2023 Financial Goals – September Update
“Enjoy your journey as much as the destination.” – adapted from Marshall Sylver.
Welcome to our September update for our 2023 Financial Goals.
Enjoying the journey
Related to the quote above, I/we try and stay focused on our financial journey because there is a lot of calamity and drama that could weigh us down otherwise. Lots of financial news of late that is very much doom-and-gloom. For the most part, we try and tune-out the noise.
We focus on what we can do, things within our control.
I do my best to avoid financial worry beyond my sphere of control or influence.
On Debt
I shared in a previous post on my site and on Twitter/X we’re close to paying off our mortgage.
Good timing.
With interest rates now normalized per se, historically speaking, looking back before the pandemic when money was dirt-cheap for many years we are happy that we killed some debt. More money paid down then has meant less money owed on the books today…
Source: https://wowa.ca/
Making our final push to kill off the mortgage is a goal in 2023.
On Investing
As far as I can remember, in running this site and sharing our journey (the good, the bad, and the indifferent!), we’ve been busy investing while the mortgage debt was coming down.
The definitive answer to paying down your mortgage or investing
As fall arrives, and reconciliation of our 2023 goals comes into focus, I’m thankful we’ve made contributions to our RRSPs this year to lower our taxable income this year while still working full-time AND to earn more tax-deferred growth inside our RRSPs for any future retirement drawdowns.
Like other semi-retirees or retirees have shared with me, based on their experiences, it makes sense to me as we approach semi-retirement to focus on maxing out our TFSAs almost exclusively in the coming years vs. RRSP contributions – when our salaries will be lower with part-time work potentially on the horizon.
On Our Portfolio
On some social media platforms, including Twitter/X/Whatever Elon calls it 🙂 – I’ve observed an increasing volume of criticisms directed towards DIY investors from some financial professionals.
That’s unfortunate.
As I age, including my evolving thoughts about personal finance and investing, it becomes almost crystal clear to me at least that you don’t need to be striving for some perfect, rational financial decision at every corner.
I just don’t have the energy to tolerate negativity as I get older. Seems like a waste…
When it comes to people who feel they are on higher moral investing ground I’m becoming more like Keanu Reeves all the time:
🙂
Last time I checked: we all live in the real-world. We don’t live in a spreadsheet.
I continue to find personal finance a highly emotional subject.
I’ve come to the conclusion that instead of debating others on pretty much any financial subject, including after I got personally attacked online months ago, that’s it’s perfectly rational to be unrational when it comes to financial decisions as long as:
- you understand the pros and cons of your decision, and far more importantly,
- you genuinely feel you’re making the best decision for you.
Source: Behavior Gap, Carl Richards
I/we invest by holding a basket of stocks for income/growing income and a mix of ETFs for growth/extra diversification. I/we also keep some cash handy.
That’s a good mix of diversification for us.
That doesn’t mean that approach nor level of diversification works for others…even the best investor of our time does not practice very much diversification.
Would you keep >50% of your portfolio in one stock??
Back to us, keeping some cash will be an important wedge/buffer for semi-retirement in the coming years. Raising that cash position remains part of our 2023 goals.
2023 Financial Goals – September Update
To summarize, these are our goals and updates (including things we’re already thinking about for 2024)…
1. Save for our 2024 TFSAs. This goal implies we’re going to try and sock away at least $13,000 this year (based on 2023 TFSA contribution room) before January 1, 2024. As of this month, savings are coming along. We are halfway there.
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 while our debt is cheap, we’re ahead of schedule and on track to have our mortgage dead in March 2024.
3. Complete the “cash wedge” for semi-retirement. With cash savings between personal and corporate accounts, we’re on pace to have this accomplished by January 2024.
4. Max out contributions to our RRSPs. As mentioned above, RRSP contributions and growth offer two great benefits as we continue to work full-time now:
- The first advantage is our RRSP contributions reduce our taxable income.
