How OpenBook Projections Work

An OpenBook projection is a conditional if-then model, not a prediction. It takes known facts, planning choices, assumptions and current rules, then shows what follows under those conditions. Precision can be useful, but only when the reader understands that the output is conditional.

Assumptions matter. Spending, relatively stable income, flexible assets, taxes, benefits, inflation, fees, investment returns, longevity and timing all interact. Changing one assumption can change the result, which is why OpenBook separates facts, choices, default assumptions, source-sensitive rules and thresholds, outputs and limits.

Projection outputs are explanations, not promises. They help readers compare scenarios and see tradeoffs: current versus future dollars, gross versus net returns, cash flow versus taxable income, and deterministic outputs versus uncertainty. Their value comes from making assumptions visible, not from predicting the future precisely.

Table of contents

1. Introduction
2. What a Projection Is
3. Facts, Inputs, Assumptions, Rules and Outputs
4. Current Dollars, Future Dollars, Nominal Returns and Real Returns
5. Fees and Net Return Assumptions
6. Taxes and Benefits in a Projection
7. What Projection Outputs Mean
8. What Projections Do Not Show
9. When to Revisit a Projection
10. Building a Retirement Projection in OpenBook
11. Final Thoughts
12. Key Takeaways
13. Important Notes

Introduction

Financial projections often produce precise-looking numbers. Precision is not the same as certainty. A year-by-year table can be useful, but it can also mislead if the reader treats the output as a forecast rather than as a scenario under stated assumptions.

A projection is like a map. A good map helps readers understand the landscape and compare possible routes, even though it cannot predict every condition they will encounter along the way.

OpenBook projections should be read as conditional models. They take facts, user choices, default assumptions and current rules, then show what follows if those inputs are applied consistently. The projection is therefore an organized "if this, then that" calculation.

This matters for retirement planning because the important question is rarely one number in isolation. A projection helps show how spending, income sources, taxes, benefits, inflation, investment returns, fees, longevity and timing fit together.

The purpose of this article is to explain how to read an OpenBook projection. It does not describe every formula in every calculator. Instead, it explains what projections show, what they leave out, and how readers should interpret the assumptions behind the result.

What a Projection Is

A projection is a structured calculation that extends a set of inputs into the future. It may show account balances, income sources, withdrawals, taxes, benefit interactions, shortfalls, surpluses or other annual values.

The projection is not a promise that the future will unfold that way. It is a scenario result. If the starting values, assumptions and rules are changed, the output should change as well.

That is why a projection is best used as a comparison and learning tool. A reader can ask what changes when retirement begins earlier, spending is higher, inflation is different, fees are lower, benefits start at another age, or the planning horizon is extended.

The educational value comes from seeing the relationship between assumptions and outcomes. The final number is useful only when the reader understands what produced it.

To understand what produced the result, the next step is to separate what is known, what is chosen, what is assumed and what is calculated.

Facts, Inputs, Assumptions, Rules and Outputs

A projection is easier to interpret when its ingredients are separated. OpenBook should distinguish the following categories whenever possible.

This separation also helps prevent false precision. A precise output based on uncertain assumptions should still be treated as a scenario, not as certainty.

Once those ingredients are separated, the projection also needs to keep its measurement units consistent. Dollar conventions and return conventions determine whether the figures are being compared on the same basis.

Current Dollars, Future Dollars, Nominal Returns and Real Returns

Projection values must use a consistent dollar convention. A spending target expressed in today's dollars is not the same as the same number expressed in future dollars after years of inflation.

Current dollars express amounts in today's purchasing power. Future dollars express amounts in the dollars of a future year. Either approach can be useful, but a projection should label the convention clearly.

Return assumptions also need consistent interpretation. A nominal return is stated before adjusting for inflation. A real return is stated after adjusting for inflation.

For example, a reader may enter a retirement spending target in current dollars and ask the calculator to inflate that spending over time. In that case, the model needs an inflation assumption. If another model asks directly for future-dollar spending, the result should not apply the same inflation adjustment again.

The practical rule is simple: compare like with like. Do not compare a current-dollar spending goal with a future-dollar income value unless the projection explains how the conversion is handled. This is why OpenBook consistently identifies the dollar convention used in each projection, especially when the projection connects back to the Article 0 principle that retirement planning begins with spending.

(Try the Inflation Impact Calculator or Real vs Nominal Return Calculator to test simple dollar-convention and return assumptions.)

Fees and Net Return Assumptions

Investment-return assumptions should show whether they are before or after fees. A gross return is not the same as the return the investor keeps after product, platform, advisory or other investment costs.

A simple fee illustration can make the issue visible. If a projection starts with a 5.5% annual return assumption before fees and uses a 1.0% all-in annual fee assumption, the net return used before considering taxes would be 4.5%.

This example is simplified. Actual fees may include more than one layer, and not every user knows the all-in cost of each account. Still, the projection should disclose whether fees are user-entered, defaulted, excluded or already embedded in the return assumption.

Fees matter because they compound. A small annual difference in net return can change long-term balances, required withdrawals and the apparent sustainability of a retirement scenario.

