How to earn a Salary for Life

How to earn a Salary for Life

Want to know how to earn a salary for life?

Some cash for life??

Geez, who wouldn’t!

Effectively that’s what many dividend growth investors are after for part of their portfolio. Yours truly included!

I’ve been a fan of designing a portfolio of ever-growing income, and creating that income stream for semi-retirement, for almost 15 years now. We’re getting very close to realizing our dividend income target in fact – something I update every month.

In Your Ever Growing Income, you might have already read about Henry Mah’s passion for the disciplined, dividend-oriented path he learned from Tom Connolly, a retired teacher in the Kingston, Ontario area, who describes his own wealth-creation journey using dividend paying stocks in The Connolly Report (a long running publication about dividend growth investing since the early 1980s). 

To quote many-a-Connolly Report, that investing path is all about the following:

If a company does not pay a dividend, don’t buy it. If it doesn’t grow the dividend don’t buy it either.”

Ha.

A discipline of Tom’s in many respects, Henry Mah has produced a new book entitled Salary for Life – For You & Future Generations about wealth-building using Canadian dividend paying stocks and highlighting investing lessons learned for all ages.

Salary for Life - Henry Mah

While money might not grow on trees, Henry does believe that with small initial and ongoing investments, given the right elements, the right amount of time and investing fortitude, your portfolio can grow big and strong to provide income for generations.

I reached out to Henry to find out what his motivations were to write yet another book, learn why this one is different, what’s in his portfolio now, and what advice he has for Canadians as they age – including plans for his own income portfolio.

I’ll of course offer a copy of Salary for Life to giveaway below to one lucky reader after this interview.

Henry, welcome back! You’ve been busy!

Thanks for having me on the site again Mark, always a pleasure to talk investing with you.

Henry, maybe an obvious question but I’ll ask it anyhow. Why did you want to write this book? Second part, what makes this book different from the others? 

My initial focus was a retirement book, but I quickly realized the topic was well covered and the subject matter varied a lot. Then I realized that most retirement books started at about age 50 and ignored or didn’t feel that younger people should be concerned about retirement. That’s when I decided to suggest planning for retirement at all ages. However, I didn’t want to use the word retirement. After several name changes for the book, we chose Salary for Life, and built the book around that.

The recommended investment strategy is the same, but I address the topic to specific age groups and then I deal with the end of life differently than most.

Great stuff. Retirement and/or income planning should really occur in your 20s and 30s in my opinion. Why they don’t teach this stuff in schools I will never know…

The title of your book Salary for Life naturally resonated with me because dividend growth investing is a major part of my semi-retirement plan and has been for well over a decade. In fact, I have a plan to largely “live off dividends” in the early part of my semi-retirement. 

Further Reading:

https://www.myownadvisor.ca/why-my-goal-to-live-off-dividends-remains-alive-and-well/

In your book you wrote:

“We learned that you can’t assume the stock market will go up every year. In fact, I learned quickly that that’s the problem; you can’t predict how the market will react at all, or which stocks will do well, which will go down, or when to get rid of stocks before they go down, and neither can those so-called experts.”

Can you re-explain to readers and investors who visit this site, your process for selecting companies to produce your desired salary for life? Why does that process work so effectively?

For me the answer to your question is almost too easy. But many brush-off investing in just dividend growth stocks, and think they should be part of one’s portfolio. That’s where I differ, because I believe you’ll do better by investing exclusively with just the best dividend growth stocks. I’ve always suggested that one should invest for income (dividend growth, if you prefer), and ignore capital growth. And I do mean that they ignore it totally. Not because one can’t make money concentrating on growth, but capital growth can’t be predicted, or growth may not occur every year. Income investing will almost certainly grow your income every year, and I feel confident recommending the strategy.

I believe every investor should do their own stock evaluation, analysis, and come up with their own list of stocks to consider. Then they should only buy the stocks on their list, which provide a reasonable yield (income). Don’t look at other stocks, other investment products and don’t seek market growth. Bold I know!

If your investment income can grow each and every year, and I like to see an average minimum income growth of 10% each year, then over the long-term, income compounding will produce your Salary for Life, which is almost guaranteed.

