How the world’s best financial plans are made


When you come to Planswell, you answer several questions and then see your plan. What you don’t see are the millions of calculations we make in the background to optimize your investments, insurance and borrowing for your goals.

These calculations are based on two types of variables:

  1. Facts that we know, such as your age and income.
  2. Estimates that we must make, such as how much the cost of living will rise in the future and what the tax rates will be when you retire.

Until recently, financial planners would take a mix of facts and estimates and build a plan for the rest of your life. The problem with this approach is that the facts will change and at least some of the estimates will turn out to be wrong. The difference with Planswell is that we enable you to quickly update your plan whenever you want. We recommend twice a year. These small but regular adjustments greatly improve the chance of reaching your goals.


No adjustments  
Regular adjustments  

This document will give you insight into the facts and estimates that we use to create your financial plan. If you have any questions – or even ideas to make your financial plan better – we would love to hear from you.  

The basics  

Every plan is unique but there are certain basic assumptions that apply to just about every-one. Here the major ones.


VariableReference / rationale
Annual return on investmentConservative: 3.91% Conservative growth: 4.34% Moderate growth: 4.67% Growth: 5.24% Maximum Growth: 5.63%Your investor profile determines the rate of return you can expect. More risk generally means more return. We use estimates based on FPSC guidelines and subtracting a 0.50% investment management fee.
Annual inflation rate1.83%25 Year Historical Average for Canada’s CPI
Wage growth rateEqual to inflation (1.83%)Industry standard
Savings rateEqual to inflation (1.83%)We expect that you can increase your savings along with your income.
Income tax bracketsIndexed to inflationGovernment of Canada
Living expensesIndexed to inflationWe expect that your living expenses will increase with the cost of living.
Life expectancy90 years oldIndustry standard
Emergency fund3 months of incomeIndustry standard
CPP and OAS contribution and benefit amountsBased on 2017 figuresGovernment of Canada
OAS limit growthIndexed to inflationGovernment of Canada
OAS clawback thresholdIndexed to inflationGovernment of Canada
OAS timing and eligibility61.5% of maximumConservative estimate
Yearly maximum pensionable earnings limitBased on Canadian aggregate wage growth dataStatistics Canada
CPP payment amount61.5% of maximum2017 Canadian average via Stats Canada
CPP payment amount growthIndexed to inflationGovernment of Canada
CPP timingPayments start at retirement (between ages 60 and 70)Government of Canada
Early CPP reduction or late CPP enhancementRemains constant over timeGovernment of Canada
Payroll deductionsCPP and EI deductedWe assume that you are an employee with standard payroll deductions based on current rates.
Home value appreciation3% per yearConservative estimate
Home equityAbility to access up to 50% in retirementWe assume that you can use a line of credit or other means to access your home equity in retirement.
Home sale costs6% in commissions and other costsYou may have a home that will be sold as part of your estate value calculation.

Investing for retirement  

Your investor profile sets your overall limits for risk and return. Our portfolio manager, Higgins Investment Group Inc. operating as Planswell Portfolios, will ask a series of questions to understand what you expect from your investments and how much risk is appropriate for you to take. This information is used to recommend your ideal investment portfolio. In addition, your plan is designed to minimize your overall tax bill. One of the ways we can do that is by determining the best timing and amount when you invest in a Registered Retirement Savings Plan (RRSP), Tax-Free Savings Plan (TFSA), or taxable (non-registered) account. We make these determinations based on your current tax rate and estimated future tax rate.


VariableReference / rationale
RRSP contribution limit$25,370 or 18% of income, increasing annuallyGovernment of Canada
RRSP contribution limit growth rateIndexed to inflationGovernment of Canada
RRSP First Time Homebuyer’s Plan allowance$25,000Government of Canada
RRSP tax refundsWe assume that these will be reinvested in the planDesigned to maximize potential investment growth
RRSP withholding tax rate30%Government of Canada
TFSA contribution limit$5,500Government of Canada
RRIF minimum withdrawalBased on current ratesGovernment of Canada
Order of withdrawal in retirementRRIF minimum first, then TFSA, then non-registered accountDesigned for tax minimization
Target retirement income70% of current living expensesLiving expenses tend to fall in retirement as you will generally have less debt and fewer dependents.
Retirement income amount displayed in planEstimated monthly after-tax income expressed in today’s dollarsMonthly after-tax income is the most intuitive way to compare your income today to your income in retirement.

