2018 Financial Goals – October Update
Where does the time go…?
I just looked at the calendar and I can’t believe it’s been five months since our last goals update. Geez.
Now, before we review our progress to our 2018 goals we have as a reminder to you just two major financial milestones to reach before our semi-retirement begins:
- Be debt-free, and
- Own a $1 million investment portfolio to spend in semi-retirement.
To the outsider, these might seem like insurmountable goals. The truth is, they probably are – unless we break down these monster milestones into more manageable chunks.
That’s been our game plan over the last 10 year: breaking big goals into smaller component parts that we can steady achieve. That equates to paying down debt bi-weekly while saving and investing – trying to do these simple things really well over time.
On that theme, here’s a recap of 2018 financial goals and what we have achieved:
- maximizing contributions to our TFSAs (for long-term dividend income and growth), and
- killing debt.
October Updates
Goal #1 has long since been accomplished. In January 2018 we decided to maximize contributions to our Tax Free Savings Accounts (TFSAs). If you don’t already know, there are many great things you can do with your TFSA here! What did I invest in back in January? I decided to buy more Canadian dividend paying stocks including some of the ones I said I would in this post here (utility stocks) and here (bank stocks).
Our TFSAs are now fully maxed out. Based on recent calculations the investments inside those accounts now churn out close to $8,000 in (tax-free) dividend income per each year. Recent dividend increases by the companies we own (like Fortis) definitely help. Dividends are nice but we don’t dare touch this money now though – investments should continue to grow inside our TFSAs to help cover future retirement spending needs when we’re no longer working.
With 2019 TFSA contribution room looming, we’ve managed to save a good portion of money for January 2019. I don’t know if we’ll have $11,000 ready to maximize contributions again to both accounts in a few months but it would certainly be nice if we did! We’ve got other priorities. So let’s go to Goal #2.
Regarding Goal #2 we are actively paying down debt. We took on some debt to make a down payment as part of this final housing dilemma decision but we believe this was the best decision for us as it relates to our near-future semi-retirement lifestyle. This move back to downtown Ottawa was certainly not a financial decision. This move is costing us tens of thousands of dollars. But this was very much a lifestyle decision. I do however believe our condo will appreciate in value over time. How much? I don’t really know and I don’t worry about it. We need a place to live and that’s primarily what our condo will be for.
At the time of this post, our mortgage debt is still in the 6-figures and it bothers me to a degree that it is. We could have been debt free sooner had we done some things differently in life. Then again, live and learn and you gotta live in the first place. Case in point: I’m currently writing this post from Whistler Village where we’ve spent the last few nights. It’s great to travel to appreciate what you’ve worked so hard to enjoy…
Whistler Village October 2018
Joffre Mountain Hike October 16, 2018. Not quite to the top of that (!) but our elevation today was ~ 5,000 feet or 1,600 m.
So, we’ll continue doing what we’re doing…pay down debt each month via bi-weekly accelerated payments, save and invest, and have some fun. Goals are great but the journey is best part.
That’s it for now. I’ll provide more details on our debt management plan and any plans we have to maximize TFSA contributions early in 2019 in the months to come.
How are you doing with your financial goals this year? Did you set any?
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Good article cannew. I read it before and I agree!
Mark, I’m not sold on its “always a no brainer” to max TFSA first before RRSP to 100K. A higher income person should consider future retirement income first, such as someone earning 80-100k. Most people will not have anywhere near that individual income in retirement. Based on anything I’ve seen if it is expected and actually is lower the RRSP will come out ahead, barring other factors such as very low retirement income w/GIS etc They are equal at the same retirement income. Make the RRSP contribution and use your refund for your TFSA. You won’t go “wrong” making the TFSA first priority, but it isn’t necessarily your best option if choosing one.
https://www.finiki.org/wiki/TFSAs_versus_RRSPs#Comparison_using_the_net_RRSP_contribution
Good luck on your 6K x 2 savings!
As a retiree I do RRSP/LIF withdrawals and use this to make TFSA contributions all at lower tax rates than when working, since my income is considerably less, even from 25 years ago. No doubt others are doing the same.
