Financial tool helps find optimal retirement drawdown strategy

Planning software promises a comprehensive and easy-to-use solution to optimize decumulation

Financial tool helps find optimal retirement drawdown strategy

A retirement-planning software package, developed by a 40-year veteran of the financial industry, promises to help retirees time and optimize drawdowns from multiple income sources as they enter the decumulation phase.

Canadian retirees rely on up to 26 distinct sources of income including registered and non-registered investment accounts, employer and government pensions, annuities, and business income. Because of implications from tax brackets, benefits clawbacks, and other factors affecting some or all sources, simply maximizing each stream won’t yield the best strategy.

To address the problem, Ian Moyer of Ian C. Moyer Insurance Agency Inc hired a computer programmer and created a software package called Cascades. As noted in the Financial Post, the package is available to financial advisors for $1,000 a year, while DIY investors can negotiate prices directly.

Using the software directly, Financial Independence Hub founder Jonathan Chevreau said inputting the information took half an hour, assuming all the information needed is available. That includes names, birth dates, income and savings from CPP, OAS, and pensions in “today’s dollars” based on present values at 2% annual inflation.

The results, mostly software-generated and adjusted by humans as necessary, are provided by Moyer and his team the next day. They include income snapshots at various ages, broken down by income source, as well as projections of disposable income and taxes payable, along with a net worth statement.

“Projected rates of return vary from a Conservative 4 per cent (based on 70 per cent fixed income to 30 per cent equity), to a Moderate 5 per cent (60/40 asset allocation), 6 per cent Growth (40/60) and 7 per cent Aggressive (30/70),” Chevreau noted. “Asset allocation will affect tax rates for non-registered portfolios.”

He said Cascades’ ultimate objective is the “winning strategy,” which would provide clients with the highest estate value, net of taxes and fees, at the expected life expectancy.

“All in all, a valuable tool, and one that if deployed while still contemplating imminent retirement or semi-retirement could well influence the timing of several key decisions,” Chevreau said.