Investing for income vs. growth is a touchy subject but I know where you are coming from – you are seeking more dependable income.

Let’s walk through Salary for Life a bit. Chapter 1 is all about helping parents understand the power of initiating a salary for life. Can you share some highlights from this chapter for readers here?

Additionally, Henry, I was curious about what you think of putting just Canadian dividend paying stocks inside an RESP for any financial future? Is that too risky? Why or why not?

Parents with children have a lot of responsibilities and life is expensive, which means saving for their own retirement is probably at the bottom of their list of things to be concerned about. Starting a saving plan for their children would be even further down the list, except for possibly an RESP. But I think starting an investment portfolio for a newborn or youth should not be overlooked, even if you don’t think you can afford it. I’m not suggesting thousands of dollars, just what one can afford. Start a plan which will generate income, regardless how small, and where you’ll see the income grow, each quarter and each year. Then you’ve started a process where you can teach your children about income, how it can grow and that it almost grows all on its own. Children may not know anything about investments, but it doesn’t take them long to understand what income or money is, and seeing it grow, will have meaning.

As mentioned in the book, for short-term RESPs, avoid stocks, but if you have five years or more before they will need the money, then I believe investing in stocks, especially dividend growth stocks are a viable choice. Dividend growth stocks are usually among the largest and safest of companies, and one should stick with the companies they believe are the best. Even if there is a market correction, their income should continue to grow, and the price of quality dividend stocks will usually recover faster than growth stocks.

If capital growth is your main goal, then you must rely upon and play the market. The greatest worry about investing for capital growth is a major market correction. This is where I differ from some investors. If you invest for income, a major market correction will make you the happiest. Your only concern is a dividend cut, which will be minimized by sticking with the best companies on your list.

Chapter 2 is about focusing on young adults and helping them invest better, smarter, including compounding their returns. In this chapter, you compare capital gains vs. income investing. I’ve included the table below for reference:

Salary for Life - Capital Growth vs. Income

Reference: Salary for Life, page 52. 

For all the talk (and expert advice) about low-cost ETFs, meaning why bother with individual stocks, what perspectives do you have for young investors who may hear that investing in individual stocks is fraught with potential underperformance?

One word, Mark: “income”. You’ll earn more income from investing in individual dividend growth stocks, than investing in any ETF in my opinion. On my blog I record a small investment portfolio where I’m buying shares of dividend growth stocks and comparing my results with the VDY ETF each month, as a benchmark.

(Mark to readers: Vanguard FTSE Canadian High Dividend Yield Index ETF seeks to track, to the extent reasonably possible and before fees and expenses, the performance of a broad Canadian equity index that measures the investment return of common stocks of Canadian companies that are characterized by high dividend yield. You can find VDY from Vanguard here.)

In fact, the seven stocks I’ve invested in make up 23.9% of the VDY weighting, and after five months, my individual purchases are providing 27.7% more income, than had I invested the same amounts in the ETF.

People who worry about underperformance are concerned with market value. If you can grow your investment income, regardless of market value, then why worry about value or comparing your investment growth to other benchmarks.

This chapter also talks to those who are low-income earners and shows that saving for their future is not an impossibility.

I think there are folks out there that might want to debate the total return vs. income approach but I’ll let you handle those debates! 

Henry, I’m a fan of dividend stocks and there is no need to convince me otherwise on that part of my approach. I also firmly believe that maxing out one’s TFSA is essentially “better” over the RRSP, for pretty much any Canadian.

Further Reading:

https://www.myownadvisor.ca/managing-the-refund-well-is-the-linchpin-in-the-rrsp-vs-tfsa-debate/

https://www.myownadvisor.ca/ill-continue-to-maximize-my-tfsa-first-because/

What’s your take on this debate?

I agree 100% that your TFSAs (for you and your spouse) should be maxed out before any contributions should be made to an RRSP. Having said that, I’m undecided whether investing in a RRSP makes sense at all, especially for those who can maximize out their RRSPs. If you can contribute the maximum to an RRSP for 20 years or more, likely you’ll amass a large amount, and I doubt that your retirement income will be less when you retire, which means that every dollar withdrawn will raise your taxes all the more. I’m talking from personal experience and am currently looking at how best to close out our seven figure RRIFs, and minimize our taxes (no easy task).

