Financial Freedom Target: Age 50 – May 2019 Update
Up until a few years ago, I never bothered to post any specific age-related date where I think my wife and I could retire or semi-retire.
It’s not that I didn’t think about that from time to time…semi-retirement…but the opportunity to work on my own terms just seemed so far away…
Fast forward to this year – after picking away at many financial goals each year, the massive financial milestones that seemed too far in the future to fathom are now becoming much more real:
Objects in the mirror are closer than they appear!
- Big fat money goal #1 – become debt-free.
- Big fat money goal #2 – own a personal portfolio worth $1 M (excluding any workplace pensions that will come our way; ignoring any future government benefits like Canada Pension Plan (CPP) and Old Age Security (OAS)).
Those are our BIG goals. Your mileage might vary!
Where we want to be…
Today’s post will revisit those assumptions and provide an update on where I think we’re trending to. I look forward to your comments.
Projected key assets by the end of 2023 (age 50):
1. Principle residence age 50 = >$700,000
A lot has changed in the last couple of years. My wife and bought a condo, we’re downsizing, and we’re moving back into the city of Ottawa this summer. It’s exciting (and stressful), but long-term this move is where we want to be. We knew we’d always move back to town and live in a smaller place. It’s happening now. With our move, we’ll be closer to amenities, current work (and new work opportunities) and much more. Our condo location is walking distance to groceries, restaurants, and entertainment – no more than 30 minutes in any direction.
In our previous post we assumed our house value would increase by about 2% per year going-forward. This condo value, while nice, is not necessary for our retirement plan. Actually, we’re not counting on our house for a retirement plan. A house is a place for us to live. Your investment plan with real estate may vary.
With some mortgage debt remaining on the books, including after our condo move, we’re optimistic we can slay the mortgage dragon within the next 4-5 years. Once the mortgage is done, part-time work will be a strong consideration.
2. Defined benefit pension (mine) age 50 = $450,000 (value?)
I’m very grateful for this pension. I’ve been contributing to this plan for 17 years, with the following formula:
1.6% x your Best Average Earnings x years of pensionable service.
Based on the my terms, if I leave my job on or after age 55 (not likely):
- I can receive a deferred pension from the Plan payable at age 65
- I can receive a reduced immediate pension from the Plan payable the first of any month prior to age 65
If I leave my job before age 55 (very, very likely):
- I can receive a deferred pension from the Plan payable at age 65 (which I will probably take – thoughts on that readers???)
- I can receive a benefit as early as age 55 with a reduction, (reduced by 0.4% per month prior to age 60; reduced by 0.3% per month between ages 60-65. I’m not planning on this option – thoughts readers???)
- I can receive an amount transferred to a locked-in Registered Retirement Savings Plan (RRSP) or a Locked-In Retirement Account (LIRA), as applicable, equal to the commuted value of your deferred pension
It is my intention, although who knows, to keep contributing to this pension until part-time work begins.
3. Defined contribution pension (wife) age 50 = $400,000 (maybe?)
My wife is very grateful for her pension as well. She has been contributing to her defined contribution plan for about 17 years, but as a contributory plan, while my benefit is known at the time of retirement her benefits are not.
I’m confident though based on the assets available to invest in (mainly low-cost indexed mutual funds), her portfolio value might be worth this much when she’s 50. This is unclear to us since the stock market and bond market however will be the decider of that.
4. Personal investments, $1 M at age 50?
Long before I started my blog (hard to believe it’s been almost 10 years…), my wife and I recognized with good paying jobs and maintaining our health, a consistent savings rate would be our biggest ticket to financial freedom in our 50s.
Time in the market versus worrying about when to invest in the market has been our friend.
We figure we need to max out our contributions to our TFSAs and RRSPs, every year, for the next five years (until end of 2023) to have a realistic shot of reaching this portfolio goal.
How have we been getting there? How will we get there? Via a simple two-pronged approach:
- We invest in mainly Canadian dividend paying stocks for passive income. Our long-term goal is to earn $30,000 per year from Canadian companies in taxable and tax-free accounts.. This goal while very aggressive is within reach.
- We invest in a couple of low-cost, U.S.-listed Exchange Traded Funds (ETFs) inside our RRSPs. I’ve learned to appreciate the lazy but effective approach that low-cost ETF investing can bring. We use ETFs for mainly international investments.
Projected liabilities by the end of 2023?
A big fat zero. None. Nada. Zilch.
Ultimately our goal is to enter semi-retirement without any debt.
I hope we get there. I’ll keep you posted if we realize our goals.
Any financial freedom goals you have set for yourself?
Have you already realized the fruits of your labour?
What do you make of my plan and approach?