Retirement Planning: Testing the TD Retirement Savings Calculator

As I mentioned in Testing the Canadian Government Retirement Income Calculator, I’ve been curious about how close we are to having enough saved for retirement. Could we step down from high-paying but highly stressful jobs without ruining our retirement? What if we had no choice and the next round of layoffs put us in “early retirement?” The Service Canada calculator said we’d be ok with what we have saved already IF we could earn enough between now and 65 to pay all of our bills during that period. What about other estimates though? The next online program I reviewed and used to test our finances was the TD Retirement Savings Calculator.

Will TD be Phoning Me Trying to Sell Me High Expense Mutual Funds If I Use Their Calculator?

A tiny bit to my surprise, TD doesn’t try to capture any personal information about who is using their calculator. They don’t specifically ask you for your name or telephone number or who you bank with. And it’s been a week since I used the calculator and no strange messages have appeared in my email or voicemail, so I guess I’m safe.

What You’ll Need to Know Before Using the TD Retirement Savings Calculator

• Your age
• When you plan to retire
• How long you expect to live in retirement (this is a value that can be increased on the final screen)
• What income you require in retirement
  This is a number most of these calculators want you to know. I took a crack at calculating our requirements by back-calculating our spending from our bank accounts as I mentioned in another article.
• Your current RRSP savings, including your personal RRSP/s, any spousal RRSP/s where you received the money from your spouse, any defined contribution pension plans or group RRSPs from work
• How much you plan to contribute to your RRSPs both personal and work, or what you expect to have contributed to your spousal by your partner
• Your current TFSA and non-registered savings for retirement (note you shouldn’t include money your saving for other things like a new car, home upgrades, your children’s education, a vacation etc.)
• How much you plan to contribute to these other types of retirement savings.
• What you estimate your annual rate of return will be for your investments including your RRSPs, TFSA, work RRSP or defined contribution plan, and non-registered savings. This is supposed to be just one number for everything.

My Review of the TD Retirement Savings Calculator

Overall I didn’t particularly like this calculator. It doesn’t clearly state its assumptions and it doesn’t clearly define what you should type in to the program.

The program doesn’t state whether the income you require in retirement should be entered in before tax or after tax values. Judging by how little it said we needed to retire, I think you should enter the amount you need before income tax to get a realistic result.

It doesn’t tell you what rate of income tax it is using, if any.

It doesn’t tell you what rate of inflation it is using, if any.

It doesn’t tell you whether it is assuming you will get CPP and OAS and if so at what rate. It doesn’t make it clear whether you should enter income from a defined benefit pension plan in the “If you expect to receive additional income after you retire, please enter it:” field. I suspect you may be supposed to enter all of these types of pensions in this field but it would be nice if it would say so clearly.

It doesn’t seem likely that it is handling taxes properly. For example, it wants you to report how much you  have saved for retirement in non-registered investments and in TFSAs in one total. This isn’t realistic as you could have a stock worth $20 000 that you bought for $10 000. If it’s in the TFSA, when you withdraw the $20 000 you pay no tax. If it’s in a non-registered investment account, when you withdraw it, you have to include the capital gain (currently 50% of $10 000) on your income tax for that year and possibly pay tax on that capital gain, reducing the value of your $20 000 withdrawal.

It doesn’t allow you to select a different rate of return for your RRSP, defined contribution or group RRSP, TFSA, and non-registered investment accounts. You have to come up with some sort of weighted average yourself for what you expect to make across all of your accounts. (I made it easy on myself by choosing the lowest possible percentage. But if you don’t have much saved yet that could be a very depressing, though possibly realistic, way to estimate your retirement!)

It doesn’t allow you to report a different source of other income during different years of retirement, like the Service Canada calculator. This makes it difficult to correctly enter the situation where you  might receive a “bridge benefit” from 55-65 which then ceases when you begin to receive CPP and OAS, or when you might plan to work part time from 65-70 but then stop working entirely.

I also didn’t like the fact that it limited me to living 35 years after retiring at age 65.

Estimating Your Canada Pension Plan Payments and OAS Payments

I discussed how to estimate CPP and OAS payment briefly in the review of the Service Canada Retirement Income calculator.

What Assumptions Does the TD Retirement Savings Calculator Use?

I wish I knew! They don’t clearly list their assumptions.

How to Use the TD Retirement Savings Calculator

1. Go to: http://retirement-calculator.tdcanadatrust.com/
2. Click on the Get Started button.

The About You section

The Tell us about yourself: screen

1. In the appropriate fields, type in your
   • age
   • age at retirement
   • annual income before taxes
     (or select monthly from the drop-down list and type your monthly gross income.)
2. Click on the Next button.

The Retirement Plan section

1. In the appropriate fields, type in
   • how many years of retirement you are saving for
     (The maximum is 35.)
   • what income you will want (monthly or annually) in retirement
     I ended up entering our before tax income required not including CPP and OAS.
   • what extra income you expect to receive in retirement such as rental or employment income
2. Click on the Next button.

The Savings and Investments Section

1. In the appropriate fields, type in
   • how much you have saved in your RRSP accounts so far
     According to their What should I include? include the amount saved in any RRSPs, spousal RRSPs (where you are the spouse who received the RRSP), LIRAs, defined contribution pension plans, and Group/Work RRSPs.
   • how much you contribute regularly to your RRSPs including your work ones, either monthly or annually
   • how much you have saved for retirement in TFSAs and non-registered investment accounts
   • how much you contribute regularly to these other savings accounts, either monthly or annually
2. Click on the Next button.

The Rate of Return Section

1. In the % estimated annual return field, type in how much you expect to earn on your investments annually.
   The lowest you can select is 1%. The highest is 10%.
2. Click on the Results button.

The Results Section
The program will tell you what your retirement savings goal is, based on your expected retirement income needs, current savings, future contributions to savings, and estimated longevity in retirement.

It will also tell you what your projected total savings will be.

If applicable, it will tell you how much you still need to save.

Don’t just close your session yet, though! You can now adjust some values more than you were permitted on the original screens.

There are four expandable lists:

• How much I save
• How much I spend
• How long I’m in retirement
• How quickly my savings grow

These allow you to change some of the information you entered without going back through all of the screens.

What Did TD Say About Our Joint Retirement Income?

Well it depends. If we put in the income we needed in retirement (after OAS and CPP) and we assumed it was an after-tax number, it said we are over-funded for retirement, just using our RRSP and work DC pension savings.

If, however, we put in a larger income needed in retirement in case the program expects a before-tax number, it said we would need to use our TFSAs and some of our non-registered savings to be funded for retirement.

So it agreed with the Service Canada calculator that said if we stopped saving for retirement now, and made sure we didn’t incur any debts between now and retirement, we’d be ok in retirement.

But do I trust it?

No. They don’t state many very important assumptions. I want another opinion!

I’d better test the same numbers with some other calculators. And although it’s nice of them to offer, I don’t think I’ll call TD to discuss how to reach our retirement savings goal.
In the meantime, we’ll keep saving.

Related Reading

• Retirement Planning: How Much Do We Really Spend Now and How Much Will We Spend Then?
• Retirement Planning Testing the Service Canada Retirement Income Calculator

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Have you ever checked whether you’re on track for retirement? Or do you only need to look at your credit card statements to know that you’re not? Please share your views with a comment.