How to use real estate, ETFs and dividend stocks to retire in style
For a few years now, I’ve been inspired and motivated by early retirement.
Or, for any members of the “retirement police” out there, let’s just say I’m inspired by some form of semi-retirement sooner than later.
I agree with many of the FIRE-esque principles (spend less than you make; aspire to a high savings rate for investment purposes; invest your money in a good portion of low-cost assets; indexed products, etc.) but these things are not new. Just new to some people with a shiny new brand around it.
When I write about semi-retirement, I’m more of a FIWOOT guy (FIWOOT = Financial Independence, Working On Own Terms).
On our financial journey I’ve been fortunate to meet a number of fine folks who are willing to share their own financial stories with me – those essays are on this retirement page at any time for your reading pleasure!
Today’s post is another one of those stories.
- Name: Dale Rathgeber
- Age: 59
- Family status: Married (34 years), with 2 kids, aged 22 and 19, one of whom has a moderate cognitive disability.
- Retired since: Half-time since 2007; 90% retired as a lawyer since 2017. My wife retired from half-time teaching in 2017, but now subs a few days per month.
- Retirement plans: I pinch-hit at my former small-town firm in Airdrie Alberta, working about 10%, and hope to do so for some years yet, if they still need me! My wife is also retired as a teacher and subs a few days per month. We may become snowbirds. Now I volunteer, still play rec-sports, golf, and am in two amateur rock’n’roll bands. I’m also a summer lake nut.
Dale has been a fan of this site for a number of years and is also passionate about investing and helping others. So much so, Dale has a site that is more a free step-by-step manual for do it yourself investors, and a soft-sell for his quarterly investment newsletter. I will share that link later! Read on!
Dale and I had some emails back and forth recently, about his investing success, his career, so I thought I’d share some of those words of wisdom today for everyone else to see. Check out what we wrote about below…
Dale, nice to catch up and thanks for being a fan of the blog. So, I wanted to ask: when and how did you get started in investing?
Our life histories pre-career and investing are that my wife and I we are both from modest, frugal, hardworking families in a small sports/railroad town; Melville Saskatchewan. As teenagers we had part-time jobs; mine packing groceries, and hers at the local DQ.
I put myself through university as a railroader, sometimes working near full-time during my undergrad, and during my final year of law school in 1985. In undergrad, I won some academic awards and scholarships, and graduated cum laude. I played Canadian Junior and College football, mostly as a bench-warmer, worked like a dog (and saved a good part of my good paycheques) and became partner at a prominent law firm in Calgary, Blake Cassels and Graydon. I slowed down to raise a family in Airdrie by joining a small firm in 1998, and since 2007 worked winters only for ten years, (with summers at the lake). But even in our family raising years we always maxed our RRSPs, and later TFSAs.
During my university days in the ‘80s I subscribed to a home study course entitled something like Canadian Personal Finance, published by Hume, whom I think published the MoneyLetter. I also read some books on equity investing, and real estate. I had a traditional full-service broker for our first RRSP investments circa 1986 or 1987. I also subscribed to a couple of mutual fund newsletters circa 1988 or 1989, and then got a discount broker and did my own decision-making. In those go-go days, our RRSP investments were all aggressive equity mutual funds, because ETFs hadn’t been invented, and dividend stocks either hadn’t yet received significant attention, and/or I then found them too dull. Equity markets were on a tear, and resource funds often were a mainstay. I switched funds often, successfully chasing performance. In hindsight, I wasn’t as diversified as I could or should have been and was typically 100% invested in a few equity funds with recent price performance.
My diversification has since changed significantly. Some real estate investments (7 town-homes) in Airdrie also fell into my lap circa 1990, and they too were a good investment during the Alberta boom. But the bulk of our wealth is, and always has been in our RRSPs thanks to maxed out contributions.
What’s your take on this FIRE movement? I mean, there have been articles on my site about ditching home ownership and becoming millionaires in Toronto instead, 30-somethings that have achieved financial freedom to a point – thoughts?
You know Mark, I haven’t had the real estate run-up of Torontonians or Vancouverites, but I would be reluctant to give up home ownership. Otherwise, I suppose I did a variant of FIRE by semi-retiring at age 47, and almost fully retiring at 57. I would caution, however, against fully retiring too early if you are not yet super-frugal, and might be giving up a lucrative career forever.
Moreover, many retirees rightly find that they become more conservative in their investments, and diversify into some super-safe income generating investments which pay only 3% per year. I believe in the safety of a good portion of a retiree’s investments being in super safe GICs, because the stock market may not continue to feature the returns of the last 32 years, especially if a major war or pandemic were to break out. I now need the certainty of knowing that even if equity markets tumble and do nothing for decades (as per the 1970s), that my financial future would still be OK. I hope that FIRE aspirants take that into account in their planning.
Those are some interesting links.
For my own planning, I formerly used retirement advisor.ca (which was free, but sadly discontinued recently). I have also used Retireware. Now, I use the newly sophisticated retirement calculator at Service Canada. I would counsel that potential FIREees do likewise, for a least a few years prior to FIREing. The quick 5-minute calculators on various banking websites don’t have enough detail to give a comfort-generating analysis.
Let’s get back to you. You had a great paying job. How did you save and invest over the years? What do you invest in now and why?
