July 2022 Dividend Income Update
Welcome to my July 2022 dividend income update – and again – I hope you’re having a great summer…
In case you missed it, last month, I posted this income update by answering a few reader questions.
I’ll do more of the same in this post.
Read on and enjoy, questions in bold font and my answers follow!
July 2022 Dividend Income Update – Q&A
Mark, are you investing in your taxable account as well this year? How so?
In a word: “yes”, buying a few BTSX stocks but in also some of these.
Mark, are you worried you’re missing out on gains with your dividend income approach?
I actually covered that answer a bit already and you can read my reply here.
As I get older, and approach semi-retirement, I’m more concerned that my portfolio can deliver meaningful, growing income vs. the need to sell any assets.
I’m also focused on the income that our portfolio can generate to cover our day-to-day expenses – that’s always been our primary long-term goal to enter semi-retirement with.
I’m not relying on any 4% rule for semi-retirement.
The 4% rule doesn’t work for FIRE. Those details can be found here.
I believe if you want to know how much you need for retirement, you really need to figure out how much you want to spend, with some margin of safety built-in.
For us that means:
- Our dividend income covers most expenses for semi-retirement to begin, and
- We have our cash wedge established.
And, of course, we have no debt.
Given our mortgage debt is scheduled to be gone in just over two years, well, that’s when semi-retirement is expected to begin. I’ll keep you posted if we decide to accelerate that date 🙂
What is your target spend in semi-retirement? It’s more than $30,000, right?
Yes, it is.
We figure our spend will be about $4,000-$4,500 per month without any major travel or “extras”.
My math tells us condo fees, Ottawa property taxes, utilities, subscriptions, and other monthly recurring bills are likely to cost us close to $2,500-$3,000 per month in 2024 dollars if we semi-retire that year. Food and transportation is likely another $1,000-$1,500 per month on average.
The goal is for our portfolio to largely cover all these expenses above without selling any assets, certainly in the first 5 years of semi-retirement. Our thinking is we will keep our portfolio largely intact throughout our 50s and potentially into our early 60s.
We figure we can pick up part-time work or occassion work to cover the international travel and extras in our 50s.
All told, if we include international travel a few times per year and other desired spending wants, we believe our total semi-retirement expenses will be approaching $6k per month on average. That seems to be a pretty good lifestyle for us and I suspect it would be for others striving for retirement as well, without debt to service. Of course, personal finance is forever personal…your mileage could vary.
We could of course spend more and work full-time longer. That’s not very appealing to us at this point!!
July 2022 Dividend Income Update Summary
Readers, keep your questions coming since I enjoy trying to keep up to every email, every comment and every interaction on Twitter with me as well.
Our July 2022 forward dividend income is now $27,519.
- That’s over $2,000 higher than just January 2022.
- That’s just over $300 more than just last 30 days.
To put that income into perspective:
- Almost half of that annual income is tax-free. Yes, all true my friends. We won’t pay any tax on any income when withdrawn from our TFSAs.
- Our forward dividend income continues to rise every month. That’s thanks in part for three reasons:
- Dividends are reinvested inside our TFSAs, all the time…
- We make new, strategic purchases a few times per year inside my taxable account…and
- We are fortunate to get some dividend raises a few times per year.
- Assuming we stay out of our own investing way (ha!), I anticipate we’ll surpass at least $28,000 in dividend income earned from our taxable account and TFSAs (x2) later this year – well beyond our initial target!!
- $27,519 in annual dividend income translates to earning $2,293.25 per month. A nice base for sure excluding RRSP withdrawals, my small pension, my wife’s small pension and more.
- This income also translates to earning about $75 per day.
Coupled with future RRSP withdrawals that will begin in a few years, we’re getting there.
Thanks for reading and sharing, and another reminder to please bring forward your comments and questions for any future updates!
I was wondering where a person’s corporate investment account may play a role in retirement planning? Would this be the last account to tap into when retired and it becomes a holding company when the corp. is no longer active or do you see there needs to be a strategy for the timing of when the assets of this account would ideally be taken out- being taxed at a person’s marginal tax rate I presume? In your case, where does your own corp investing factor in to your draw down strategy with semi-retirement and beyond? So many moving parts to keep track of 🙂
Thanks for your detailed question, Sue.
