| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Tax-Free Compounding | I know that steady returns and steady inflation each year is not how the real world works. I also know that RRIF withdrawals are unlikely to be once per year. Modeling these factors more accurately would only distract from the purpose here which is to show the value of tax-free compounding. | ||||||||||||||||||
2 | Assumptions: | |||||||||||||||||||
3 | Capital Gains | Dividends | Interest | |||||||||||||||||
4 | Yearly Return | 8% | Return Breakdown: | 70% | 20% | 10% | ||||||||||||||
5 | Inflation rate | 4% | ||||||||||||||||||
6 | Marginal Tax Rate | 40% | 20% | 18.70% | 40% | dividend tax rate computation just an approximation | ||||||||||||||
7 | Yearly turnover: | 10% | (equity turnover during accumulation phase resulting in capital gains taxes) | |||||||||||||||||
8 | Yearly Savings (rising with inflation) | $6,000.00 | RRSP contribution to give the same out-of-pocket as savings: | $10,000.00 | ||||||||||||||||
9 | Assume saving for 35 years and live off savings for 25 years. | |||||||||||||||||||
10 | ||||||||||||||||||||
11 | RRSP Savings Approach | Non-Registered Savings Approach | ||||||||||||||||||
12 | ||||||||||||||||||||
13 | Year # | New Contribution | RRSP Balance | New Savings | Interest (after tax) | Dividends (after tax) | Realized Cap Gain | Adjusted Cost Base | Cap Gains Taxes | Savings Balance | ||||||||||
14 | 1 | $10,400.00 | $10,400.00 | $6,240.00 | $0.00 | $0.00 | $0.00 | $6,240.00 | $0.00 | $6,240.00 | ||||||||||
15 | 2 | $10,816.00 | $22,048.00 | $6,489.60 | $29.95 | $81.17 | $0.00 | $12,840.72 | $0.00 | $13,190.16 | ||||||||||
16 | 3 | $11,248.64 | $35,060.48 | $6,749.18 | $63.31 | $171.58 | $34.94 | $19,852.75 | $6.99 | $20,905.90 | ||||||||||
17 | 4 | $11,698.59 | $49,563.90 | $7,019.15 | $100.35 | $271.94 | $105.31 | $27,328.45 | $21.06 | $29,447.01 | ||||||||||
18 | 5 | $12,166.53 | $65,695.55 | $7,299.92 | $141.35 | $383.05 | $211.86 | $35,322.24 | $42.37 | $38,877.98 | ||||||||||
19 | 6 | $12,653.19 | $83,604.38 | $7,591.91 | $186.61 | $505.72 | $355.57 | $43,890.95 | $71.11 | $49,268.28 | ||||||||||
20 | 7 | $13,159.32 | $103,452.05 | $7,895.59 | $236.49 | $640.88 | $537.73 | $53,094.10 | $107.55 | $60,692.72 | ||||||||||
21 | 8 | $13,685.69 | $125,413.90 | $8,211.41 | $291.33 | $789.49 | $759.86 | $62,994.22 | $151.97 | $73,231.77 | ||||||||||
22 | 9 | $14,233.12 | $149,680.13 | $8,539.87 | $351.51 | $952.60 | $1,023.76 | $73,657.21 | $204.75 | $86,971.98 | ||||||||||
23 | 10 | $14,802.44 | $176,456.99 | $8,881.47 | $417.47 | $1,131.33 | $1,331.48 | $85,152.65 | $266.30 | $102,006.38 | ||||||||||
24 | 11 | $15,394.54 | $205,968.08 | $9,236.72 | $489.63 | $1,326.90 | $1,685.37 | $97,554.20 | $337.07 | $118,434.92 | ||||||||||
25 | 12 | $16,010.32 | $238,455.85 | $9,606.19 | $568.49 | $1,540.60 | $2,088.07 | $110,939.94 | $417.61 | $136,364.94 | ||||||||||
26 | 13 | $16,650.74 | $274,183.06 | $9,990.44 | $654.55 | $1,773.84 | $2,542.50 | $125,392.77 | $508.50 | $155,911.70 | ||||||||||
27 | 14 | $17,316.76 | $313,434.47 | $10,390.06 | $748.38 | $2,028.10 | $3,051.89 | $141,000.82 | $610.38 | $177,198.92 | ||||||||||
28 | 15 | $18,009.44 | $356,518.66 | $10,805.66 | $850.55 | $2,305.00 | $3,619.81 | $157,857.89 | $723.96 | $200,359.31 | ||||||||||
29 | 16 | $18,729.81 | $403,769.96 | $11,237.89 | $961.72 | $2,606.27 | $4,250.14 | $176,063.89 | $850.03 | $225,535.29 | ||||||||||
