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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
I've looked into it and decided not to implement a Jan 1 feature as it would be an inacurate projection.
Today I'm happy to announce parameter SCANS for the TIME MACHINE.
To explore the effects of systematically changing one or more of the many parameters you have entered in your scenario for the TIME MACHINE, we now allow SCANS. In addition to the 6 saved runs that you can have at a time, we also allow you to save up to 6 SCANS at a time. Each scan can contain up to 101 runs.
In a scan, you can vary most values for most of the entities you have entered in your scenario. You will first select the type of entity from a drop-down list (e.g., EXPENSES, INCOMES, INVESTMENTS, etc.), and then select the entity (e.g., the EXPENSE) and the kind of values that apply to that entity (amount, percentage, date, etc.). You then enter a starting value, an increment value (which can be negative for a decrement), and a stop value. For dates, the increment is in full years. A TIME MACHINE run will be done for each value of that parameter, keeping everything else constant in your scenario.
Because different parameters often move in tandem, you can add additional parameters in exactly the same way. Although there is no limit to the number of parameters you can add, there is a limit to the total number of runs (100) we allow per SCAN. Each parameter is linked to the others, and the final number of runs will also be determined by the parameter with the fewest scan values. You will be able to see a table of the values that will be used for each run to confirm that you have set up the SCAN as you want before actually running it. The last run that will be done is for your current unmodified scenario.
For example: Say you have quotes for different term life insurance values. You can get a $100,000 death benefit for a $1,000/year premium, and every additional $100,000 of coverage costs $1,000/year. To set up this SCAN, you would select INSURANCE from the first dropdown, then select "death benefit" from the second. To explore a death benefit from $100,000 to $1,000,000 in $100,000 increments, the starting value would be $100,000, the increment $100,000, and the stop value $1,000,000. Once those are entered you can `Save and add a parameter'.
Again you would select INSURANCE from the first dropdown, then select "premium" from the second. The starting value would then be $1000 and the increment $1000. The stop value for a million dollars of coverage would be $10,000 in this case. If you enter a stop value less than that, say $8,000, the last run would be for $800,000 of coverage not a million. If you enter a stop value that is higher than $10,000, the runs will still stop when the stop on the death benefit is reached. In other words, the first of the stop conditions to be reached ends the run.
Here’s another more complicated example: Say you just received your statement from your defined benefit pension plan. It shows you how much you will get in pension income and bridge benefits if you start your pension at 55, 60, 65, and 70. You are considering when to retire and wish to explore those options. You would select the PROFILE table, and then set the start date of retirement. Set a starting date at your retirement date, increment 5 as dates are incremented in years, and stop value of your retirement date at age 70. Because you have linked INCOMES, EXPENSES, and SAVINGS to your retirement date, the TIME MACHINE will automatically also adjust the start/end dates for those entries as well. You would then add the parameter for the table INCOMES and select the pension you've entered. You would add the value for the pension from your statement at 55, then for the increment enter the difference between the value at 60 and 55. You can add a very high value for the stop as the runs will stop after 4 runs anyway due to the date of retirement parameter. The pension may not increase linearly, however, so the increment may only be approximate in the SCAN; you can always run another TIME MACHINE with a more accurate value once you have narrowed down your options. You can then add another parameter for the bridge pension in the same way as for the pension. The TIME MACHINE will not pay out a bridge pension after 65 anyway, so again you can set a very high number for the stop value.
When the runs are finished, you will see a table with some stats (total taxes paid, legacy, to estate, etc.) for each of the runs in a given SCAN, similar to your list of saved runs. You will be able to view each one and compare them pairwise. Just like saved runs, you can restore its scenario. SCAN runs have an automatic description added to them that shows the values of the parameters used in that run. Its name is just the TIME MACHINE run number. You can modify the name and the description if you want.
SCANS are a little dangerous because there is little or no checking of your inputs at this level. You may be instructing the TIME MACHINE into a parameter space that is disallowed for whatever reason (a loan can't be amortized for example), and it may even crash. If there is a crash, the scans should continue running, but you won't get the results of any run that crashed.
Your list of saved runs now has an extra table with the list of SCANS. You can click on a scan to view it. SCANS have an automatic description added with the inputs that you entered for that scan. You can add additional information in the description. Changing the description will not change the parameters, you need to set up a new scan to do that. For advisors, note that SCANS and their results will be visible to clients by default. You can remove that permission for any scan by unchecking `Allow client to view results' where you go to edit the SCAN name and description.