It really “depends”. At Cashflows & Portfolios, for folks with larger corporation balances, we see advantages to reduce the value/drawdown the corporate account if they don’t plan on passing on the account via estate/legacy in the earlier retirement years. This is because, as you have rightly pointed out, income is taxable at personal marginal rates. You might be interested in this post:
When it comes to my plans, I have a small corporation, so I’m likely to take some (small) dividends each year in semi-retirement but I’m still not 100% there yet in doing that. I will probably keep my corporation throughout my 50s, slowly wind it down over time to smooth out taxes and income needs. The corporation is likely gone/out of money in my 60s. I will spend personal assets after that (re: RRSPs/RRIFs to wind down, then spend TFSAs, etc.)
That’s the current thinking anyhow! 🙂
It is a interesting situation for many- we spend decades in the accumulation phase for retirement or atleast having that mindset. It is important to consider along side that, what the drawdown picture will look like. Alot of food for thought because I don’t know how/when this process will happen for me, apart from knowing that the TFSA’s will be the last account to tap into regarding the capital. It makes me realize too how important asset allocation and what the asset mix is in relation to how to go about the draw down phase. It feels quite daunting to me to even think about the drawdown phase and perhaps some of your other readers feel the same as I do about that.
It’s quite daunting for me to think about that as well, Sue!
I’m thinking about it a lot more since a) I know it’s on my mind more with 2-3 years of full-time work left before part-time work, and b) it’s on the mind of many readers since I get lots of questions 🙂
I think drawing down RRSP/RRIF assets in the 50s, 60s, and 70s is generally tax-smart to smooth out taxes. This basically leaves either the TFSA or non-registered or a mix of both in the later years which can also be tax-efficient. That is absolutely our plan and more to come!
I agree with you Mark! In fact, I am the risk taker in the family when it comes to this sort of thing! That being said, I find your advice so helpful, sound, and grounding!!
One more question I have is should we be cashing out RRSP’s now (me – age 52, hubbie – 56) to maximize TFSA? And Maximize TFSA amount until age 65 for each person?
I’m learning a lot from your blogs. My H and I were good savers but now we have to learn how to withdraw tax efficiently. Retired for a year now. We have most of our savings in non registered in TD eseries index funds. The remainder of our maxed out TFSA and RRSP are in index ETFs. Happily, we have defined benefit pensions that are enough to live off. The savings are our FUN money. We are currently withdrawing H RRIF before he claims CPP. Then we’ll begin drawing down W RRIF before claiming CPP. My question is I’m wondering what’s the best way to move Non registered eseries into Dividend earning stocks. Sell all at once, triggering a larger capital gains or sell gradually over years. Or leave it the way it is. Based on your blog I’m thinking it would be nice to be able to access this money through regular dividends rather than worry about selling when the market is lower. Also, when moving investments from one vehicle to another does the “sell high” mantra even matter because if you sell high you also will be buying high likewise if you sell low you will be buying low?
Nice to hear from you, Kat!
Thanks for the kind words – it’s very nice to read that.
TD e-series are good funds…and indexing is very smart, as you know.
The overall approach to slowly winddown some RRSP/RRIF assets before taking CPP at age 70 is very wise – tax wise. We (Joe and I my partner) do a lot of work at Cashflows & Portfolios to show some clients some options about that!
To your question: what’s the best way to move Non registered eseries into Dividend earning stocks?
Well, not advice, but I would do it slowly since unlike Lump Sum Investing (LSI) I personally don’t know when I could be selling low. I would gradually sell it off to avoid triggering major capital gains in any given year.
To your question, I have slowly built up taxable investing account to provide a small dividend income stream whereby I would not need to sell any assets (unless I wanted to!) to fund some semi-retirement expenses. That’s always been my plan for well over a decade now, but I like it, so I’m biased.
You can always “create your own dividends” by selling assets over time, but that’s not for me at this point in my life.
