Retirement Planning Calculator Overview

Our calculator determines your optimal Annual Discretionary Expenses (ADE) - the amount you can sustainably spend each year from retirement to age 95 while maintaining constant purchasing power through inflation adjustments.

Key Features
  • Inflation-based asset returns
  • Asset-specific performance deltas
  • Automatic expense inflation adjustment
  • Canadian provincial tax calculations
  • TFSA and RSP contribution limits
  • Intelligent debt payment priority
Inflation-Based Returns
Conservative: 2% inflation Average: 2.5% inflation Optimistic: 3% inflation

Returns = Inflation + Asset Delta. Housing: +1%, Stocks: +3%, TFSA/RSP: +3.5%

Cash Flow Allocation Priority

When you have positive cash flow (income > expenses), here's how excess money gets allocated:

1. High-Interest Debt Payment

Priority: Pay credit card debt first (18% interest)

2. Tax-Free Savings Account (TFSA)

Annual limit: $6,500 | Tax-free growth and withdrawals

3. Registered Retirement Savings Plan (RSP)

Annual limit: 18% of income (max $31,560) | Tax-deferred growth

4. Mortgage Acceleration

Extra payments to principal (4% guaranteed return)

5. Stock Portfolio & Other Investments

Taxable investment accounts after debt and tax-advantaged accounts

Retirement Withdrawal Strategy

When expenses exceed income (retirement years), withdrawals happen in reverse priority order to preserve tax-advantaged accounts:

1. Cash Account
Tax-Free
No tax implications
2. Other Accounts
Taxable
Provincial + Federal rates
3. Stock Portfolio
Taxable
Provincial + Federal rates
4. RSP/RRSP
Fully Taxable
Provincial + Federal rates
5. TFSA (Last Resort)
Tax-Free
No tax, but lose contribution room forever
Tax Calculation: For taxable withdrawals, the system uses your actual provincial and federal tax brackets to calculate the precise gross amount needed. For example, if you need $1,000 net in Ontario and you're in the 43.41% marginal bracket, the system withdraws $1,767 gross ($1,000 net + $767 tax).

Inflation-Based Asset Returns

Each asset type earns returns based on inflation rate plus a specific delta:

Asset Return Rates
Housing:
Inflation + 1%
TFSA/RSP:
Inflation + 3.5%
Stocks:
Inflation + 3%
Cash:
Inflation + 0.5%
Example (2.5% inflation):
Housing:
3.5% return
TFSA/RSP:
6% return
Stocks:
5.5% return
Cash:
3% return
Expenses: All expenses automatically increase by the inflation rate each year, providing realistic long-term projections.

Account Movement Tracking

Every year, each account balance changes based on these components:

Opening Balance
Starting value for the year
Growth/Interest
Asset-specific returns applied
Contributions
Money added during year
Withdrawals
Money removed for expenses
Formula: Closing Balance = Opening Balance + Growth + Contributions - Withdrawals

Canadian Tax Calculations

Accurate after-tax income calculations using 2025 marginal tax rates for all provinces and territories:

Federal Tax Brackets (2025)
  • 15% on income up to $55,867
  • 20.5% on income $55,868 to $111,733
  • 26% on income $111,734 to $173,205
  • 29% on income $173,206 to $246,752
  • 33% on income over $246,752
Provincial Variations
  • Lowest rates: Alberta, Nunavut (~20% total)
  • Average rates: Most provinces (~30-40%)
  • Highest rates: Quebec, Nova Scotia (~53% top bracket)

Annual Discretionary Expenses (ADE)

The core calculation finds your optimal sustainable discretionary spending from retirement to age 95.

What is ADE?

ADE represents the annual amount you can spend on discretionary items (travel, hobbies, entertainment) throughout retirement while maintaining constant purchasing power.

Key Principles:
  • Inflation-adjusted constant spending power
  • Covers discretionary expenses only
  • Fixed income expenses handled separately
  • Assets depleted to near zero by age 95
Optimization Algorithm

We use gradient descent optimization to find the precise ADE that depletes your assets to approximately $0 by age 95.

Algorithm Steps:
  1. Start: Initial ADE estimate based on assets
  2. Simulate: Run year-by-year projection to age 95
  3. Adjust: If final balance ≠ $0, adjust ADE
  4. Converge: Repeat until balance within $5,000 of $0
  5. Result: Optimal sustainable ADE found

Year-by-Year Simulation Process

For each year from current age to 95, the calculator performs these calculations:

Working Years (Pre-Retirement)
1. Income & Taxes
Apply provincial tax rates to gross income
2. Fixed Expenses
Deduct inflation-adjusted fixed costs
3. Asset Growth
Apply inflation + delta returns to all assets
4. Excess Allocation
Invest surplus in tax-advantaged accounts
Retirement Years
1. Asset Growth
Apply inflation + delta returns
2. Fixed Expenses
Withdraw for inflation-adjusted fixed costs
3. ADE Withdrawal
Withdraw current year's ADE amount
4. Tax Calculation
Calculate gross withdrawal for net expenses

All calculations are estimates for planning purposes. Consult a financial advisor for personalized advice.

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