For those still in the accumulation phase, maybe directing a portion of money allocated to a RRSP, to a non-registered account, might be a happy medium. Taxes on qualified dividends are much lower and if you don’t sell there are no capital gains.

I’ll let readers check out Chapter 3 for themselves (about the best stocks to own), but I must say, my favourite part of the book was Chapters 4 and 5. In those pages, you highlight how much you need for retirement and more. A few questions Henry because I’m curious!

  1. How much income does your portfolio generate following your own approach? 
  2. What stocks are you holding and why? 
  3. Finally, is that enough to meet your income needs and wants?

I usually sidestep these questions because I don’t want people thinking I own the best of stocks. In fact, I wish for a third of my holdings (four of twelve) that I had invested in some other stocks during my accumulation phase. Still, our investment income is well over $100,000 per year now and has always exceeded our retirement expenses. Our income has dropped the past few years, because we are gifting shares to our kids and grandkids.

I’ve always resisted listing the stocks I own, in the quantities we own for sure, because I prefer that any investor decides what stocks to own themselves. The stocks we own are easily recognized so I will reply this way:

  • We actually only own 11 companies in our accounts, but I added two new stocks at Wealthsimple so we own 13 stocks in total.
  • Those companies include 4 banks, 2 telecommunications, 3 pipeline, 3 utilities and 1 consumer sector stock.

I should also highlight for your readers that based on our approach, there is no need to invest in funds, no ETFs, no REITs, no U.S. stocks or any fixed income products.  We do continue to maintain a healthy cash account (you call it a cash wedge Mark) for personal and emergency needs.

Last but not least Henry, what’s next? Is there another book on the way? Do you have any plans to change how you invest in the coming years as you get older? What might be some predictions you have for this investing year?

I thought Income Investing Explained was my last book, and now think this one is. But who knows? As for my investment strategy, why would I consider any changes, as long as my income continues to grow, or doesn’t drop significantly from my withdrawals. Even when it does drop, it quickly begins growing again.

As for 2022, I predict my income will grow by at least 12% over 2021.

I also predict Henry’s income stream is likely to grow in 2022 – thanks for this Henry.

Clearly folks, Henry Mah has conviction when it comes to investing and I believe some of that passion and decision-making is helping Henry realize some ever-growing income goals. Henry has already built his Salary for Life and is now helping his family build even more wealth via gifting.

Whatever your wealth-generation plans might be, Henry’s approach to investing might be one you want to learn more about or at least confirm the plan you’re on works for you.

Even though Henry and I invest a bit differently, and share some different investing perspectives (e.g., I certainly hold more stocks and some ETFs for extra diversification) I do enjoy trying to build my own Salary for Life for my semi-retirement dreams just like Henry has achieved.

Good luck with the giveaway and thanks again to Henry for his time and sharing his perspectives.

Mark

Further Reading:

My goal to “live off dividends” and why is outlined here.

Why the TFSA comes first before the RRSP. 

Learn from Henry how to make your TFSA work harder so you can retire sooner!

Henry Mah wrote about building Your Ever Growing Income:

Check out the U.S. edition.

A Canadian edition.

I wrote about some ETFs and dividend stocks built do last.

Keeping cash, beyond income paying stocks too, is a great way to manage any market calamity.

The Cash Wedge – Managing market volatility

Enter the Salary for Life giveaway! 

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Good luck!

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm 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. Follow me on Twitter @myownadvisor.

83 Responses to "How to earn a Salary for Life"

  1. Excellent interview. I appreciate and use all the information I pick up here. We’re mostly (90%) dividend investors with a couple reits. I can’t say often enough how wonderful it feels when I see our quarterly dividends knowing that they will be contributing to a very secure and financial worry free retirement.

    Reply
  2. 22 years ago back when I was much smarter and more beautiful, tried to encourage my parents to end their mutual fund ways. Alas that never happened. Fast forward today the wife and I have been drip drip dripping along, like magic we’ve far surpassed our income needs.

