Financial Freedom Target: Age 50
I don’t believe I’ve ever shared an age-related date in a post on my site about our financial journey – until now. Today’s post highlights some of our lofty financial milestones: financial freedom target age 50.
Projected assets by the end of 2023:
- Principle residence = $600,000 (hopeful value). I’m assuming our house value will increase by about 2% per year going-forward to reach this amount but I’m not betting on it. We are not counting on our house for a retirement plan. A house is a place to live.
- Defined benefit pension (mine) = $450,000 (~commuted value?). I’m very grateful for this pension. I hope to work at my current place of employment for another seven years (until 2023 full time) however nothing is guaranteed.
- Defined contribution pension (wife) = $400,000 (maybe?). Her defined contribution pension plan is not as good as mine but remains very valuable. I assume my wife will continue to work full time until 2023. Again, employment has no guarantees.
- Personal investments = $1,000,000 (big hairy audacious goal). We recognize a modest and consistent savings rate is our key to financial freedom. Money we save now, in the markets, will be put to work sooner and will continue to work for us. Time in the market and the power of compounding is our friend. We figure we need to max out our contributions to our TFSAs and RRSPs, every year, until the end of 2023 to have a hope of reaching this goal. There is optimism we can derive 3-4% real returns from our portfolio for the foreseeable future. There is no point worrying about what the stock market does or does not do, or what the inflation rate is. We can simply control our savings rate and keep our investing costs low for as long as possible. After savings are set aside each month we have some fun with the rest – fun that includes international travel.
You might recall from reading my site, we employ a two-pronged approach for our personal investments.
One – 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 is very aggressive but within reach.
Two – we invest in a couple of low-cost, diversified Exchange Traded Funds (ETFs) inside our RRSPs. Although we have a bias to owning dividend paying stocks across our portfolio (for income) I’ve learned to appreciate the lazy, simple but effective approach that passive investing can bring. We use ETFs for mainly international investments.
Projected liabilities by the end of 2023:
- None. Another goal of ours is to pay off the mortgage by this date: 2023. At the time of this post we currently have only a small car-loan on the books for another 6 months. As we get older it would be nice to pay cash for our (used) cars.
Ultimately our goal is to enter semi-retirement without any debt and some passive income derived from our investments (~$30,000 per year) to pay for all basic living expenses (those are property taxes, home maintenance, household utilities, food and insurance). There is a great deal of discipline ahead of us but there’s also some optimism we’re on a good path while taking time to enjoy what’s important today.
Any financial freedom goals you have set for yourself? Have you already realized the fruits of your labour? How are you realizing your financial goals?
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.
Is it your plan to retire by age 50?
That’s the idea – well, at least work part-time or do some seasonal work but not work full-time.
I left work about 3 years ago and it’s funny you can be both bored and crazy busy all at the sametime. Part of it my wife still has a few years to go so it’s harder to enjoy retirement when one spouse is still working. she figures by 2020 they’ll do another round of buyouts so I’m just running the numbers to see if she could leave then (age 58) Problem is Pension/investments are staggered, age 63 we’d get 20% of her take home gradually increasing to 80% by age 72. So there’s a fairly healthy gap there.
That’s the thing. I suspect in full-on retirement, you need to stay busy. I have a host of plans for retirement, I just need to have the time and ability to fund them 🙂
Congrats on your journey thus far Rob!
Oh wow, you are in a really good position to become FI. In fact, it looks like you could retire on your pensions and house alone ( plus the OAS/CPP later on).
We don’t have pensions here in the US…The only “pension” for us will be Social Security in roughly 3 decades.
Have you written before about those pension plans in more detail and how they work?
There’s an article about pensions on my site here:
https://www.myownadvisor.ca/pensions-101-basics-defined-benefit-defined-contribution-pension-plans/
The plan is coming along DGI. Thanks for the support.
I prefer not to retire on pensions or house alone because a) I have little confidence my employment will stay the same over the next 5, 7, 10 years or b) a house is a place to live and should not be used as a retirement plan. That’s just me.
The U.S. is rather challenged financially. Folks not saving in the U.S. are in a real mess in another few decades. Far more “have nots” than “haves” and that gap will only widen.
Nice plan. Good luck on making it happen.
The idea tat inspires me is semi retirement. Have passive income to cover the basics. For me, I could than work some time for the extras like travel and increasing the nest egg…
Agreed, the semi-retirement thing is great for me because I’ll always work at something, just on my own terms after age 50 I hope. 10-20 hours per week in the spring, summer and fall would be ideal. I don’t want to be in cold Ottawa in the winter!
Credit to both of you for not just sitting back and saying Our DP will do us in the future! You’ll do fine!
I have no idea what our employer has in store, so we save on our own. I don’t take anything for granted. Conservative and boring I know!
Hey Mark,
I had a bit of a chuckle this morning reading this…. “big hairy audacious goal” but it’s important to keep a bit of humour along the way on any financial journey. I think when people get too serious about their investments they become too hard on themselves. Realizing that things could happen is important as you point out jobs are never secure but keeping tabs on what’s going on in the market is key to financial success. That and some smart investment moves. Well done!
Happy to make you laugh. This blog is supposed to be fun…..and entertainment.
I’m glad the job emphasis came through, you never know what the future has in store including health issues.
Thanks for the support.
Good plan. I am curious how the defined benefit and defined contribution are almost the same … The actual benefit of a defined benefit plan has guaranteed income whereas the contribution plan is just a matching contribution. Certainly the value are not the same for two people working about the same amount of time? I would have expected yours to be much much higher.
The DC contributions (wife) are higher than DB (mine). I’ve been rather conservative with our commuted values to the point whereby I’m not really focusing on them (pensions) very much. Will they be worth more in 7 years? Maybe, probably. Much like some indexed parts of my portfolio – I don’t bother with them. I don’t include RRSP values in my dividend income updates every month. Set and forget.
Awesome progress and great looking projections Mark.
I really like to see someone focused and doing well with their financial and life goals and you’re a shining example.
We’ve achieved our financial freedom goals and are happily enjoying this stage of life.
Thanks RBull. We are very fortunate to have pensions even if they are not the “gold-plated” kind like most government workers have. We believe in saving on our own since there are no guarantees that come with our jobs and our company is always cutting back.
We save and then we have fun with what is leftover so we feel it’s a good balance for us.
American here, so I might not know how it is in Canada. How likely is it that the 850,000 pension you and your wife are going to get is going to be there forever? It seems like everyone in Canada has a pension, and I wonder how solvent it is? I think you would be close to ok without out. When can you collect, if you retire at 50 can you start collecting at 50 or need to be 65 or something?
Hey Nick,
The pensions are rather secure, these are not private sector pensions, ours are affiliated with hospital and government pensions. We cannot collect these pensions until age 55, but that occurs with major penalties. The pensions are partially indexed with inflation.
My goals are simpler now that I am retired. Top up the TFSA annually for me, DW and DD. Make annual contributions to DD RDSP to ensure full government grant. Withdraw just enough funds from my RRSP to take me to the top of the 15% federal tax bracket. (This last ‘goal’ fluctuates due to a variable small farm income.) Apply for a reduced CPP in four years (DW is already on CPP Disability and will revert to a much lower regular CPP at her age 65). Other than that, most of everything else financially wise is on autopilot.
Autopilot sounds great Lloyd. As you have read we have a few years to go for that but we’re enjoying the ride.