Posted By 
More than a year ago I wrote a column for the Financial Post about a handful of Canadian retirement income planning software packages that help would-be retirees and semi-retirees plan how to start drawing down from various income sources: Click on the highlighted text to retrieve the full article: How you draw down your retirement savings could save you thousands: this program proves it.
The focus of the FP piece is Cascades but you can also find a MoneySense piece I wrote from late 2018 that looked at Viviplan, and one I wrote for the Globe & Mail last November that described Cascades, Viviplan and Doug Dahmer’s Retirement Navigator and BetterMoneyChoices.com.
Dahmer has been writing guest blogs on decumulation here at the Hub almost since this site’s founding in 2014. See for example his most recent one, or the similar articles flagged at the bottom: Top 10 Rules for Successful Retirement Income Planning. Dahmer says he’s pleased that others are waking up to the need for tax planning in the drawdown years: “Cascades provides a very good, easy-to-use introduction to these concepts.”
There may be as many as 26 distinct sources of income a retired couple may encounter, estimates Ian Moyer, a 40-year veteran of the financial industry and creator of the Cascades program described in the articles.
When he started to plan for his own decumulation adventure, six years ago, he felt there was very little planning software out there that was both comprehensive and easy to use. So, he hired a computer programmer and created his own package, now called Cascades.
This past summer, Moyer revised the package and, since my wife and I are now certainly semi-retired and closer to full-time retirement, put the package through its paces again. Among the improvements are permitting additional deposits, such as Sale of a Business, cottage or inheritance. It also is more flexible on custom income sources, including Registered Annuities, non-registered life annuities, non-registered term annuities, child tax credits, child support, spousal support (alimony), and rental income.
The new version also accommodates additional income needs: for example, during the first five years of Retirement where vacations may be quite frequent, buying a new car every four years, and extra medical care during the last 10 years of life expectancy.
One key feature of Cascades is that money is rolled over for non-registered funds to TFSAs each year where there is no room.
Personally, I found going through both firm’s programs a fascinating exercise, very much like putting together a jig saw puzzle. For me, Dahmer’s Better Money Choices helps you visualize the final picture you’re trying to assemble, showing how much money you’ll need and when you’ll need it. Cascades provides vivid yearly snapshots of your year-by-year progress in putting the pieces together.
Three different withdrawal priority strategies
The screen shot at the top of this blog is from a fictional Cascades client. As you can see, for that particular client, it optimizes tax paid in retirement and the ultimate estate value to recommend a certain order in withdrawing money from registered, non-registered and tax-free accounts. In this case, it suggests the optimum strategy is to withdraw non-registered funds first, then some years later shift to withdrawing from registered funds (RRSP and/or RRIFs), saving withdrawals from Tax-free Savings Accounts (TFSAs) till the later years.
In the case of me and my wife, the recommendation was the same, though of course our own numbers would be different. I must say the resulting recommendation may not be intuitive to many retirees or those planning for it: off the cuff, I’d have thought you’d want to draw down on registered savings between 65 and 71, in order to lower future OAS clawbacks once forced annual (and taxable) RRIF withdrawals have to begin.
In all these programs, it’s a fascinating exercise to run projections, particularly for couples. No two couples will be in the same circumstances: some have lucrative inflation-indexed Defined Benefit pension plans, while others have mostly registered and non-registered savings that have to be managed to generate an income. All the usual questions that this site and others talk about are raised: when to take CPP, when to take OAS, how to minimize the OAS clawback, and even whether it may make sense to restructure affairs of even middle-income retirees to benefit from tax-free Guaranteed Income Supplement (GIS) payments between 65 and 70.
Then there are questions of risk tolerance and asset allocation, what numbers to plug in for investment returns of various asset classes, expected inflation and so on. Cascades lets you choose from four investment personalities, ranging from Conservative to Aggressive, and the projections will vary depending on what you enter. I’m not sure how they estimate asset allocation across investment accounts, but the final reports generated show how much interest, dividend income and capital gains will be generated across accounts.
Full disclosure: Cascades is currently advertising on this site: see the top right corner of the site for the ad, and there are periodic sponsor guest posts that run, also fully disclosed.
Excellent review. I am surprised by the findings that withdrawing from the non-registered accounts first resulted in a higher net estate. I am assuming that net estate means the value of the estate after the final taxes are paid? Contradicts what my accountant has been telling me.