Receiving tax-free cash flows

Question:

I'd like to know if there is a way to account for tax-free cash flows in Retireware? (ie: an individual has agreed to lend a mortgage to someone. The capital payments that this individual recieves should be tax-free.)

Answer:

You could enter up to four different years worth in 'Other Assets' on the 'Other' tab. If payments are monthly, multiply by twelve, then select 2008, 2009, 2010 and 2011 for 'Year Anticipated'. In this case, be sure to select 'Other future assets' in 'Sources of Income'.

If there are more than four years of payments, then enter them as 'Additional Income' in 'Sources of Income'. These amounts are taxed as income, so you could gross them up by a percentage such that the after-tax amount is roughly equivalent to the non-taxable payments.

Defined benefit pensions

Question:

1. My spouse, age 59, will retire in June 2008 (at age 60) with defined benefit unreduced pension (Government of Canada). Where does this calc pension amount go?

2. The pension does not show up in "Income & Cash flow forecast" until age 65. Why not from age 60?

3. Why do RRIF withdrawals show up prior to age 69 or 70 when minimum withdrawals is selected?

4. How do I enter the age of entitlement for an undereduced pension?

Answer:

1. If you know the pension amount, enter it as a 'prior defined benefit' pension in 'Company Pensions'.

2. Ensure you select 'company pensions' in 'Sources of Income'. Also, select age 60 for the age of pension commencement.

3. The latest age and minimum will apply only if other funds or income are sufficient to meet the retirement income objective.

4. You select the age at which the pension will be paid on the last tab of ‘Defined Benefit’, and the program will apply the early retirement reduction rule and unreduced pension age rules specified in the 'Early retirement' tab.

Windows Vista & Apple

Question:

I own a two year old version of RetireWare. Will it run on:
1)Vista if I buy a new computer, or
2)Apple O\S if I buy a new computer.

How do I load the software from my old computer to the new one, or do I have to purchase new software?

Answer:

RetireWare works with Vista, (also Windows XP, 2000, NT, 98).

For Apple computers, it will run provided you have software that can run Windows XP or Vista on your Mac, such as Parallels Desktop 3.0 for Mac (www.parallels.com).

You can always downlaod the installation file from:

http://www.retireware.com/downloads.aspx

The purchase of the 2008 update is optional. Here's information on the pricing:

http://www.retireware.com/pricing.aspx

Retirement income objective

Question:

I have inserted a retirement expense objective of $33K. The Client is 63 years old and retired with only an RRSP portfolio to draw from. For some reason, in the first year only (eg.2008), the objective is doubled to $66K and thus there is a large withdrawal from the registered portfolio. How do I fix this issue?

Answer:

The first year of retirement may be only for a few months. So the objective would reflect employment income up to the month of retirement, and a portion of the $33,000 for the remainder of the year. Also, when the retirement year is in the future, the objective of $33,000 in terms of today's dollars will be indexed all the way up to the retirement year.

Government Pensions

Question:

Your calculations for the amount of Canada Pension and Old Age Security which I will receive increase dramatically over the years. What is the basis for these annual increases? Is there any provision made for Claw-Back of Old Age Security Payments in years when total income is above the limit?

Answer:

CPP and OAS increase annually by the rate of inflation you selected, unless you left the default value, which is 2.5%. Clawback is applied in the calculations and is reflected in the income tax column of the results. .

Updating and dates of calculation

Questions:

1. When I load my old file, which worked fine before, it says my retirement date of 04/30/2007 is below allowed? I picked same date from calendar and got same message?

2. My date for Financial Information of 12/31/2007 also gives the same out of range message. I tried the calendar to pick the date and got the same msg again.

3. When I run it with existing data without changes to my data file it does not show any CPP income just OAS?

Answers:

1. It's because the program looks in the future. I know it may be an annoying feature, but the projection starts from now going forward and it has no importance. We'll look into making the date messages less annoying to users.

NOTE: We have made a change to the program. Now a date of retirement before the date of calculations is accepted.

2. Use 1/1/2008. It's the same annoying reason!

3. Being a young man, you're not collecting CPP, so enter in Financial Information an income, say $50,000, and check 'Already retired', and the program will calculate an estimate for CPP. The CPP needs earnings to calculate an estimate unless you enter a monthly amount if already in the course of payment.

Maximum RRSP contributions

Question:

The program does not seem to increase one’s RRSP contribution to the maximum allowed in coming years, even though the feds have announced increased limits, or am I missing something.

Answer:

The RRSP maximum annual contributions for future years are in the program.

You need two conditions to hit the annual maximum: high income and high annual savings. If both of these are met, then the maximum will apply.

In order to see RRSP contributions during the first year of your plan, ensure you put the applicable amount for the current year RRSP deduction limit on the 'RRSP Deductions' tab of 'Registered Investments'.