- The second positive – assets held within our RRSPs — both the amount I/we contribute and any gains we see – is also sheltered from tax until we withdraw it. So, our thinking is, when money comes out of our RRSPs in full-retirement, we hope to be in a lower tax bracket and therefore pay less tax.
Given this could be close to the final year (or so?) of full-time work, we might as well max out RRSP contributions. For 2023, done! 😉
2023 Financial Goals – aligns to our early drawdown ideas
A reminder as I close, 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 eventually:
- 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.
- 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 and any money you do make, beyond fixed costs that will not go away (food, housing bills, transportation) is yours to largely enjoy.
Well, we hope to be debt-free very soon.
Reducing debt, keeping our savings rate intact for investing purposes, and sticking with your portfolio investing plan are things that remain within our control for financial success. Worrying about other things outside our financial goals are likely to distract us from things that really matter. I suspect the same will be true for you as well.
I welcome any thoughts, opinions, different perspectives or investing approaches on this site. Ask and comment away!
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. 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.
With higher interest rate and possibly more increases, have you ever thought about a review of possibly using a self directed rrsp to hold you mortgage vs traditional bank/ financial institution mortgage? Listing the pros / cons of each. Just wondering.
Ya, it was always an option for me but I don’t really like holding a mortgage inside the RRSP for these reasons:
-the fees to do this, your mortgage, appraisal, etc. are usually higher.
-it’s complex.
-my understanding is you need to have enough funds to covert your assets/investments into cash, to fund the RRSP mortgage.
-what do you do if your house value goes down a bunch? will your house be worth more than your RRSP assets otherwise?
I dunno. I see too many cons since I like keeping things lower cost, simple and avoiding debt for the most part. 🙂
A good read:
https://rates.ca/resources/self-directed-rrsp-mortgage
And another:
https://www.investmentexecutive.com/newspaper_/building-your-business-newspaper/news-31549/
All my best and thanks for your readership.
Mark
Hi Mark and fellow commenters,
I’m 55 y/o and the house will be paid off early next year (7k$ left!). Not sure I’ll be able to direct more money to my investment though since my wife wants to renovate the upstairs bathroom, and besides the 3 months salary worth emergency fund set aside, the rest is invested. I only started investing aggressively by DIY about 7 years ago.
With ~600k$ invested in 100% stocks ETF (VEQT and VXC) so far in RRSP, TFSA and LIRA, I project that I’ll start reducing work in 5 years and keep working for another 5 at the most after that. I’ll start investing in my Non-reg account this year since I’ll have maxed out the registered accounts before Dec 31.
I don’t plan on reducing my stocks exposure as I near retirement since I’ll have a small pension that should cover about a third of my retirement expenses. And if needed, I can always start OAS at 65 to cover up to half of my retirement expenses. That’s why I’m not too worried about sequence of return risk, since I’ve got options. QPP I plan to delay ’til 70.
Since my wife is 7 years younger than I am, I’m planning to use her age when I start withdrawing from my RIFF at 65 to lower the required amount withdrawn and spread taxes on more years. I think my withdrawing order will be both RIFF/LIF and Non-reg from 65 until 70, and then RIFF/LIF + OAS/QPP starting at 70. I’ll also increase my emergency fund in my last working years to bring it up to about a year’s worth of expenses
This is roughy my plan for the years ahead. I welcome any insights or comments. Thanks in advance!
Awesome work, Paddy!
A few quick thoughts, not advice of course, just what I’ve learned from others, my own plan, and supporting clients with their projections…
1. Having a paid off home/no debt to enter retirement is ideal. That simply helps any retirement income plan.
2. With mostly equities you’re keeping a bias to growth during retirement which seems smart based on return history.
3. Most folks I see/support/share information with seem to take OAS at age 65 (no major advantage to delay vs. CPP) but instead alter CPP start dates from age 60 to 65 or even 70. Waiting until age 70 could be ideal for some folks (not all….) for higher income and less stress on making personal financial decisions as they age.
Great work!