    Last weekend our son came in while I had the trading account open. Went over a few things with him, as he was keen to understand. Later while helping his Mom he announced she had to upscale her life-style as we were living below our means. Ha! That’s how we got here. Tortoise and hare, if your approach is sound and runway long, you’ll get there.

    Am most interested to learn more regarding how to transfer wealth to our children (tax efficiently) Shall check out your blog Henry.

    Thanks for the interview Mark, you site is a great resource for those wanting to learn.

    David

    Reply
    1. Awesome stuff David and thanks for your readership and engagement.

      I hope to be there too: “like magic we’ve far surpassed our income needs.”

      🙂
      Mark

      Reply
      1. Thanks Henry, I will add the blog to my ” must read ” too. First of all, I would like to thank Mark for his site, I have discovered a new way of investing and so much useful informations. Then I have discovered other people, like Henry, who want also to share what they have learned through mistakes and all. I have your first book et it helps me a lot to begin a new journey. You are with Wealthsimple, so I think they are good and reliable. What else can you say about them ? Thanks

        Reply
        1. Thanks Lili! Very kind of you. We all make investing the mistakes, the key (I find for me…) is to make less of them and much smaller of them as I get older! 🙂 Ha.

          Best wishes for 2022.
          Mark

          Reply
  3. School actually began to teach this kind of things. I peeked into my daughter’s homework. One is doing budgeting and another one is calculating how much money they will have at retirement time saving different amount on different frequency for different length.

    I think the important thing is each student has to be good at math. LOL.

    I follow Henry’s strategy as my core holdings. Still think should not limit myself to only Canadian dividend growth stocks. But one surely can do great following Henry’s path.

    Reply
      1. I am also holding some Canadian DG stocks with low yields. CNR, ATD.B and MRU are doing pretty good. I have these three in my taxable account and TFSA for tax benefit.

        I assume I am taking it easy right now as last year our investment income (before tax) exceeding our expenses (after tax). But last year is not a normal year with the pandemic and we didn’t spend much. I am hoping at the time when I retire, my investment income (after tax) can cover my expenses (after tax) including discretionary expenses. I like the title of your book: earn a salary for life. We are pretty close to it.

        One problem with dividend income is tax. Tawcan blogged a couple with more than $300K dividends each year. At that level, dividends taxed not as beneficial as capital gain. I want to have enough dividends to cover our expenses, but above that, I want to have more flexibility with tax. So my thought is having enough dividends to cover expenses so that I can sleep tight. But beyond that, with capital gain so that I can decide when to take them and optimize taxes.

        Reply
        1. May: You might be interested in my recent posts about me trying to close out our RRIF accounts and minimizing the taxes. Tax on Div’s in a non-reg is much lower than RRIF withdrawals, and definitely tax on RRIFs at time of death.

          Reply
          1. Just went to read it and it’s a very good case study and a timely reminder to my own situation. Thanks.

            Obviously you have the too much RRIF problem, 7 figure RRIF at your age is a good problem to have, but still a problem. I am hoping I could avoid that problem. Definitely want to die with zero balance RRIF accounts. And hopefully begin to take CPP and OAS at 70 with RRSP accounts not too big.

            Our original plan is to retire at the end of 2022, in that case we should have enough time to withdraw RRSP. But now we decided to work longer which means our RRSP will be bigger and the years before 70 to withdraw RRSP will be shorter. Also, even we don’t contribute by ourselves, we will definitely continue to contribute to group RRSPs in order to get company match which is free money. So RRSP will continue to grow due to this and investment return. Maybe better to stop now before it’s out of control.

            Reply
      1. It’s actually the math course. The teacher is pretty good and I am super happy to see the way she teaches the math in the way of math is important in your life and you need to apply it everyday.

        Reply
  4. Jean-Paul Huntzinger · Edit

    Thank you for this very interesting interview. Idid not know Henry so thanks for its introduction to me. I am in between growth stocks and dividends stocks but reading this article will definitely redirect me to only dividend growth stocks. I will also read all the books from Henry.
    Thanks again to both.

