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To speed up analyses like Simulations, Scans, and the CPP/QPP and Withdrawal Optimiser that require many TIME MACHINES runs, we now distribute those runs over several machines so that they are done in parallel. Mileage varies, but our testing has shown the analyes are now 3 to 8 times faster, which is a great improvement. We hire machines on demand just for your own individual jobs, so that only under extreme traffic conditions will they be waiting in queue.

The only downside is that showing you the actual progress of an analysis is a little more complicated, as progress is no longer linear.

You will now see "0% done" at the start as a worker is hired which gets the jobs ready to distribute. You'll then see "Distributing tasks (x% done)" with the x increasing up to 99% as the tasks get distributed to other workers. It could look stuck there for a bit, as it waits for tasks to come back, then you will see "Tasks done (x%)". This last one increases pretty quickly as the tasks come back finished.

Although the analyses are much faster, they can still take some time so please be patient.

Enjoy the long weekend!

The latest Federal budget proposed a higher capital gains inclusion rate for capital gains of 66.67%. This would apply to all capital gains for corporations, and to capital gains above $250,000 for individuals. This is supposed to be applied from June 28, 2024. Many people have asked for its implementation in the app already, and the app applies it for all of 2024 (since April 19, 2024 when we implemented it).

The TIME MACHINE has mostly a one-year resolution.  Do not use the app for last-minute tax planning, you should use a tax advisor for that. We will roll back this change if the proposal does not pass although it seems likely to pass. We will be implementing other tax changes announced in the latest federal and provincial budgets in the next few weeks, so you may see slight differences in tax calculations.

You can create an AUTOMATIC WITHDRAWAL.

From the  Select Account for deposit/withdrawal dropdown menu, select the RRSP you want to withdraw from.

From the Select Contributor of deposit or recipient of withdrawal dropdown menu, select "Other". Normally taxes are applied to the owner of the account, but making the recipient "Other" will make it not taxed.

Then fill in the amount and the dates to begin and end (same date for a lump sum).

The funds will be taken from the account tax-free and will be considered already spent. It'll show up as "Withdrawal to Other" in the year report.

You can adjust the pension income for that entry in INCOMES.

 

 

Thanks, I'm glad you are finding it useful and sleeping soundly! I like to say the app is only as complicated as is your financial situation. That said, it's easy for a financial situation to get complicated quickly given Canada's tax and pension systems. We do try to make it as easy as possible and still be comprehensive and accurate.

I recommend using the Withdrawal Optimizer to help you determine your best withdrawal strategy, but if you want to study the effect yourself you can certainly do that using AUTOMATIC DEPOSITS/WITHDRAWALS.

You can have entries for the registered accounts you want to withdraw from, specifying a yearly amount or a yearly % of the account balance, for any date range. The withdrawals will be made in the TIME MACHINE and will contribute to the required minimum withdrawal if one is required. It may not be made (or not in full) if there is a maximum withdrawal limit (like for some LIFs). What is withdrawn ends up in your Wallet.

You can also specify entries for automatic deposits to TFSAs or Non-registered accounts of your choosing. You can match the date ranges and amounts you set for the withdrawals you set on the account above. However, if you set the withdrawal as % of the account balance, you will not know what that amount will be exactly. For TFSAs, the TM will never go over the contribution room whatever you set. The funds for the deposits will come from your Wallet and so should use up the withdrawals you set up.

You can also set up SCANS so you can run multiple scenarios at once. In this case, you could put a scan on the amounts you have set for those automating savings/withdrawals to cover a range.  The table of results for the scan will show you the legacy and total taxes paid so you can easily identify the best values to use.

 

No worries. There also might be some necessary selling from accounts to cover the probate fees on top of other usual expenses, leading to higher taxable income and taxes that year, possibly capital gains if the withdrawals are from non-registered accounts.