You can re-run a SCAN on your current scenario. The SCAN's previous runs will be deleted and replaced with the new runs. For example, you could change the age of death in your scenario, and re-run the life insurance scan for that age of death. Or you can just re-run a scan in a few months with updated values of your accounts and other entities. To avoid crashes, make sure the parameters of the scan are still applicable to the updated scenario.
This feature is included with any subscription. Let me know if you have any questions or feedback.
Enjoy!
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.
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.
Hi everyone,
For completeness, I just wanted to catch up on some recent changes that were either already announced in the other forums or are fairly minor.
- The REPORT now includes a Table of Contents. It has links to navigate the report on the web or the pdf.
- Taxes in the year reports are now broken down by federal, province/territory, CPP, and EI contributions.
- The Sample report pdf download has been updated.
- Joint (Not Really) accounts. Useful for Non-Registered accounts that are Joint to avoid probate, but are used as individual accounts to avoid attribution rules and simplify tax filing.
- CPP/QPP Death Benefit. It will only be calculated if you have not already started taking CPP/QPP.
- Union dues have been added to the list of deductible EXPENSES.
- If you have already started U.S. Social Security benefits. If you or your spouse are also currently receiving WEP (including CPP/QPP) or GPO pensions, we now ask you for the amount of the U.S. Social Security benefits you are receiving. This allows for the calculation of the WEP and GPO amounts that were used by the SSA to calculate your benefits (including spousal benefits). The TIME MACHINE will update the amounts as required should you have set further WEP or GPO pensions to be started in the future and will update your benefit calculations.
You can add an entry in AUTOMATIC SAVINGS/WITHDRAWALS to create an automatic deposit of the maximum top-up (currently $7000/year) starting Jan 1.
This will force the TIME MACHINE to make those deposits as long as you have room. The TIME MACHINE will calculate the increased limits available every year and will index the SAVINGS entered to that amount to automatically max out your TFSA room.
How about ALL GONE 🤪
I used EXPENDITURES as suggested.
I'm glad you like the changes.
Thanks again!
DigitalTorqueWrench wrote:
I like the new CASH-FLOW Summary. This is helpful. Thank you.
There is, however, one thing that I think could be improved in the CASH-FLOW Summary and in some of the other charts & tables. It has to do with the way the MoneyReady App treats CPP contributions. I am attempting to provide honest feedback; I am not suggesting that anybody or everybody has to agree with me!
From the documentation:I am guilty of reading the documentation too fast which caused me to initially miss that statement. I wish I had paid more attention to this detail because I spent several hours trying to figure out why the MoneyReady App was showing slightly bloated tax values in situations that involved employment income.‘TAXES’ includes CPP/QPP and EI deductions
I think that grouping TAXES, CPP, and EI together and calling them "TAXES" is too much of an oversimplification.Treating EI contributions as taxes is a bit of a stretch, but there is probably not too much harm in it.However, I personally do not view CPP contributions as being a tax. Unfortunately (for me), I know that not everybody out there on the Internet shares my view.
I would have preferred it if the Sankey diagrams provided four flows immediately to the right of the vertical centerline into:⇒ TAXES⇒ TO ACCOUNTS (this could potentially be renamed to simply DEPOSITS for consistency with the CASH-FLOW summary).
⇒ SPENDING⇒ PENSION CONTRIBUTIONS.
The PENSION CONTRIBUTIONS flow should then be split into two outflows on the far right side of the diagram:⇒ CPP CONTRIBUTIONS
⇒ OTHER PENSION CONTRIBUTIONS (or something to that effect)
The TAXES bar chart should not include CPP contributions. CPP could be moved to a new bar chart labelled PENSION CONTRIBUTIONS.Or, if the TAXES bar chart must continue to include CPP contributions, could the chart be relabeled and could CPP pensions be rendered in a different colour?
So now, back to the new CASH-FLOW report. It has two columns named TAXES and SPENDING. I do not think it is right that the CPP pension contributions get included in the first column but other pension contributions get included in the second column.I would have preferred to see three columns:• TAXES• SPENDING• PENSION CONT.
I recognize that not everybody has a wide monitor so some people might not like the table becoming wider than it already is. Also, I don't have loans or mortgages so I cannot comment on how or where such things are supposed to appear.
The existence of separate columns labeled SPENDING and TOTAL SPENDING is confusing. Based on their names, one would expect the two columns to hold identical values. Therefore the TOTAL SPENDING column could be dropped entirely or renamed to something more meaningful such as TOTAL OUTFLOWS. For me, the word spending infers the use of money to buy goods or services. Spending is what I do with my spending money. I don't use that word when referring to the payment of income tax and/or pension contributions.