Thoughts? Happy to talk through more since there are many ways to decumulate assets for sure!
Thanks for the replies. I will continue to take out extra funds from my RRIF until I collect CPP next year at 70. I will then reduce the withdrawals to reflect the extra income. Transfers from my non-registered account to the TFSA in January will continue as that account is golden.
Keep up with the good advice and comments, ladies and gentlemen.
Jan, without running the numbers of course, I believe that general plan is excellent:
1. Take out RRSP/RRIF money, strategically, small chunks every year, and move to TFSA if you don’t spend it all before age 70.
2. Move some non-reg. $$ to TFSA, as needed, to max out over time.
3. Take CPP at age 70 for income boost, inflation-protection, AND survivorship benefits.
Not advice without seeing any math, but the more you can defer CPP AND meet your current income needs in your 50s and 60s, that is smart I believe.
Also, any time you can max out the TFSA, over the years, that is also very smart since TFSA = tax free income. The more, the better.
There are so many scenarios to consider within all of this. Each person is different as to wants and means. Plus add in your upbringing and work/life trajectory through the last 40 years or so.
I went through a divorce in 1990 and my main goal was to be alive to see my kids (1. 4. 7) on their own. Lived through re-mortgaging the house at 15%. My main objective at that time was to pay down the mortgage and try to save as much as possible to be able to retire without being a burden to the kids (they DO grow older – LOL) and maybe help them out. So without knowing the future (went through two employer changes) I piled money in to the RRSP and when it became available the TFSA.
So now I can say that life has basically been good to me. The kids are all working in good fields (read make more money than I ever did), And piling all that money (maximizing contributions) in to the RRSP has led to clawbacks starting this year.
My advise to you is grow your funds, whether they be the TFSA or RRSP, as much as you can when you start out. You can adjust your goals as time passes. Your salary and how secure you are in your employment play a lot in to how you squirrel money away. Plus all the other incidentals like getting married, starting a family and lifestyle.
Projected dividends for this year are approx $116K subject to market variations.
Remember that nothing is written in stone, You can be rich one day and poor the next.
Very true: “There are so many scenarios to consider within all of this. Each person is different as to wants and means. Plus add in your upbringing and work/life trajectory through the last 40 years or so.”
Life seems to very good for you, Ricardo.
I mean, healthy, happy kids and your own health – with some $$ to spend – what more can life offer? 🙂
If most Canadians could even strive to max out their TFSAs, every year, that would be a HUGE step in any personal retirement planning.
Thanks for your comment and readership.
Great info, as always, Mark! I did notice that Morningstar dropped it’s rating for AQN to 1 star. is this a concern or they are just reacting to the market right now?
They have a lot of debt on the books and I think Morningstar is not a fan of that 🙂
I’m not either really.
Their debt has been growing – but largely because of acquisitions and funding projects. The stock price is not moving because of that.
That said, I have some trust in this company that their renewables/portfolio will shine long-term so I’m adding a bit here and there.
I certainly wouldn’t put more than 3% of my entire portfolio in this company, and don’t, for those debt reasons just in case 🙂
I keep a 5% rule whereby I try to avoid any one stock being more than 5% of my entire portfolio weight – for those risk reasons that stock prices go down and/or such dividend payers cannot increase their dividends like I really want them too! 🙂
I agree with you Mark! In fact, I am the risk taker in the family when it comes to this sort of thing! That being said, I find your advice so helpful, sound, and grounding!!
Ha. Thanks. I’m pretty boring when it comes to investing (and I like to get paid = dividends + low-cost ETFs for growth) but boring works for me!
Mark, I am wondering about the logistics of living off your dividend income when a chunk of it will be in your TFSAs. Do you plan to withdraw this income? It will give you additional contribution room in the following year but with no new contributions to your non-taxable accounts, doesn’t that mean that you will have to transfer funds/investments into your TFSA for the contribution? That would then trigger additional capital gains taxes.
In my situation, I am reinvesting the income in my TFSA and not withdrawing it in my retirement. Which results in selling some investments in my non-registered account in about the same amount as the income in the TFSA. I hope my questions are clear but if not, let me know what questions you have.
