Can I retire and still leave $500,000 to my kids?
That was Carrie’s biggest concern as she headed into retirement. She was 65 with $1.5 million saved, but before we ran a single number, I asked her one question: why $500,000?
She grew up with very little and remembered the financial pressure her parents lived with. She wanted her kids to have the help her parents could never give her. That mattered to her, so we built her retirement plan around it.
What we found was that Carrie could retire and leave $500,000 behind. But the most important part of this story wasn’t the math. It was a conversation she hadn’t had yet.
Start With the Retirement Carrie Could Afford
Before protecting an inheritance, we needed a baseline. What could Carrie spend if leaving an estate wasn’t a requirement?
Her $1.5 million portfolio was split between $1 million in an RRSP, $175,000 in a TFSA and $325,000 in a non-registered account. She had already started CPP at 60 and was receiving $1,046 per month. OAS, which she started at 65, was paying just over $750 per month.
That gave her a little over $21,000 a year from CPP and OAS. The rest of her retirement income had to come from her investments.
There was another challenge: Carrie didn’t really know what she spent. While she was working, her salary comfortably covered her lifestyle, so she had never tracked it closely.
Instead of guessing, we worked backwards. Her one fixed cost was $2,500 per month in rent. We then tested another $5,300 per month for groceries, transportation, travel and everything else.
That put total spending at $7,800 per month, or just over $93,000 per year, increasing with inflation.
Using age 90 as the planning horizon, that version of the plan was 100% funded, but with essentially nothing left at the end. I wouldn’t be comfortable treating that as the final plan because there isn’t much room if she lives longer than 90. It was simply our baseline.
Why Her $1 Million RRSP Changed the Withdrawal Strategy
Two-thirds of Carrie’s savings were in her RRSP. That matters because RRSP withdrawals are taxable, while TFSA withdrawals are generally tax-free.
It also matters for her estate. Carrie is single, so there isn’t a spouse or common-law partner to receive a tax-deferred rollover. Generally, the fair market value remaining in an RRSP or RRIF at death is included in income on the final return, subject to specific exceptions. The CRA explains the rules for RRSPs at death here.
So rather than automatically spending the TFSA first, we planned to draw roughly $60,000 per year from her RRSP, with the rest of her cash flow coming from CPP, OAS and her non-registered account. Under our assumptions, the RRSP or RRIF would be depleted in her late 80s while the TFSA stayed invested longer.
We tested the opposite approach too. If Carrie spent the TFSA first, the plan ran out of money at age 88 instead of 90. That’s a two-year difference simply from changing the order of withdrawals.
This doesn’t mean everyone should withdraw from their RRSP first. The right sequence depends on your income, taxes, account balances and goals. We’ve looked at this in more detail in our article on how to optimize RRSP withdrawals in retirement.
What Does Leaving $500,000 Actually Cost?
Now we added Carrie’s real goal: she wanted at least $500,000 remaining at age 90.
Her $2,500 monthly rent stayed the same. To preserve the $500,000 estate, her other spending needed to fall from $5,300 to $4,740 per month.
That’s a reduction of $560 per month, or about $6,700 per year. Put another way, leaving $500,000 behind cost Carrie roughly $18 a day in spending.
So the answer to her original question was yes. Based on the assumptions in her plan, she could retire at 65 with $1.5 million and still leave $500,000 to her kids.
But once we knew she could do it, a more important question came up: should she?
Then Carrie Talked to Her Kids
A retirement plan can show you what’s possible. It can’t tell you what the people in your life actually want.
Before committing to the $500,000 estate goal, Carrie talked to her two adult children. She explained why leaving the money mattered so much to her and what she would be giving up each month to preserve it.
Their answer changed the plan.
Both were in their early 30s and established in their careers. Carrie had already helped them with school and getting started. They would rather see her enjoy retirement than deliberately hold back spending so they could receive a larger cheque decades later.
If there was money left later, great. But they didn’t need her retirement built around an arbitrary inheritance target.
The Third Plan Gave Carrie More Room to Live
We went back to the numbers one more time.
I still didn’t want to take her spending all the way back to $7,800 per month because that original version used essentially everything by age 90. Instead, we settled on $5,100 per month for expenses outside of rent, plus her $2,500 monthly rent.
Compared with the $500,000 inheritance plan, that gave Carrie about $360 more each month, or roughly $4,300 more per year.
And she still had a buffer of about $200,000 at age 90. That could become an estate, or it could continue funding her lifestyle to roughly age 92 under the assumptions we used.
Most importantly, Carrie knew what she wanted to do with the extra room. She planned a family trip to Aruba with her kids, their spouses and her grandkids.
She grew up in a home where a trip like that wasn’t possible. Now she could be the person who made it happen for her family, while she was there to enjoy it with them.
Your Estate Goal Should Be Part of the Retirement Plan
The lesson isn’t that you shouldn’t leave money to your kids. For some people, leaving a specific inheritance is one of their most important goals.
The point is to understand the trade-off.
How much does preserving that estate reduce your spending today? Does your withdrawal strategy support the goal efficiently? Are you holding back money your family would rather see you use together now?
Those are planning questions, not just investment questions. Our Atlas System is designed to coordinate retirement income, investments, taxes and legacy decisions so you can see how one choice affects the rest before you make it.
Carrie’s numbers are specific to her circumstances and the assumptions used in her plan. Your sustainable spending, withdrawal order and estate outcome will depend on your own accounts, income, tax situation, investment returns, inflation and longevity.