    Reply
  5. I totally agree with this approach. We have followed this strategy for over 20 years now and don’t regret it. There is no need to follow conventional advice like, you must have fixed income, emerging markets, US ETF’s, and more. Our dividend income (salary for life) is almost triple of our regular expenses so we don’ need to look elsewhere for growth. We have US dividend stocks which is great for travel and other expenses, (travel when we can, and online orders) I do have an ETF for tech exposure (QQQ) and BRK.B for growth. But if we needed the income we could easily convert to dividends. Diversification to be everywhere is overrated. Good companies with rising dividends is all you need. Great advice Henry.

    Reply
    1. DivInvestor: Thanks, and we need more people like you and Don, to speak out to reinforce the reality that Living Off Dividends, is and can be achieved by those willing to follow the strategy.

      Reply
    2. I agree to a point Div – the need for lots of fixed income as you age, emerging markets, etc., new digital gold as another example. I don’t like that blanket advice.

      I like a bit of QQQ myself, as you might know, some VTI for low-cost U.S. exposure but I also have an affinity to dividend payers for the same reasons: income today, rising income tomorrow, and the ongoing psychological motivation to stay invested.

      I appreciate your comments.
      Mark

      Reply
  6. Great interview and information. Planning on retiring in about 4-5 years so I am looking forward to reading Henry’s books. Especially interested in gifting stocks to children.

    Reply
  7. Like every other topics in personal finance, there is a psychological benefit of receiving that quarterly/semi-annually/annual dividend vs. try to sell off a portion of your portfolio to generate income. A lot of times, the most mathematically optimized solution might not be the most suitable option for each individual. It has its space for sure.

    Reply
    1. Ye: Every person must decide what and how they prefer to invest. I chose investing for income because it’s predictable and one will continue see their income grow even when the market is down. If market movements are not a concern, investing becomes much easier, especially if your income continues to grow.

      Reply
  8. Great interview Mark and Henry!! I have read and reread all of Henry’s books. Capital appreciation is always a bonus…but an “Ever Growing Income” and “Salary for Life” will provide a reliable source of income for your retirement. Like many others, I wish I had started sooner. Thanks Henry.

    Reply
  9. Great information Henry and Mark! I am looking forward to reading Henry’s new book.

    I really liked the information in Henry’s first 3 books and find myself going back to reread parts of them often. I also use some of the tabs from his spreadsheets on a regular basis. I have used many ideas from the books to refine my stock selection process. It also helps to know that a similar approach to mine has been working for both of you for many market cycles, especially if my conviction starts to weaken.

    I am getting close to retirement, and am interested in reading what Henry has to say about dividend growth investing in retirement.

    Thanks.

    Reply
  10. Amazing Interview !! Henry&Mark you guys are like mentors to me ,
    Henry now that I’ve read all your books I feel so confident about my investment approach and it simply works!
    Thank you both for dedicating the time and effort to help and educate others.

    Reply
    1. Happy to answer any questions Joyce. Total returns really matter but certainly some stocks with the right investor temperment can deliver both good gains and income returns over time, assuming you have enough holding/time in the market.

      Reply
  11. Excellent interview!!

    My wife & I are also retirees without a company pension that are living off dividend income and CPP/OAS.

    As I’ve mentioned numerous times, I totally agree with Henry’s investment strategy and follow it with just a couple minor differences. We hold a full position in 17 TSX listed dividend growth/income stocks and a mid-size position in 2 ETFs (FIE, ZWB). We have absolutely no direct foreign holdings and no fixed income. We hold 4 banks, 2 telcos, 4 utilities, 4 pipelines/midstream, and 3 REITs so the only real difference is the 2 ETFs and 3 REITs (GRT does regularly raise its payout but DIR and NWH don’t but do have high yields).

    I also totally agree on TFSA before RRSP and think a person should stop contributing to an RRSP at some point and just invest any extra dough in a non-registered account.

    I find it quite interesting that as time has gone on and with more take-overs, our portfolio keeps looking more and more like Henry’s.