Hey Lloyd, I think that’s a safe bet on the 6K. It’s been a few years with 5.5K and a huge knockdown from 10K. Libs will want all the political capital they can get to win again.
I think it’s a no brainer to max out all your RRSP, TFSA, RESP. But of course, I do realize I am very lucky to be able to do this without struggle year after year.
Very fortunate indeed. You’re doing very well!!
Having all those options is a good thing for people now.
Very lucky and well done May – keep it up!
I dunno, we might need to agree to disagree. I think the TFSA is a gift to all Canadians and assuming, big assumption, all Canadians have the discipline to not touch TFSA savings/investments over time then I believe that account should be maxed out first.
Then, and most families with 2 parents or partners making $80k+ should have money leftover, should be contributing to their RRSPs as much as possible to ensure long-term, the tax differential works in their benefit.
True, most people will not have anywhere near that individual income in retirement ($80k per year) but they won’t need that much anyhow. Likely 50-60% of that in retirement is plenty when you factor in CPP and OAS.
I’m not against higher income earners focusing on their RRSP vs. TFSA however I believe the TFSA is simply a given for all Canadians and they should leverage it to the extent possible. That choice is just that much easier for anyone making north of $80k per year.
I’m going to fall back on the “it depends” argument when it comes to TFSA v. RRSP. One has to be cognizant of a lot of factors and most of them would be personal to *know* which path to take.
Having said that, as a rule of thumb, if a person is in a financial position where they have to choose one or the other, they are likely in an income bracket that would lean towards TFSA. If they are in a tax bracket that would be conducive to RRSPs they likely have the assets to do both anyways and as my buddy Joey says it’s all moo.
I was writing as you replied.
Yeah, at the end of the day your second paragraph pretty much nails it and give your buddy Joey a cigar.
Ya, we cross posted. I don’t think Joey smokes.
https://www.youtube.com/watch?v=iObtPBh3NXs
haha, that explains it.
Lol, we usually do agree but perhaps we will agree to disagree on this. Although, maybe we’re closer than we think with your last sentence though!
My statement was based on credibly presented analysis with more than one source. Perhaps you have seen something that refutes this.
ie TFSA it’s not “always a no brainer to max the TFSA first”; namely at the higher income levels I referred to. I believe the correct answer is like most things in investing – “it depends” (numerous factors). If I was employed at higher income I’d make sure I had my RRSP maxed, utilize refund amount for TFSA next (didn’t have this choice at the time), since I would expect I’d be in a lower income bracket than working. (as I am now) If I missed the TFSA I’d be further ahead financially (, with ability to save in TFSA / catch up missed limits all at lower retirement tax rates. For now it works but can’t be sure 20 years from now.
Maybe a clue to why we differ is in what you said. “TFSA is a gift.” I don’t see either of them as gifts or one more so than the other (wihtout considering factors). I’d classify an employer pension contribution portion a gift. I have no bias to either and utilize both as you do. They’re simply investing and saving opportunities that each have pros/cons with either the same or possible different outcomes based on individual incomes/circumstances/investment types, and long term savings discipline with the individual. The majority of people seem to favour the TFSA probably because it feels better watching growth and not expecting to pay tax on it. And there don’t seem to be people spreading misinformation/ govt. conspiracy theories on it like a few on RRSPs. lol
Ultimately one knows for sure what will happen with either of these, rules, changes or with taxes etc in future. And people that can capitalize on both or at least whichever makes the most sense for them will be well served, and less of a future burden on society.
I guess I just feel that the TFSA should be low-hanging fruit for any high-income earner, and the residual should be to max out the RRSP thereafter.
“Ultimately one knows for sure what will happen with either of these, rules, changes or with taxes etc in future.” – this is where I think it makes sense to max out the TFSA now since rules will eventually come in to alter this moreso than the RRSP. My fear at least 🙁
I just see it in the reverse order because the higher income person is likely to have max benefit with RRSP ie lower taxes (currently) in retirement. If you make bigger bucks – capture your RRSP refund (ideally reduce at source deductions) and you’re done for your TFSA contribution! However like Lloyds friend said it really doesn’t matter for most of those higher income folks that are going to max both somehow. You do, I did/do, others on here do etc.