Thanks. I'm sure you would also not use a broken clock even though it's accurate twice a day :)

To apply the spousal rollover as you describe correctly, you must make sure you have selected "Spouse" as the beneficiary of your account where you edit the account properties. In that case, you should see something like "ACCOUNT NON-REGISTERED rolled over to spouse" in the warnings column of the year of your death. The account is not taxed in the TIME MACHINE, and the balance and its cost-basis continue on as owned by your spouse.  Otherwise, you will see this warning: "NON-REGISTERED ACCOUNT liquidated to Estate", indicating the account has been deemed disposed and taxed.

Even if the account is rolled over to the spouse,  probate still applies unless the account is also held jointly with your spouse. So even though there is no tax, there may be probate fees to pay (depending on your province). The warnings column also gives you that information like this: "To probate xxx,xxx.xx. Fees: x,xxx.xx". I think this may be why you are thinking the account is taxed when it isn't.

To avoid probate on the account, it needs to be a Joint account (both in real life and the TIME MACHINE). Then you need to consider CRA attribution rules on Joint accounts. Please read p. 30 of the MoneyReady App eBook for details on setting up Joint accounts.

Great! And good point about the readvanceable mortgage.

I'm wondering if you're not looking at the HELOC balance in Today's dollars? The limit is not indexed, and $500,000 will appear a lot lower that far in the future.

Check the values in Future dollars. If that's not the issue, just contact me and I can go over your scenario and results.

Interesting question. The two models are not comparable. I think you answered the question yourself. The Actuarial Society model we use in the Monte Carlo simulations is based on probabilities based on historical market data and some current market and economic conditions to simulate both short-term and long-term changes in yields. It models the variability and even includes "regime switching" probabilities of going from optimistic to pessimistic and back. This allows to consider the variability of returns. Given that we run that model on your entire scenario, it also allows us to consider the sequence of returns, that is the timing of your planned deposits and withdrawals in a varying market. When the yields don't change, that is not so much an issue. I'm sure some similar models are used by the FP Canada Standard Council to come up with their long-term projections as well as other factors.

For long-term projections, we encourage you to use long-term rates, and we set them to the FP Canada guideline as default, but you can change those to whatever you want.

Your default inflation rate you get is the BOC rate the day you register on the app.  You're right we could put the current FP Canada projection instead. For years I had it set at 2%, the BOC target rate. But when inflation was shooting up I made that change. It would be very confusing to change it without your knowledge so we don't. You can set the inflation rate to whatever you want in RATES/YIELDS/CURRENCIES.  We tell you there what the current BOC rate is, but you can set it to what you like. You can also set new rates to start at anytime in the future if you have your own ideas of where interest rates are going. Inflation should be near the top of the table of rates, but if you have a lot of rates and can't see it, just type Inflation in the search box at the top.

 

Hi and welcome.

The Optimizer uses a mathematical algorithm to find the optimum, not simple rules of thumb. If we set your scenario to the optimal plan found by the Optimizer, it would look like a very complicated large mess. The reason is that the TIME MACHINE run applies the algorithm's recommendations by setting AUTOMATIC withdrawals (sometimes savings) for each of the appropriate account types and each year. The run resolves that to your actual accounts, and can also make additional adjustments to your PRIORITIES on the fly in accommodating the suggestions including a fuller and more accurate tax calculation that the Optimizer algorithm can handle on its own.

You can see what it did in the results shown. The details are in the TIMETABLE, but the most useful output to analyse what it did, are the Consumption graphs and the Cash-Flow summary. Those give you a good indication of where money is coming from in every year. You can use that to set up your scenario to mimic it by adjusting your AUTOMATIC savings/withdrawals and/or PRIORITES. This way you can match the Optimizer, and possibly even beat it. This will also give you a much better understanding of your plan, which will make it much easier for you to follow.

I remembered this morning that you can actually already  set any EXPENSE to decrease (or increase) smoothly with the years by adjusting how you set that expense to be indexed (or not) with inflation.

You can set how the EXPENSE grows in time between the start and end dates. We ask if the EXPENSE is indexed, a multiplier (default is 1), and an addend rate (default is 0% and can be negative).  If you check "Index to inflation", the EXPENSE will grow with inflation multiplied by the multiplier, plus the specified addend rate. Essentially: 

growth rate = inflation x  multiplier +  addend

If not set to be indexed with inflation, you can still set an alternate rate to grow it. In that case:

growth rate = addend.

