The TIME MACHINE on its own does not optimize at all, it just follows your orders for your scenario that you set with AUTOMATIC WITHDRAWALS and your Withdrawal PRIORITIES, still enforcing tax rules along the way.

The WITHDRAWAL OPTIMIZER does optimize for tax efficiency over the retirement years indirectly. The optimizer algorithm considers more than just taxes and considers all those years together to maximizes your legacy and tries to beat the original TIME MACHINE scenario you set.  It does not matter whether you want to leave a legacy or not.

So yes you should use the optimizer to determine if your set withdrawal strategy is optimal, and if not, to consider the results of the optimal strategy obtained by the program.

I'll look into capturing that better for these types of funds. In the meantime, you can just enter your expect foreign dividend yield as income yield, since the tax treatment is the same. Reduce the eligible dividend yield by the same % as they are additive.

Try increasing your TFSA contributions amount in AUTOMATIC deposits, if there’s room and other sources of cash it will make the contribution, but won’t go over the limit. Also check there is money to cover it in the accounts of the same spouse that has room.

Hi,

You can set up to withdraw all distributions from the TFSA accounts in AUTOMATIC WITHDRAWALS. Once started these withdrawals will never end, and will add to your contribution room for the following year.

You can then set up AUTOMATIC DEPOSITS to the TFSAs. To cover the fact that you have that extra contribution room due the previous distribution withdrawals, enter a larger amount than the yearly allowed increase in TFSA room (currently, $6,500). For example enter $10,000, indexed. The TIME MACHINE will only make contributions up to the contribution limit it calculates in every future year.

Set up your WITHDRAWAL PRIORITIES to your RRIFS as the top priority, then the Non-reg accounts, then the TFSAs.

That should achieve the scenario that you want. Once you run it, can also try running the WITHDRAWAL OPTIMIZER to see if it can beat it.

The form does not allow you to enter a negative amount for the balance of a credit card loan. The issue is what would you want te TIME MACHINE to do with it? A credit balance on a credit card card is not a a good investment so usually insignificant and temporary.

It is a heuristic search. To be precise, the core algorithm is exact, but heuristics are applied to deal with constraints like minimum and maximal withdrawals, spouses (CRA attribution rules, pension income splitting) etc...

In the example you provided, disallowing withdrawals from the TFSAs forces you to bail out your spouse as that money is not available to them when they run out of other sources of income. That turns out to be more slightly more optimal in the end for your case, but the algorithm finds the optimal answer with your spouse paying for their own share of expenses, more exactly following the scenario you ordered.

The algorithm is described in the blog post:

Finding the optimal withdrawal strategy in retirement to minimize taxes and to maximize your financial legacy.

The post gives references for the algorithm's origins, describes it in some detail and goes over its application and limitations. Let me know if you still have questions after reading it.

The Optimizer optimizes for your liquid legacy, after tax, at death. Many things can come into play, like as you say capital gains taxes within your lifespan and at death. Expected investment rates of return are also a big factor if some accounts return more than others. It works by doing the math given tax rules and your inputs for your scenario.

You can set up your scenario the way you want, the Optimizer will try to beat it and often does. If it can beat it it'll tell you something like "this scenario has been optimized and ignored your priorities". If it can't it just goes with what you ordered it to do. It always goes with the optimum for your heirs, after the unavoidable death and taxes.

See https://www.moneyreadyapp.ca/blog/post/8

We've added a new way to add repeating expenses, so we now offer three options for entering the dates and amount applicable for an expense.

Updates on this as people ask me questions about the AI:

1. Is it safe? Yes, your data is not sent to OpenAI, only your question. Don't put personal information in the question.
2. If you did, it wouldn't know what to do with it anyway. It's a language model, instructed to answer questions based on the MoneyReady documents only. It's not a calculator or a financial advisor/planner.  It understands language and is aware of the MoneyReady documents only. It can't run the tools for you or analyse your data.
3. Vous pouvez lui demander des questions en Français, et le AI repondra en Français si possible car il peut faire la traduction des documents. C'est pas toujours parfait.

When logged in, you can select to search all the MoneyReady documentation using OpenAI from our forum search page. Just type in any question you may have and a response will be generated with an OpenAI large language model. The model has been fed all the information in the MoneyReadyApp eBook, all the app's help pages, all the forum posts, all our blog posts, the app's homepage, and our various other pages. It is instructed to answer only based on those documents. It does not know your data.

The answer given is sometimes surprisingly smart, sometimes disappointingly wrong, and often incomplete.  We attempt to provide the references to the top documents it used to form its answer so you can quickly find the source of the information.

If the AI answer is not useful, please don't hesitate to contact us with your question or post it on the Forum. You'll get a real human to respond.

To accomodate mostly pensions but also any other INCOMES, REVENUES, EXPENSES and AUTOMATIC SAVINGS/WITHDRAWALS that are indexed proportionaly to inflation, we' ve added a new parameter to fine tune indexing to inflation in the TIME MACHINE.

See the FAQ for (logged in) users: https://www.moneyreadyapp.ca/forum/topic/76-how-is-indexing-to-inflation-set for details.

The general model we use (with some modifications for Canadians, to bring it up to date to today, and some additional factors relevant to our users like USD exchange rates) is described https://www.soa.org/resources/research-reports/2000-2006/research-modeling-of-economic-series-coordinated-with-interest-rate-scenarios/ and https://www.moneyreadyapp.ca/blog/post/14. It drives all the rates, for each year, in each the 100 TIME MACHINE runs. They are generated on the fly with the model, they are very variable, we don’t store these inputs. You can look at at an individual simulation in RATES/YIELDS/CURRENCIES and see the rates there, and then run that particular simulation through the TIME MACHINE, but for the 100 simulations we don’t store them, or analyze which gave you the worst case case. It’s not important, as we may not have even hit the very worst-case (due to the 100 limit, and the model itself. It’s just a model, a good one, but still not reality). What’s important here is to see how likely and when, you run into a cash-flow problem with these simulations, that is helpful to know so you can adjust your spending to avoid it.