Any possible rules changes for TFSA would be forward on, if and whenever they happen. Available contribution room is never going to be taken away, otherwise they’d have to claw back others. Not going to happen! ie no reason to worry about staying up to current on contributions other than to max compounding benefit.
My biggest fear is governments keep running big deficits, rates/debt cost go way higher, public keeps demanding more social services, seniors health care keeps spiraling out of control = all taxes go higher and reduce benefit of RRSPs and likely unregistered accts for cap gains inclusion & eligible dividends, finally possible negative changes in TFSAs. However we can only plan now for what we know now, not what “might” be bad scenario, or not.
I’ll bet you a cold one they tweak TFSA rules (hopefully with higher contribution room over time, that’s a given) via various changes before the RRSP. But yes, re: higher income, I know and see your points!
I agree. Limit changes are a given and maybe larger one for TFSA if the conservatives ever get in power again. I suspect TFSA changes may relate to things like qualifying as income for other benefits like GIS. I support GIS tweaks that take into account other assets/income to ONLY direct it to the truly needy, and provide even higher benefits.
Other major countries like US (Roth IRA) & Britain had equivalent of TFSA before us, but I haven’t done any research on details of them to see if there might be some clues for future CDN changes.
So I can’t take the bet but it’s one I wouldn’t mind losing to you anyhow. Anytime I can buy you a cold one you’re on!
I’d bet a large double/double AND a donut that the TFSA limit for 2019 will be $6K and that is what I’m budgeting (figuratively speaking) for. Logically, there really isn’t much upside for the Liberals to increase it beyond that so I don’t believe there will be any other changes in that program until after the 2019 election. If, I say again IF, there is another Liberal majority (no bets on that), I’d not be surprised to see some tinkering take place. The TFSA is an extremely beneficial program to citizens and not so beneficial to government revenues.
$6k per account would be great Lloyd….now I really need to start saving!
Keep it going Mark!
There is an interesting article by John De Goey suggesting TFSA should max at $8,500 and I agree with his reasoning.
https://www.moneysense.ca/save/investing/tfsa/why-its-time-to-raise-the-tfsa-limit-to-8500/
That’s why I actually liked the move to $10k a couple of years ago. “For those doing the math in their heads, I’ll spare you the trouble: 18% of $46,600 is $8,388. In keeping with the principle of moving in $500 increments, I’d like to propose that the TFSA limit be moved to $8,500 and indexed to the middle class tax bracket (in $500 increments) going forward.”
This way, it’s a no-brainer for folks earning under $100,000 to always max out their TFSAs and then with any money leftover they could contribute to the RRSP, kids’ RESPs, etc. That approach would work for the majority of all adult Canadians. Alas, what do I know.
Nice pictures! I’m sure it was a great trip.
Kudos on #1; good luck with the #2 goal.
MG, you may be right especially since it will be an election year.
Great trip overall. Beautiful weather here. Very lucky.
Excellent.
Long story but finally got my outlook email working 5 days down, after about 3-4 hrs with MS!
Hope you keep getting some good weather Mark. September and early October were really awful here in BC (most unusual), finally some sunshine for days on end where I live in the Okanagan.
Me too Barbara. We were in the Okanagan a couple of years ago. Spent 4-5 days touring the valley and staying in Kelowna. Beautiful part of Canada.
Well done Mark!
The journey is definitely important. We also maxed out our TFSA (and RRSP). It’s a great feeling.
Awesome work DE. You’ve done exceptionally well with your portfolio to date.
Hi Mark,
Keep up the good work. There is a rumor you might actually need $12K for your TFSAs next year – let’s keep our fingers crossed for that!
Cheers,
MG
I hope you’re right MG. I will try and find that $1k or so in the coming year amidst my debt repayments.