Thanks for the feedback DigitalTorqueWrench. Yes, I don't want to add additional columns to summary reports because horizontal screen real estate is precious. We may be able to clarify the terminology in labels for columns and charts, however. We can also give you additional breakdowns of the TAXES in the year reports which are meant to be detailed. Thanks again.
The TIME MACHINE Year reports now have subtotals by expense type (when specified), income type, and account type. You can now get all the years together in a single report. This extensive report, in both today's and future dollars, is now included as new worksheets in the Excel download.
You can view only a selection of the years. That is the same cash-flow report that is included in the REPORT for printing or pdf download.
A new summary cash-flow report is now also available. For every year, it shows the Cash In totals of EXTERNAL INCOME and ACCOUNT WITHDRAWALs by account type. The Cash Out columns show the total spending, total taxes, and ACCOUNT DEPOSITS by account type. The Net-savings are also shown. The cells are coloured with a heat map to help you see exceptionally low and high amounts.
Although these reports are available for older runs including saved runs, those may not show all the subtotals. Also if you've entered a lot of EXPENSE entries, you may want to add an expense type for them if you haven't already. This way you'll see their subtotals in the reports, and it will also make the Sankey diagram in the year report a lot cleaner.
You can get to any of these larger reports from the Views section below any TIME MACHINE Timetable, or from the Year report (click on any year in the Timetable).
Let me know if you have any issues, questions, or suggestions.
Elisabeth
Here's what the summary cash-flow report looks like:
"Joint (but not really)" accounts are now implemented. The way it works is where you add or edit a non-registered, joint account, on the screen where you set "Percentage of account my_name contributed to", you can now also set who can contribute or withdraw from the account (only you, only your spouse, or both of you).
So for your account, to make sure all taxable income is attributed to you in the TIME MACHINE, you can set your contributions to 100% and restrict deposits and withdrawals to you only. You would set your contributions to 0% for your spouse's account and restrict deposits and withdrawals to your spouse only for them to be solely responsible for the taxes on their account. Both accounts will still be considered joint with the right of survivorship so there would be no deemed disposition or probate on the death of the first spouse.
The TIME MACHINE will from today on calculate the death benefit if it also calculates the CPP/QPP pension (i.e. in cases where you are not already taking the pension). A section was added to the eBook. it reads:
There is a $2500 death benefit payable to the spouse (if there is one) or to the estate upon the death of a pensioner. To qualify for the death benefit, the deceased must have made contributions to the CPP or QPP for at least one-third of the calendar years in their contributory period for the base CPP/QPP, but no less than 3 calendar years, or 10 calendar years. This taxable amount has not been increased in years, and it does not appear that it will be indexed anytime soon. If you are not already collecting CPP or QPP, the TIME MACHINE will also calculate the death benefit. If you are already collecting the pension, and thus did not enter a CPP/QPP pensionable earnings table as described in the section above, no death benefit will be calculated as the TIME MACHINE cannot determine eligibility in that case.
Thank you for that. You make an excellent case for the "Joint (but not really)" accounts! I'll see what I can do.
I'm glad that's resolved for you. And it gave me an opportunity to teach more about Joint accounts and attribution rules, so I hope others will benefit. Thanks
I fixed the issue where "Percentage of account my_name contributed to" when set to zero wouldn't stick and revert back to 50%. Thanks for alerting me to it.
To keep with CRA attribution rules, any taxes due on a Joint account are attributed to each spouse according to their percentage of contributions. Since it's Joint, the TIME MACHINE allows either spouse to contribute to it. It then updates the percentage contributed anytime a deposit to the account is made.
So for the scenario you are describing, where the Joint accounts are not really Joint, you'd have to set it up in a way to make sure the TM does not need you to contribute to "her" account, and for her to not need to contribute to "your" account. That way the proportion contributed by each spouse would not change if you each only contribute to your own accounts. I realise that is not easy to do given the way Joint accounts are treated in your Priorities table. The Optimizer may also do its own thing to optimize. So I would have to set up something special for you, like a separate account type: "Joint (but not really)" 😉. I'll think about it.
In the meantime, I suggest you just set them up as not Joint and know your probate fees won't be quite as high as shown. You can set up a non-taxable income for the last day of the year the first spouse dies to make up for the probate if needed.