For your example of reducing the expense by 2% a year, you would set the addend to -2.

You can see what that amounts to in today's and future dollars in the graph below your list of EXPENSES.

 

 

 

 

 

I've been asked that before, because of that book.  You have the option to enter multiple expenses, and you can start and end them at whatever dates you want.  I find the 1%, 2% a year reduction a great rule of thumb that works when looking at an average over many people, but not so easy to do in practice for an individual.

I think it's more reasonable and useful planning to set an EXPENSE entry for your basic non-discretionary living expenses. You may need more than one if you are thinking of moving into a retirement home at some point or think you will need additional elder care. And then have entries for discretionary expenses, for which you can vary the amounts for different date ranges as you envision your life's circumstances and goals. For retirees, that's often the travel budget, and it's not easy to reduce that in 1% increments.

Edited: See my response below on how you can also adjust the growth rate of any expense.

 

 

There's nothing in the documentation about that and the AI loves to make stuff up when it doesn't know. In this case, it is on to something though, because that feature does exist. But is not available to users. I use it mostly for testing things. Particularly near the end of the year, to make sure that nothing will break when the new year rolls around. I'll look into making it available and let you know.

Thanks

The TIME MACHINE treats ROC and dividend distributions the same way so that you do receive both. The difference is in the taxation of those distributions in non-registered accounts.

The TM tracks the ACB for investments starting with the book value you manually entered (or get from Wealthica).  The ACB is reduced by the ROC distributions received, which would not be taxable until the ACB reaches zero, at which point they would become taxable capital gains. Of course, if the distributions are reinvested, this increases the ACB so that it may go back up above zero.  This is a good case for using the feature for setting the TM to use long-term rates in later years.

To understand what is causing your cash-flow problem would require going into the minutia of your runs. Did you save and compare them side-by-side? It is possible that for some years once the ACB has gone to 0, you would be taxed higher for a ROC distribution than an equivalent amount of Eligible dividend since at low-income levels the latter can be taxed at a lower rate than capital gains. Even small differences in amounts can become large with compound growth and time in the TM.

Let me know if you want me to look at your saved scenarios.

 

 

 

 

Hi and Welcome,
 
The short answer is yes. The long answer is found in this blog post:
 
 
Feel free to ask me any questions if anything is still unclear.

 

You and your CCPC are entirely separate entities for the CRA, and we treat them as such too. The TIME MACHINE treats the CCPC accounts quite differently than your own accounts.
To get money from the CCPC, you need to specify how the payments will be made in INCOMES.
You add INCOME entries, specifying what type of income you want (Salary from your CCPC, Non-eligible dividends, Eligible dividends, or Capital dividends).
The TIME MACHINE will pay those to you if it can from Retained Earnings first (which come from any REVENUES that you entered), and then from the CCPC Investment accounts if not enough earnings. It’ll invest more in the accounts if there are excess earnings. Salary and Non-eligible dividends are usually not a problem to pay out, but for Eligible dividends, or Capital dividends the CCPC there are limits imposed by the CRA based on the balance of notional accounts like the GRIP and CDA. For the current year, these are captured in the TIME MACHINE tab right before you go to run it.
The TIME MACHINE enforces those limits and keeps the notional accounts updated for future years to get the limits and taxes correct. It will put a Warning if it can’t pay out the income you’ve asked for.
 
If you have entered more than one CCPC account, these may appear in your Priorities, but that is just to tell the TM when it has the choice, of which account to deposit/withdraw first, just in the context of the CCPC.
 

There is no optimization for the age to convert RRSP to RRIF,  as it is not really needed. The Withdrawal Optimizer withdraws as is optimal from the RRSP/RRIF. The conversion age required only dictates the required minimum withdrawals once converted. It will use the age you entered to enforce those, mostly for users who have already converted. If you haven’t, best to leave it to last possible age of 71 which is the default, and that gives you and it maximum flexibility. It usually likes to withdraw before then to smooth out the taxes, but that entirely depends on the specifics of your scenario.