

Causes of a Shortfall:

  1. Lack of Available Assets:
    • If certain assets, such as a locked-in retirement account (LIRA), are not accessible because they haven't been converted to a Life Income Fund (LIF) or similar income-producing vehicle, the platform may not be able to withdraw from them when needed, leading to a shortfall.
  2. Excessive Spending Goal:
    • If your annual spending goal is too high relative to the assets you have accumulated, the platform will calculate a shortfall once it runs out of accessible funds to cover the spending.
  3. Asset Allocation Issues:
    • Sometimes, the plan might not be set to withdraw from the most optimal sources (e.g., using non-registered funds first, instead of deferring tax-advantaged withdrawals like from RRSPs or TFSAs), which may result in running out of money prematurely.

How to Fix It:

  • Adjust Asset Accessibility: Ensure all assets, especially locked accounts like LIRAs, are properly converted to income-generating vehicles like LIFs at the appropriate time.
  • Reevaluate Spending Goals: If the shortfall is due to overly high spending goals, consider adjusting your expectations or look for ways to reduce expenses.
  • Modify Withdrawal Order: Review the withdrawal order to ensure funds are being accessed in the most tax-efficient manner, allowing for maximum usage of available assets before running into a shortfall.