30 | 17 | $19,479.00 | $455,550.57 | $11,687.40 | $1,082.57 | $2,933.76 | $4,947.14 | $195,725.33 | $989.43 | $252,879.58 | ||||||||||
31 | 18 | $20,258.17 | $512,252.78 | $12,154.90 | $1,213.82 | $3,289.46 | $5,715.42 | $216,955.85 | $1,143.08 | $282,555.93 | ||||||||||
32 | 19 | $21,068.49 | $574,301.49 | $12,641.10 | $1,356.27 | $3,675.49 | $6,560.01 | $239,876.71 | $1,312.00 | $314,739.91 | ||||||||||
33 | 20 | $21,911.23 | $642,156.84 | $13,146.74 | $1,510.75 | $4,094.14 | $7,486.32 | $264,617.39 | $1,497.26 | $349,619.70 | ||||||||||
34 | 21 | $22,787.68 | $716,317.07 | $13,672.61 | $1,678.17 | $4,547.85 | $8,500.23 | $291,316.21 | $1,700.05 | $387,397.00 | ||||||||||
35 | 22 | $23,699.19 | $797,321.62 | $14,219.51 | $1,859.51 | $5,039.26 | $9,608.08 | $320,120.95 | $1,921.62 | $428,287.89 | ||||||||||
36 | 23 | $24,647.16 | $885,754.51 | $14,788.29 | $2,055.78 | $5,571.17 | $10,816.69 | $351,189.55 | $2,163.34 | $472,523.92 | ||||||||||
37 | 24 | $25,633.04 | $982,247.91 | $15,379.82 | $2,268.11 | $6,146.59 | $12,133.44 | $384,690.83 | $2,426.69 | $520,353.10 | ||||||||||
38 | 25 | $26,658.36 | $1,087,486.10 | $15,995.02 | $2,497.69 | $6,768.75 | $13,566.23 | $420,805.28 | $2,713.25 | $572,041.10 | ||||||||||
39 | 26 | $27,724.70 | $1,202,209.69 | $16,634.82 | $2,745.80 | $7,441.11 | $15,123.58 | $459,725.87 | $3,024.72 | $627,872.41 | ||||||||||
40 | 27 | $28,833.69 | $1,327,220.15 | $17,300.21 | $3,013.79 | $8,167.36 | $16,814.65 | $501,658.96 | $3,362.93 | $688,151.70 | ||||||||||
41 | 28 | $29,987.03 | $1,463,384.80 | $17,992.22 | $3,303.13 | $8,951.48 | $18,649.27 | $546,825.20 | $3,729.85 | $753,205.16 | ||||||||||
42 | 29 | $31,186.51 | $1,611,642.10 | $18,711.91 | $3,615.38 | $9,797.69 | $20,638.00 | $595,460.59 | $4,127.60 | $823,382.04 | ||||||||||
43 | 30 | $32,433.98 | $1,773,007.44 | $19,460.39 | $3,952.23 | $10,710.55 | $22,792.15 | $647,817.48 | $4,558.43 | $899,056.18 | ||||||||||
44 | 31 | $33,731.33 | $1,948,579.37 | $20,238.80 | $4,315.47 | $11,694.92 | $25,123.87 | $704,165.76 | $5,024.77 | $980,627.74 | ||||||||||
45 | 32 | $35,080.59 | $2,139,546.30 | $21,048.35 | $4,707.01 | $12,756.01 | $27,646.20 | $764,794.09 | $5,529.24 | $1,068,525.03 | ||||||||||
46 | 33 | $36,483.81 | $2,347,193.82 | $21,890.29 | $5,128.92 | $13,899.37 | $30,373.09 | $830,011.15 | $6,074.62 | $1,163,206.39 | ||||||||||
47 | 34 | $37,943.16 | $2,572,912.49 | $22,765.90 | $5,583.39 | $15,130.99 | $33,319.52 | $900,147.04 | $6,663.90 | $1,265,162.32 | ||||||||||
48 | 35 | $39,460.89 | $2,818,206.38 | $23,676.53 | $6,072.78 | $16,457.23 | $36,501.53 | $975,554.81 | $7,300.31 | $1,374,917.65 | ||||||||||
49 | ||||||||||||||||||||
50 | Inflation-adjusted RRSP withdrawal amount: | $44,975.50 | After tax withdrawal: | $26,985.30 | Inflation-adjusted after-tax withdrawal Amount: | $18,574.11 | ||||||||||||||
51 | ||||||||||||||||||||
52 | Withdrawal | RRIF Balance | Withdrawal | Interest (after tax) | Dividends (after tax) | Req'd Withdrawal | Adjusted Cost Base | Cap Gains Taxes | Savings Balance | |||||||||||
53 | ||||||||||||||||||||
54 | 36 | $184,576.42 | $2,859,086.47 | $76,226.89 | $6,599.60 | $17,884.93 | $54,933.60 | $936,577.40 | $3,191.24 | $1,396,979.44 | ||||||||||
55 | 37 | $191,959.48 | $2,895,853.91 | $79,275.97 | $6,705.50 | $18,171.91 | $58,237.20 | $897,533.41 | $3,838.64 | $1,416,973.08 | ||||||||||