I’m almost fully retired now, I sold my partnership interest for less than you would probably guess in my small Airdrie firm in Dec of 2017; however, I now pinch-hit when the firm is overly busy; perhaps working 10% of a full load. (Being in a small law firm is a bit like being in the mafia; just when you think you are “out”, they suck you back in).
You know, we weren’t terribly frugal, but like I mentioned we always maxed out our RRSPs, and more recently TFSAs. We also contributed to RESPs, and more recently a Registered Disability Savings Plan (RDSP) for our cognitively challenged daughter. Our RRSP investments were very aggressive until 2007, probably too aggressive in hindsight, but we were more lucky than smart.
We also paid off our home mortgage very quickly. Again, we had good paying jobs, even though my wife taught half-time after our kids arrived. Despite the jobs we also did the simple, smart things I think others should consider:
- Rule 1 – don’t be house-poor
- Rule 2 – almost always buy 2-year old cars (and drive them into the ground)
- Rule 3 – take modest vacations – ours were typically at the lake, first at our parents’ cottages, and later at our own modest place, which we sometimes rented out in the winter. We rarely took winter vacations.
In short, we were not terribly frugal; nor extravagant. We watched our money very well.
In the ‘90s we got lucky with high-flying equity mutual funds, particularly resource funds, and our RRSPs grew, sometimes by 25 or 30% per year. Sometime around 1995 I read an article in Canadian MoneySaver about seasonality in equity markets, and the probability of markets dropping most of the time in September and “Scary” October, and I started cashing in my equities around then. I have done that ever since for what are now my ETF replacements for mutual funds.
You know what – this has saved me many drops, especially big ones in 2001, 2007 and even last year. This back-fires once in a while, but not enough to negate the probabilities. This is part of momentum investing and I call this “The October Strategy” in the mutual fund newsletter I initiated in 2002. The debate around momentum investing has filled tomes, and some of it is on my website. For sector mutual funds, and their better ETF cousins, I am a firm believer that as long as rebalancing happens two or three times per year, and your investments are sufficient to justify the $5- $10 transaction costs, momentum works. We switched from mutual funds to ETFs circa 2007. We still do autumn fall-out, and 3-times-per-year partial or full rebalancing of momentum seeking equity ETFs; these tend to be sector funds, and typically not Canadian. We no longer take big positions in small sectors or sole countries; but often take small positions in narrow sector funds, balanced off by some ultra-low-MER broadly based ETFs.
Since semi-retirement in 2007, half of my equity investments have been Canadian dividend payor-champions (which I know you’re a fan of!); those I don’t sell in September due to a risk in missing a valuable dividend. Prior to 2007, I followed David Stanley for some years in Canadian MoneySaver. The success of his “Beating the TSX” strategy was a big factor in my decision in 2007 to invest half of our equites in Canadian dividend paying stocks. The good part of this strategy that you’re aware of Mark – on your Dividends page and via your monthly updates is: the strategy helps with discipline. Investors could do far worse than this approach.
Since 2002 we have averaged 9% per year on our equities, both ETFs and Dividend Champs. In the ‘90s we probably did better, but I don’t really have any solid evidence to back that assertion.
Our conservatism in 2007 also meant de-risking with a good dollop of plain old vanilla GICs and MICs (Mortgage Investment Corps), which MICs have varying degrees of risk, but are largely uncorrelated to stock markets. At retirement, my wife and I each had seven figure nest-eggs, including her pension. We’re very fortunate.
I’m a fan of dividend paying stocks and low-cost ETFs for my portfolio. What flaws do you see in my approach?
None really, except that I would counsel taking on some income generators like GICs and perhaps MICs, especially in retirement. Some wise investors remember the 1960s, and especially 1970s, when stock markets were poor for a long time. Personally, I will hate bonds and bond funds until interest rates “normalize”.
My advice to readers is if you have kids, start a family RESP. If you have a disabled person in your life, use an RDSP.
If you have the time, you might also consider autumn abstinence like my “October Strategy”. But how I invest is not for everyone. In fact, there are risks involved and it’s suitable only if you have the time, and a sufficient nest egg not to worry about transaction costs.
What’s going to keep Dale busy in retirement?
Well, I work 5-10% of a full load as a lawyer. That, and my newsletter (and handling investments for my extended family and friends) takes up few dozen hours per year. I started a blog some years ago (thanks for the link below Mark) but I found that yours was filling the niche to which I would have aspired. My blog became an investment and personal finance manual per se.
Since my “retirement” I took on the volunteer chair role at the Airdrie Community Foundation and became president of my local Rotary Club. I’m also part of a volunteer program with Rotary and Inclusion Alberta which finds jobs for, and mentors cognitively challenged adults. I play in two amateurish rock’n roll bands, curl twice a week, play rec hockey, senior slo-pitch, and am an avid (but mid-handicap) golfer, and lake nut near my original home town in Saskatchewan.
Now that we have some time and money, we plan to continue short sun vacations to Mexico and Phoenix in the winters, summer vacations at the lake, and possible partial snow-birding, when our daughter becomes more independent.
In terms of investing, I’ll consider getting even more conservative as I get older.
Back to you, keep up the good work; I try never to miss your Friday round-up. The single best investment? Education in personal finance, for which your blog can continue to play a significant role. Well done Mark.
Kind words and high praise indeed! Dale has done very well for himself and I only wish him and his family the best. Visit Dale’s site over at:
…to see that manual he speaks about above and learn more about his passion for investing.
Thanks to Dale for this extensive post. What’s your take? Got questions for Dale? Fire away.