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The asset-light, early retiree client

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This is a not un-common retirement scenario. In this case, the client is in early retirement. He has smallish assets/capital and it is many years before his pension/CPP/OAS kick in.

This is what planners call the ultimate 'bridging' problem......

"I told my boss to 'stuff it' before I checked on the size of my RRSP!"

Of course, the first thing you try to do is amortize, since this is the calculation that this type of individual generally wants to see.

Say the client was 50, retired, and doesn't expect any more income until age 60 when his CPP comes in, and 65 when the rest of his entitlements come in.

Normally, if his capital (rsp/nonreg) is sufficient, then the program will amortize, bridging the pre 65 gap just fine. However if his assets are skinny, then when the program tries to amortize, it has to find a net income level which will at least match the $15K yearly income (indexed, remember) that the CPP/OAS will be bringing in.

If his assets are too low to fill in the pre-65 hole to at least the level of 15K until the entitlements start rolling in, then the solution will choke. You can see if this is the case by eyeballing the 'net income' or the 'capital' graphs. It will be quite apparent if there is a bridging problem.

To remedy this, you will have to force his net income down, either by putting a smaller net income cap in the first column of the data entry grid (down to age 60/65), or simply smooth and forget amortizing.

Now.... if this person was part of a 2-spouse pair, then when you go to run the second ('richer') spouse and you (of course) 'carry over the net income'. When the 2nd spouse computes it will adjust for the 'choppy' net income from the 1st spouse.

The result will be a smooth net income for the two combined.

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