2023 Financial Goals – May Update
“Life is about accepting the challenges along the way, choosing to keep moving forward, and savoring the journey.” ―
Welcome to our May update for our 2023 Financial Goals.
I hope this year is treating you well so far…
Enjoying the journey
Related to Roy’s quote above, it’s hard to believe I’ve been a DIY investor for 15 years now. I took matters into my own financial hands for many reasons years ago and I would encourage you to consider the same.
Costly financial fees (never to be seen again paid to financial advisors) was just one of many reasons I went the DIY route and never looked back, as Rob Carrick from The Globe and Mail so rightly reminded Canadians yet again (subscription):
“This brings us to fees. The 1.3 per cent fee used in the financial planning guidelines reflects what an investment adviser or planner would charge plus the cost of owning low-cost exchange-traded funds. All-in fees for advisers using mutual funds would be higher – maybe 2 per cent or more in some cases.”
“As for the cost of using an adviser or planner, you need to consider the fee on one hand and the services provided on the other. Your fee can be described as well-earned if you have a financial plan in place, helpful ongoing management of your portfolio and confidence that you’re making progress in reaching your goals.”
I’ll admit, by going it alone, I’ve certainly had a few ups and downs when it comes to my financial journey (link below) – I suppose I wouldn’t be human if I didn’t make a few mistakes along the financial way. But on the flipside, my/our financial path has been very rewarding all the same. We’ve managed to save and invest on our own to some great success, a path that might pay off well for us in the coming years as we consider work on our own terms…
Related Reading: Some of my best personal finance advice is found here.
For years, we’ve established a number of specific personal finance goals on this site to avoid any generic hopes leading to lacklustre results.
In our house, there is always beauty in simplicity – ensuring we don’t make any plans unnecessarily complicated. This has been one our financial keys to success and I hope it will serve us well in the future too.
Our portfolio overview
As a follow-up this reader question a few weeks back, I figured this month’s goal update could highlight our portfolio overview to you with some context.
Mark, I understand you have a few accounts to manage. Are you investing differently in each of those accounts and if so, how?
You are correct, we have a few investment accounts to manage. In no particular order of importance:
- x1 – my defined benefit pension (DB) plan from work (approaching 22 years in at the time of this post). My DB pension is affiliated with some of the largest pension plans in Canada but has a more conservative asset mix, closer to a traditional 60/40 balanced portfolio. If I leave the full-time workforce before age 55, I will be forced with a few decisions including commuting my pension.
Further Reading: Should I take the commuted value of my pension?
- x1 – my wife’s defined contribution (DC) pension plan from work (approaching 21 years contributed). My wife’s DC pension is invested, where possible, in indexed mutual funds in a mix of domestic equities (30%), U.S. and international equities (50%), and a Canadian bond index fund (20%). When she leaves the full-time workforce the value of her DC pension will come with her and move into a LIRA.
- x1 – my Locked-In Retirement Account (LIRA). I’ve owned a few different assets inside this account over the last 20+ years but in recent years I’ve simplified the portfolio as I prepare for semi-retirement.
Further Reading: What is a LIRA, how should you invest in it?
- x2 – RRSPs. We own a mix of Canadian and U.S. dividend stocks, and some low-cost ETFs.
- x2 – TFSAs. We own mostly Canadian dividend paying stocks, and low-cost ETF XAW.
- x2 – taxable accounts. We own just Canadian dividend paying stocks here.
- x1 – corporation account. For now, I’m using this account to build up a bit of a cash wedge approaching semi-retirement.
Further Reading: How much cash should you keep?
A few investing accounts to manage to say the least. And this is where some of our goals fit in…
2023 Financial Goals – May Update
Given we cannot access any DC or DB workplace pension assets for a few years, including anything moved from the workplace to a LIRA until age 55, we’ll need to consider other accounts to drawdown if we want to semi-retire sooner than most.
This means we’ll need to rely on our RRSP assets, taxable investing assets, and potentially TFSA assets (where that makes sense in that order) to fund some income needs and wants. How does this relate to our 2023 Financial Goals??
Let’s find out!
1. Save for our 2024 TFSAs. This goal implies we’re going to try and sock away $13,000 this year during the rest of 2023 assuming contribution room in 2024 is another $6,500 per person. We’ve just started to save that money this spring since we’ve been very busy with these other goals.
2. Reduce our mortgage by $30,000 by the end of this year. By continuing to make our bi-weekly accelerated mortgage payments, and by making the odd lump sum payment, we believe we’ll make a sizeable dent on our mortgage this year – so much so there is likely barely anything left in 2024. As it stands now, our mortgage might even be done in another 11-12 months.
3. Complete the “cash wedge” for semi-retirement. With cash savings between personal and corporate accounts, we hope to accomplish our goal of having 1-years’ worth in cash savings for all basic expenses in place by January 2024. See our modified bucket approach below!
4. Max out contributions to our RRSPs. Ah yes, RRSPs. To lower our taxable income this year while still working full-time AND to earn more tax-deferred growth inside our RRSPs, we need to max out these accounts in 2023. We’re just on the cusp of completing those RRSP contributions now. In fact, this might be the final year we can/we will max contributions to our RRSPs let alone make any contributions to these accounts moving forward with any part-time work on the horizon…so might as well seize it.
2023 Financial Goals – aligns to our early drawdown ideas
Of course there are a myriad of drawdown tactics that can be used to balance short-term and long-term tax efficiency needs, optimize retirement income, let alone fulfill any wealth transfer desires but we believe something like this should work for us if we continue to keep the pedal down on our 2023 financial goals for decades ahead:
- Use a mix of Non-registered (N), RRSPs (R), then TFSAs (T) assets in an NRT draw down order – to smooth out taxation over time while meeting semi-retirement income needs.
- Turn existing workplace pensions into LIRAs into LIFs at age 55 here in Ontario and therefore “unlock” 50% of those assets to the RRSP while turning on more modest LIF income taps at age 55.
- Defer CPP income to at least age 65 or beyond.
Once all debt is gone, I’ve heard from other early retirees that “life really begins” since you’re unshackled from paying other people first. We hope to be there very soon.
In a recent webinar with my partners at TD Direct Investing, I revisited our portfolio bucket approach for income generation while being defensive in semi-retirement including how much cash we intend to keep starting sometime in 2024:
In closing, these remain, very aggressive goals for 2023 with only so much income flowing in and only so much we can save, invest and pay down debt with, let alone live our lives…
But my forecasts tell me such goals of ours remain doable for 2023 because we have largely lived below our means for so long now that this is really business as usual now.
We have four (4) big financial goals to accomplish for 2023 to springboard so potential changes in 2024 so I hope we nail them all of course. I will keep you updated if or when we do.
“Instead of worrying about what you cannot control, shift your energy to what you can create.”