Taxes and Benefits in a Projection

Taxes and benefits are often where projection outputs are misread. Cash flow, taxable income, tax payable and after-tax spending power are related, but they are not the same figure.

A RRIF withdrawal generally creates taxable income when received. A TFSA withdrawal generally provides cash without creating taxable income. Non-registered investments may generate interest, dividends or capital gains, each with different tax treatment.

Public benefits can also interact with income. Old Age Security may be affected by the OAS recovery tax. GIS and other benefits use their own eligibility and income rules. CPP/QPP and OAS start ages, indexing and tax treatment should be modelled according to each program's rules.

OpenBook tax and benefit outputs should therefore be read as estimates unless the calculator explicitly states otherwise. They do not replace a tax return, benefit adjudication, pension statement or professional review.

The useful question is not only how much tax appears in one year. It is also how taxable income, benefit exposure and after-tax spending power change across the whole scenario.

What Projection Outputs Mean

Projection outputs should be read as a set of connected signals rather than as one isolated answer.

A good projection should make it clear which output is the main answer, which outputs provide evidence, and which assumptions are doing the most work.

What Projections Do Not Show

A projection can be transparent and still incomplete. It cannot know future markets, future tax law, future benefit rules, future health costs, future family circumstances or the exact lifespan of any person.

A deterministic projection may use a steady annual return to show relationships. That does not reproduce the actual path of market returns. If the calculator does not include stress testing or scenario analysis, it should not be read as showing the range of possible outcomes.

A projection may also simplify tax, benefit and account rules. It may omit deductions, credits, province-specific pension details, legal restrictions, account-contract terms, estate outcomes, care needs or other facts that may matter in a particular case.

These limits do not make the projection useless. They define what the projection is for. It helps readers understand assumptions and compare scenarios; it does not decide what is suitable for a specific household.

When to Revisit a Projection

A projection should be updated when the facts or rules behind it change. Common triggers include:

• account balances or debt balances change materially
• spending patterns change
• retirement age or work income assumptions change
• CPP/QPP, OAS, pension or annuity information changes
• tax brackets, credits, RRIF factors, OAS recovery thresholds or benefit rules are updated
• inflation, return or fee assumptions are revised
• market declines or strong market gains change the starting point

household status, province of residence, health costs, housing plans or estate priorities change.

Periodic review is normal. A changed projection does not necessarily mean the earlier projection was wrong. It may simply mean that new information or a different assumption now applies.

Building a Retirement Projection in OpenBook

In practice, an OpenBook retirement projection should start by making the main inputs and assumptions visible: spending target, income sources, account balances, dollar convention, return and fee assumptions, tax and benefit rules, and the time horizon being tested.

(Try the Retirement Calculator to test a simplified retirement projection after reviewing the assumptions.)

The projection should then show calculated outputs in layers: the main result, a compact assumption summary, supporting tables, source status and limits. This keeps the result connected to the model rather than presenting a single number without context.

This section also acts as a bridge to the broader OpenBook retirement library. Article 0 explains retirement income planning as a system; Article 16 explains decumulation; more focused articles address inflation, real and nominal returns, sequence risk, safe withdrawal rates, CPP/QPP and OAS. M01 explains how the projection layer should be read across those topics.

Source Status Labels

The following labels can help readers understand where a projection value comes from.

Final Thoughts

The most useful projection is not the one with the most detailed-looking output. It is the one that helps the reader understand why the result changes when the inputs, assumptions or rules change.

Retirement and financial-planning projections involve many moving parts. Spending, relatively stable income, flexible assets, tax, benefits, inflation, fees, returns, longevity and timing interact continuously, so no single output should be treated as the whole answer.

A projection becomes valuable not because it predicts the future, but because it helps readers understand why different futures are possible. That is why OpenBook projections should be read as transparent comparison tools: they make assumptions visible, show tradeoffs and allow scenarios to be compared without pretending to provide certainty.

Key Takeaways

• An OpenBook projection is a conditional model, not a prediction.
• The output is based on the facts, choices, assumptions and rules shown.
• Current dollars, future dollars, nominal returns and real returns must be labelled consistently.
• Gross returns and net returns are different when fees are considered.
• Cash flow, taxable income and after-tax spending power are not the same measure.
• Tax and benefit outputs are estimates unless a calculator states otherwise.
• A deterministic projection can show relationships even if it does not simulate every market path.
• The assumptions behind a projection often matter more than the final number.
• A projection should be revisited when facts, rules, markets or household circumstances change.

Important Notes

This article is educational only. It does not provide financial, tax, legal, accounting, investment, retirement, pension or other professional advice.

Projection results depend on user-entered values, default assumptions, source data, simplifications and the way each field is interpreted.

A projection may omit facts, rules, exceptions, elections, fees, account terms, benefit interactions or personal circumstances that could be material in a specific situation.

Tax, benefit, pension and account rules can change. Source-sensitive values should be confirmed against current official or authoritative sources before publication and during scheduled reviews.

Examples are simplified to explain mechanics. They are not recommendations and do not determine any person's tax result, benefit entitlement, investment outcome or retirement decision.