You can set when you to convert an RRSP (or similar types) accounts by editing the account, and make sure to click submit until it asks you  “age to convert”. The default is 71 but you can change it. You can also do partial conversions by setting it up in AUTOMATIC WITHDRAWALS. 

The CPP calculations are done following the CPP Act, so the way the CRA would do it when you apply for the pension. It’s more accurate than the estimate you get from the Service Canada today which  is calculated  as if you were 65 today and your average earnings so far.  Our estimate considers your expected future income and contributions, and also considers your expectations for inflation until you start CPP. The TIME MACHINE Report provides a summary of the the CPP calculation given your entered table of contributions if you are curious about how the calculation was done,. It’s the last thing in the pdf report, so you’ll need to scroll all the way down.

I  checked on your run it and it does looks fine. I see what you mean about it optimizing to 66 for you. Looking at the 3D graph, it’s very flat. Essentially any ages after 63 for you and 62 for your spouse for starting CPP, results in about the same legacy. Why? I think the most likely explanation in your case is that you have a large portfolio set to earn decent returns, so any money you get from CPP earlier reduces what you need to withdraw from those accounts and they thus get to grow more, and that dampens the effect of receiving more CPP if you delayed. Generally the better investor you are, the more advantageous it is to take CPP earlier. I agree delaying CPP is generally advantageous, but not always, you have to do the math which is what we do. If you haven’t already, see https://www.moneyreadyapp.ca/blog/post/9 for my study of the issue. 

I’m glad you’re enjoying the MoneyReadyApp, thanks for you kind words,

You can now specifify the months to add to the age you start/started taking the pensions. The CPP/QPP Optimizer will still only explore the starting dates on each of your birthdays after retirement.

From the Projection Assumption Guidelines:

"Making projections is critical to creating financial plans that help clients realize their long-term goals," says Julie Seberras, CFP®, MBA, FCSI and Chair of the FP Canada Standard Council™ Standards Panel. "The Projection Assumption Guidelines are a useful tool for planners to ensure their projections are based upon sound assumptions."  

The Guidelines are intended to be used when making long-term projections of 10 years or more, and they're meant to look beyond the current day rate environment. For shorter-term financial projections (less than 10 years), financial planners may use actual rates of return on fixed-term investments held to maturity and dividend yields on equities.  

The Projection Assumption Guidelines for 2025 are as follows: 

Note that these are all before fees.

To help with your expense planning, we've improved the presentation of the EXPENSES table.

You can now add a Subtype as well as a Type descriptions on expense entries to allow for more refined breakdown of expenses.

To make entering those expenses easier, there’s now a dropdown so you’ll be able to select for the Type from any previously entered types, or create a new type by typing it in. Same goes for the Subtype. 

Above the  EXPENSES table you’ll see buttons to group by date range (beg to end), by Type or by Subtype. The groups will have a subtotal in CAD and today’s dollars added to the table. The Type and Subtype groupings are still first grouped by date range (otherwise a subtotal makes no sense).

Below the table are additional graphs for the Type and Subtype groupings over time. These can be toggled to full screen by clicking on them. The graphs are also available in the pdf Report (for new runs). The Excel download EXPENSES tab of the TIME MACHINE results should show each  entry with its type and subtype.

Type and Subtype are completely optional, they are just separate tags, so not truly hierarchical, and if no types or subtypes are entered anywhere, these columns will not appear on the web, pdf, or Excel download.

We've tried to make this very generic to suit everyones needs to use as they like to set things up. Your comments and suggestions are welcome.

Depends on the view you are looking at in which currency investments are shown. In the Investments list for a particular account, each investment’s price, market value and book value is shown in its native currency, and the currency symbol is shown, so for a US security you'll see  US$49.37 or €6.00 for a Euro stock for example. At the bottom of the list is the total in CAD for the account, where all the foreign amounts have been converted to CAD. That amount is what you’ll see as the balance for the account in the list of Accounts.  The list shown in "View Investments in all accounts" also show investments prices and values in native currency. That makes sense as you can change the prices right on that screen, and you wouldn’t want to have to convert it yourself (same as when you add or edit the investment). In the Excel download of all accounts, there is  a Currency column there instead of showing the currency symbol on the values, to make it easier to do calculations in the spreadsheet.

The totals in CAD shown in the Accounts list may differ from your bank statement in CAD due to a difference in the date of valuation of the investments (thus price and number of shares), and the currency conversion rate. As mentioned you can see the prices used in the Investments list. You can also see the conversion rate being used in the app under RATES/YIELD/CURRENCIES. If you have a lot of rates, just type currency in the search box above the rates table. You should see the rate for USD. You can change it for today and for the future in the TIME MACHINE.

Keep in mind that the app updates the foreign currency exchange rate nightly using the daily rates from the European Central Bank. It also updates investment prices and values nightly using market data provided by Fundata Inc for those investments we track with a ticker symbol. And if you’re a Wealthica user and linked the MoneyReady App to Wealthica, you can update investments on demand from them.

For calculations in the TIME MACHINE and in its results and reports, all foreign investments are converted to CAD.

Hi,

Add (or Edit if already entered) the INCOME. Make sure for Select an Income source to select "Other income" from the drop-down, and fill out the rest of the form.

For a one time payment, the Start date and End date should be the same.

Click Submit.

A new form will the ask you to Select the tax treatment of this income.

Select "Not taxable" from the dropdown. Click Submit.

Your list of INCOMES should now have it  as Type OTHER NOTAX.