Mark
Congrats on being close to burning your mortgage! I did years ago even though it probably made more sense to invest more based solely on the numbers. I always maxed RRSP and TFSA, and then paid extra on the mortgage where possible. I suppose if I invested in non reg I could be better off, but I also didn’t know what I was doing and didn’t have the time working FT with 2 little kids. We both believe it was the best decision for us, because the feeling of freedom can’t be explained. It gave me the courage to quit my job and become self employed which was the best decision I ever made for work/life balance, revenue and savings generation.
What’s your target for cash? I have 6 months + extra that covers the kids university costs. I also have cash in my biz operating account to ensure I can pay taxes etc and don’t sell stocks in a dip. This will basically cover a full year of “employment” and tax while I transition from earner to retired. Most of it is in HISA or GICs so I can early a little something 🙂
Thanks, Sandra.
I think with two younger kids, 6 months in cash for you seems very smart and wise, assuming you’re able to save and invest beyond that of course since long-term (as in decades), keeping idle cash can be a loser to inflation. This you know already…
I have no doubt being debt-free will be great. I liked your comment: “…both believe it was the best decision for us, because the feeling of freedom can’t be explained.”
Personal finance is more than math for sure.
Right now, we’re approaching 1-years’ worth in cash savings as we contemplate some form of semi-retirement in another year or so.
Read on here, let me know your thoughts!
https://www.myownadvisor.ca/how-much-cash-should-you-keep/
Thanks for your comment.
Mark
My kids are in university as we speak, hence holding the funds in a HISA to pay for the next few years. I plan to retire in the next 3-6 months so that’s why I held out biz funds to pay myself and taxes. Once I make the leap, it’s a combination of dividends and selling shares with a cash cushion to cover the difference in case the market tanks. I really don’t want to go back to work once I pull the plug!
Congrats, Sandra. Awesome.
I hear ya. I think once we make the decision to go part-time, I really don’t want to go back to full-time work.
That’s our thinking too. We intend to work part-time + live off the dividends and distributions from our portfolio only for the upcoming 5-10 years. After that, we’ll start eating the capital and selling off shares/ETF units to drawdown the portfolio after those 5-10 years have passed. We want ~ 1-years’ worth of key expenses covered by cash just in case we don’t even want to spend any dividends or distributions as a buffer or should a major expense be needed. You just never know.
Keep me posted, sounds like you’re trending to a great place!
Mark
My situation is somewhat complicated and I’m retiring early so can’t collect cpp/oas yet. I’m considering an RRSP meltdown and a delay in CPP to max my payments later in life when my brain might not be as equipped to manage the investments 🙂 There’s more than one way to slice and dice all my accounts so still need to nail down how I do this.
Yup. Very much our approach here as well…delaying CPP to at least age 65 but taking OAS at age 65.
Lots of drawdown options but usually a blend on non-reg. + RRSPs is usually good and strategic.
Did you read this one on my site?
https://www.myownadvisor.ca/how-much-do-you-need-to-retire-on-6000-per-month/
OR
https://www.myownadvisor.ca/they-have-1-2-million-and-no-pensions-can-they-retire/
Cheers,
Mark
Thanks for the links. I have been poking around your blog for a while but find new nuggets now and again. Based on the 6k / month case study, we are golden. I’m 55 so fewer years for the RRSP meltdown + non reg, and we have more non reg than the example couple. 6k/month would be fine, although we are considering more travel which could cost more, so we’ll have to figure out the ideal amount to pull for our go-go years and not run out. No plans to sell our home unless we really had to in our no-go years (retirement home?). It’s our nuclear option too.
Yes, I have noticed 🙂
I/we replied at Cashflows & Portfolios as well.
Having any nuclear option to sell your house, when older, in your 80s/90s is great and many GenX and Boomers are purposely designing that into their drawdown plan.
Happy to discuss these things anytime!
Mark
Thanks for the email. I’m looking forward to seeing what you have to offer for the DIY Retirement planning solution!
Regarding: “I’ve observed an increasing volume of criticisms directed towards DIY investors from some financial professionals.”