Investing for a child’s education  

Whether you’re investing for school or retirement, the main principles remain the same. However, when saving for a child’s education, our portfolio manager, Higgins Investment Group Inc. operating as Planswell Portfolios, will help you maximize available government grants and automatically apply them to your Registered Education Savings Plan (RESP).


VariableReference / rationale
Post-secondary education timingAge 18Industry standard
Annual RESP contribution$2,500This amount maximizes the Canada Education Savings Grant (CESG).
Maximum Canada Education Savings Grant20% of contributions up to $500 per beneficiary annually and $7,200 per beneficiary lifetimeGovernment of Canada
Maximum lifetime RESP contribution$36,000Although the legal limit is $50,000, you get the maximum CESG when you reach $36,000 in total contributions.
Canada Learning BondNot included in RESP calculationThis benefit is available only to certain lower-income families.

Protecting your income  

The role of insurance is to replace the income that would be lost if you or someone in your family were no longer able to work. The goal is to make sure that, even if there is a negative health event, you and your family will not suffer a lower standard of living now or in retirement. If you are over age 60, we will not automatically recommend insurance as part of your plan, but will discuss your needs with you on an individual basis.

Your plan may include three types of insurance:

Term Life Insurance pays a tax-free lump sum if the insured person passes away. We design your plan with the expectation that this amount will be invested according to the risk tolerance of the surviving spouse in order to produce ongoing income.

Critical Illness Insurance pays a tax-free lump sum if you are diagnosed with one of several common illnesses including cancer and heart disease. This amount is designed to cover lost income as well as a variety of medical expenses that are not covered by public health plans.

Disability Insurance pays a monthly tax-free benefit if you become temporarily or permanently disabled and cannot work at your current occupation. Studies show that an accident or illness will cause about one person in three to be disabled for 90 days or more in their lifetime.


VariableReference / rationale
Life insurance income replacement100% of after tax income + all outstanding liabilitiesWe recommend enough coverage to maintain a certain percentage of your current household income up until the retirement of the surviving spouse. We expect that the survivor will continue to work and earn the same income they do today.
Life insurance debt coverageCoverage amount designed to pay off all outstanding debtsIndustry standard
Critical illness insurance100% of annual after-tax IncomeIndustry standard
Disability insurance65% of pre-tax income replacement until age 65Industry standard

Managing your debt  

At Planswell, our goal is to prevent you from paying unnecessary interest costs. That’s why we’ll recommend ways to minimize your debt costs while you invest, or even before you can start investing.

Here are the three main debt solutions that may be included in your plan:

Refinance your debt. If you have credit cards, loans, lines of credit, or other debts and also have home equity of 20% or more, we may advise you to pay off your debts with a new home mortgage in order to free up free up cash flow for investing and insurance.

Pay down your debt and invest at the same time. If you have debt with an interest rate lower than your expected investment returns, we may advise you to work on paying it off while also adding to your investments.

Pay down your debt before investing. If you have high-interest debts that cannot be refinanced, we will advise you to work on paying them off, starting with the highest interest rate first. Once this is done, we’ll get your investments started.


VariableReference / rationale
Credit card interest rate19.99% per year compounded monthlyFinancial Planning Standards Council Guidelines
Car loan interest rate5% per year compounded monthlyFinancial Planning Standards Council Guidelines
Line of credit interest rate5% per year compounded monthly5% per year compounded monthly
Other debt interest rate5% per year compounded monthly5% per year compounded monthly
Mortgage interest rate3% per year compounded semi-annuallyIndustry Standard
Maximum debt to service ratio44%Industry Standard
Maximum home loan to value (LTV)80%Industry Standard
Amortization periodUp to 30 yearsIndustry Standard
Fee to break existing mortgageThree months’ interest for variable rate mortgagesIndustry Standard

Reaching your goals  

The world’s best financial plan is the one that actually gets you to your goals. That’s why we’ll ask you to log in to your Planswell dashboard every six months and spend a few minutes updating your plan. This will help make sure that your plan reflects the most up-to-date facts and estimates ,and that you have the best possible picture of where you’re heading financially.


VariableReference / rationale
Plan update intervalEvery six monthsThis is the key to reaching your goals!
This document is regularly revised in response to many factors – from changing market conditions to tax law updates and the real-life situations of clients like you.
If you have any questions or would like to suggest ways to improve your plan, please let us know. [email protected]