56 | 38 | $199,637.85 | $2,927,884.37 | $82,447.01 | $6,801.47 | $18,431.99 | $61,740.14 | $858,426.21 | $4,526.59 | $1,434,583.43 | ||||||||||
57 | 39 | $207,623.37 | $2,954,491.75 | $85,744.89 | $6,886.00 | $18,661.06 | $65,455.47 | $819,258.96 | $5,257.64 | $1,449,464.63 | ||||||||||
58 | 40 | $215,928.30 | $2,974,922.79 | $89,174.69 | $6,957.43 | $18,854.64 | $69,397.19 | $780,034.64 | $6,034.57 | $1,461,237.46 | ||||||||||
59 | 41 | $224,565.44 | $2,988,351.18 | $92,741.67 | $7,013.94 | $19,007.78 | $73,580.32 | $740,756.15 | $6,860.37 | $1,469,486.44 | ||||||||||
60 | 42 | $233,548.05 | $2,993,871.22 | $96,451.34 | $7,053.53 | $19,115.08 | $78,020.97 | $701,426.41 | $7,738.25 | $1,473,756.70 | ||||||||||
61 | 43 | $242,889.97 | $2,990,490.94 | $100,309.39 | $7,074.03 | $19,170.63 | $82,736.43 | $662,048.46 | $8,671.70 | $1,473,550.65 | ||||||||||
62 | 44 | $252,605.57 | $2,977,124.64 | $104,321.77 | $7,073.04 | $19,167.95 | $87,745.25 | $622,625.58 | $9,664.47 | $1,468,324.23 | ||||||||||
63 | 45 | $262,709.80 | $2,952,584.82 | $108,494.64 | $7,047.96 | $19,099.96 | $93,067.37 | $583,161.46 | $10,720.65 | $1,457,483.02 | ||||||||||
64 | 46 | $273,218.19 | $2,915,573.41 | $112,834.43 | $6,995.92 | $18,958.94 | $98,724.19 | $543,660.39 | $11,844.62 | $1,440,377.88 | ||||||||||
65 | 47 | $284,146.92 | $2,864,672.37 | $117,347.80 | $6,913.81 | $18,736.44 | $104,738.72 | $504,127.50 | $13,041.17 | $1,416,300.32 | ||||||||||
66 | 48 | $295,512.79 | $2,798,333.37 | $122,041.71 | $6,798.24 | $18,423.23 | $111,135.70 | $464,569.11 | $14,315.46 | $1,384,477.43 | ||||||||||
67 | 49 | $307,333.30 | $2,714,866.73 | $126,923.38 | $6,645.49 | $18,009.28 | $117,941.76 | $424,993.10 | $15,673.15 | $1,344,066.41 | ||||||||||
68 | 50 | $319,626.64 | $2,612,429.43 | $132,000.32 | $6,451.52 | $17,483.62 | $125,185.58 | $385,409.48 | $17,120.39 | $1,294,148.56 | ||||||||||
69 | 51 | $332,411.70 | $2,489,012.08 | $137,280.33 | $6,211.91 | $16,834.28 | $132,898.09 | $345,831.19 | $18,663.96 | $1,233,722.78 | ||||||||||
70 | 52 | $345,708.17 | $2,342,424.88 | $142,771.54 | $5,921.87 | $16,048.27 | $141,112.75 | $306,275.15 | $20,311.34 | $1,161,698.51 | ||||||||||
71 | 53 | $359,536.50 | $2,170,282.37 | $148,482.41 | $5,576.15 | $15,111.37 | $149,865.78 | $266,763.90 | $22,070.91 | $1,076,887.84 | ||||||||||
72 | 54 | $373,917.96 | $1,969,987.01 | $154,421.70 | $5,169.06 | $14,008.16 | $159,196.66 | $227,328.11 | $23,952.17 | $977,996.90 | ||||||||||
73 | 55 | $388,874.68 | $1,738,711.29 | $160,598.57 | $4,694.39 | $12,721.78 | $169,148.66 | $188,010.76 | $25,966.26 | $863,616.06 | ||||||||||
74 | 56 | $404,429.66 | $1,473,378.53 | $167,022.51 | $4,145.36 | $11,233.92 | $179,769.99 | $148,874.51 | $28,126.75 | $732,208.58 | ||||||||||
75 | 57 | $420,606.85 | $1,170,641.97 | $173,703.41 | $3,514.60 | $9,524.57 | $191,115.77 | $110,016.37 | $30,451.52 | $582,096.49 | ||||||||||
76 | 58 | $437,431.12 | $826,862.20 | $180,651.55 | $2,794.06 | $7,571.91 | $203,253.24 | $71,601.46 | $32,967.67 | $411,440.65 | ||||||||||
77 | 59 | $454,928.37 | $438,082.81 | $187,877.61 | $1,974.92 | $5,352.02 | $216,278.80 | $33,963.28 | $35,728.12 | $218,202.52 | ||||||||||
78 | 60 | $473,125.50 | $3.93 | $195,392.72 | $1,047.37 | $2,838.38 | $230,417.57 | -$1,901.28 | $38,910.60 | $4.29 | ||||||||||
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