    I also find it quite amazing that Henry has the energy and patience to keep fighting what I call the “dividend income vs total return” battle. I have generally given up on posting about the topic as it seems like a losing and unnecessary battle so I really respect Henry’s persistence.

    Ciao
    Don

    Reply
    1. Hi Don: You and others like you who have followed and achieved the “Living Of Their Dividends” strategy, are the examples for others. It’s their loss that they don’t understand, or want to listen.

      Reply
    2. Don, you and your wife have done very well.

      Without any pension, the ability to “live off dividends” with CPP and OAS is great…

      I also have my own path, I include some ETFs for growth, but I fully appreciate where Henry is coming from when he chooses to own a few banks, telcos, utilities, pipelines in his portfolio – like you do with a few “extras”. 🙂

      Can’t agree enough about TFSA first. I can’t tell you how many times I’ve written about that gift of an account!!!

      Keep up the great investing work and thanks for your comments Don.
      Mark

      Reply
  12. Thanks Henry and Mark for this interview. I have read Henry’s first 2 books and am looking forward to reading this one too. I think I will learn something again. I learned a lot from Your Ever Growing Income and highly recommend the book. Thanks for spreading your knowledge.

    Reply
  13. Thanks for the great interview. I would love to learn from you Mark and Henry great investment ideas. I am sure the book would assist me in that regard.

    Thanks again.

    Reply
  14. Thanks to the both of you, Mark & Henry for providing a platform for such useful information-very much appreciated-you are both a positive credit to the financial services industry-Happy New Year!

    Reply
  15. Mark and Henry,

    Great Interviews! Henry, I read the first two books, and recommended to two friends, we are all following your strategies now. I would like to get a copy of this third book to fine tune my strategy. Thank you!

    Reply
  16. Henry, It is always great to read your logical and thoughtful strategies for securing life long income without the drama and suspicious promises found in many other purveyors of financial recommendations. Thank you.

    Reply
  17. I started investing on my own about 6 years ago when I realized that my mutual funds weren’t going anywhere and never had. I read a Canadian book that described dividend investing and got started. Then I found Mark’s blog and have used it — including all the comments — ever since to continue educating myself. To say I am pleased with the results is putting it mildly. I am in my 70s now and can’t imagine where I would be if I had started in my 20s. I am still learning and am hoping to pass what I learn along to my granddaughter. Money isn’t everything but it sure takes away a lot of the worries that can drag you down. So a new book for a new generation would be wonderful.

    Reply
    1. Awesome Pat. Certainly, there are some risks with individual stock selection but I remain very confident in my approach and my dividend investing helps with me both financially and sticking to an approach I believe in.

      Well said: “Money isn’t everything but it sure takes away a lot of the worries that can drag you down.”

      Best wishes and thanks for your readership,
      Mark

      Reply
  18. Henry’s book “Your Ever Growing Income” resulted in an epiphany in my investing life. I am a full blown dividend growth Investor now and only wish I had started a decade or two earlier! I look forward to reading Henry’s current book. And of course would love to win a copy! LOL Thanks too Mark for your website and regular email updates. All are most helpful!

    Reply
    1. Good stuff James. Total returns matter but I can appreciate, myself, as a dividend investor that there is some psychological comfort knowing from many companies historically that you get paid to remain invested and be an investor.

      I appreciate your kind words James!!
      Mark

      Reply
  19. Thanks Henry. I’ve read your 1st 2 books. Good sound information without the drama!
    The K.I.S.S. method! Mark…I’d like a copy of Henry’s new book. Cheers.

    Reply
  20. Hi,
    I feel late entering the game of investment being late in my 40 but I have hope to educate my 2 teenagers on financial literacy. Since reading Your TFSA Compounder, it has encouraged me to make the first step plunging in dividend investment. I am still learning but I am so very grateful of your book, the delivery and the knowledge passed down. I am looking forward to read your new book. Thank you.

    Reply
  21. Oh Henry!
    You did it again. Can’t wait to read your next book. Your other books have been helpful and I keep referring back to them to remind myself to stick with my investment strategy. I really appreciate how you teach people how to choose the best stocks for themselves so that this is a timeless approach. Thank you for sharing!

    Reply

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