I’ve seen the same! In fact, I just recently saw an ad from Fidelity Investments indicating that “the pros” will be able to generate 2.3 times more wealth than “those who go it alone”. Ya right – lol! I walked away from my advisor years ago who was doing very little for me and haven’t regretted it one bit! I once heard and truly believe the following: Nobody cares more about your money than you do yourself! Amen to that!
Amen MikeyP re: “Nobody cares more about your money than you do yourself!”
Continued success and stay in touch!
Mark
I find myself thinking more often than not that “It’s a good a plan as any”. There can be many different roads to Rome.
But one thing stood out to me in your post today….
“As I age, including my evolving thoughts about personal finance and investing”.
That, that right there is a good place to be at. Ageing *and* evolving thoughts, how can one go wrong?
Yes, lots of different roads to Rome. Getting older by the day here, Lloyd!
Mark
Mark, you are right on about advisors. Mine always had a great big smile and real friendly when we added $$$ to our account with him. The moment we let him know we were using the web for DIY investing and we would transfer funds out, everything changed. As soon as $$$ moves out from your advisor, you will see their true personality. Not pleasant. However, truly best thing we ever did.
I have no doubt your financial advisor was not happy when you left them for DIY investing. They have to put food on the table too. 🙂
Nice to hear from you,
Mark
We are well into retirement and started late in the acquisition of Canadian dividend stocks, our goal is to continue in this process in the hopes that there will be funds for the children to build on when we leave.( may have ten years+- left – just like the market no one can be sure )
The problem now is having trouble with decision to purchase( pause over the buy button ,thinking too much or?)
I tell myself “it’s time in the market”— read that somewhere—
Any suggestions on what or where we could look provide a little clarity for a couple of mature rookies?
I wouldn’t overthink it, Tom. If you have an opportunity to buy, then do so. Relatively speaking to U.S. stocks, Canadian stocks are cheap.
From July, FWIW, a bit of market-guru noise mind you:
https://www.bnnbloomberg.ca/the-canadian-stock-market-is-dirt-cheap-right-now-david-rosenberg-1.1942264
“For people that have been involved in the U.S. market, start bringing some money home in the Canadian market — it’s dirt cheap.”
Another strategy Rosenberg advised to investors was to park their money in cash holdings, which he says is perfectly appropriate during an elevated interest rate environment.
“I know people will say well it’s five per cent (return on cash holdings), and look at what the Nasdaq 100 is doing. Well — think about five per cent last year when the market was down almost 20 per cent,” he said. “Have some dry powder and get paid for it — to me that’s just common sense.”
Lazy investors can buy low-cost ETFs like XIU that are also tax efficient. Not advice, but you own all the top-60 stocks in Canada in one fund if you want to avoid DIY stock selection. All good with me!
Other readers might chime in too…
Mark
Tom,
For a relatively straightforward and simple strategy for picking which growth dividend stocks to purchase, I highly recommend Henry Mah’s books. Particularly, “Your Ever Growing Income” and “Income Investing Explained”.
Once you have purchased the stocks you have decided upon, your portfolio will become pretty low maintenance giving you more time to enjoy the income they generate for you.
Good luck – p
Thanks for sharing, Paul. I’ve had Henry Mah on this site a few times, a very passionate DIY investor.
Mark
Sage. Ignore the noise, the arguing and the rest of the distractions. Matters not. You have a very solid plan, strong focus on it and are nearly to where you’ll have even more choice in your life!
I get it on the tolerance as you age. Wait for another 15 or so years. LOL
Ha, I’m trying my best (to ignore) but I also very much appreciate learning from folks that have “been there, done that”.
You are one of them!
LOL on the tolerance.
Mark
I’m trying my best too. Sometimes lose and get dragged in. LOL
Thanks. You’ve got a bunch of readers with solid been there done that records, and smart ones well on their way.
Just trust me on the tolerance!! Being completely FIWOOT will bring on more too.
Ha. Yes, I hope so too!
Chat again soon.
Mark