Thanks for the blog!
I’m sure Mark will weigh in on this but I thought you might like another opinion as I’ve given this some thought in the past.
If the dividend income from a person’s non-reg account doesn’t cover all the expenses, then I’d probably withdraw the dividend income from the TFSA on an ongoing basis throughout the year. If a RRIF isn’t involved in the equation, then at the start of the next year, I’d do an in-kind non-reg to TFSA transfer for an amount that matches the new total contribution room and just take a hit on the capital gains.
If a RRIF ins involved, then I’d do a lump sum withdrawal of the required amount around Dec 20th of the current year and use that for the TFSA contribution on Jan 1st. (assuming the dividend income for the current year is sufficient to match the required minimum withdrawal).
As an aside, our situation is really easy as my wife & my non-reg accounts generate more dividend income than we need so we just re-invest the dividend income from our TFSAs and from my wife’s RRSP. I just accumulate my RRIF dividend income for my annual Dec 20th withdrawal. If there’s extra, I just buy more of what we already own.
With the extra non-reg dividends, we pass along some annual early inheritance to our kids, add to the grand-kids account, and buy additional shares of what we already own. The non-reg buys mean we suffer more OAS clawback but for us (in Alberta), the total marginal rate including the OAS clawback factored in is still only 27% so still well worth it.
You read my mind, Don.
Our TFSAs are there “if” we need them in our 50s, to easily withdraw $10k or more in tax-free dividends each year without touching the capital every year.
That said, our plan is to slowly wind down RRSPs/RRIFs before age 71 – such that eventually in our 70s and 80s we have converted tax-deferred income (RRSPs/RRIFs) to tax efficient income (taxable via CDN stocks) and to tax-free income (TFSAs).
To Don’s point – say we withdraw $20k each from our RRSPs in December, if we feel we don’t need the money for next year, or not sure, I will put some of that money into the TFSA. This way, tax-free money is compounding vs. not. 🙂
The punchline is for us: any money not needed inside RRSPs/RRIFs for spending and/or money I can move from non-reg. each year to either TFSA will be done 🙂 The longer I can max out TFSAs for us while meeting our spending needs = the better for overall taxation and estate planning.
You have a great plan, Don!!
You have a most excellent plan. I especially like you trying to wind down the RRSPs/RRIFs. That will really reduce the future taxes and OAS clawbacks.
We did try pretty hard to draw ours down a bit but it was such a market run from 2013 onwards (my retirement year) that even though we were withdrawing up to a combined $100k in some years, they just kept growing. In hindsight, I would have stopped contributing to our RRSPs a few year earlier (but such is life). Also, having a TFSA at a younger age would have been huge and TFSAs are definitely the best investing vehicle. (way better than RRSPs)
I converted my entire RRSP to a RRIF at age 65 to make portfolio management and income splitting easier and to get the $2k old age pension income amount. My wife will wait until age 71 to do hers. In hindsight, I probably should have only converted part.
The end result of the above two is that we will get just under 20% of our OAS clawed back in the next few years. Once my wife converts to a RRIF, we will lose quite a bit more of our OAS. This is part of the reason we both took OAS at 65 is that we will have these 7 years between my wife’s 65-71 ages with smaller clawbacks.
I certainly enjoy all these calculations and planning!! I really give Excel a huge workout. 🙂
Keep up the good work
Thanks very much, Don!
Yes, having TFSAs earlier would have been HUGE for you….but you’re doing all the right things as you know.
I will likely do the same, convert everything leftover in RRSP at age 65 to RRIF re: get my pension credit.
(I will draw down the RRSP before that though for sure in my 50s and 60s.)
In doing so, I should almost assure no OAS clawback for either of us and/or I can use RRSP withdrawals for money not spent in any given year to max out the TFSA(s) 🙂
I could think there are worse problems to have, in my 60s and 70s, to have a maxed out TFSA (or both TFSAs ideally), with hundreds of thousands of dollars compounding away tax-free to live from, along with CPP and OAS benefits.
Like you, I believe sooooooo many Canadians need to consider drawing down RRSPs/RRIFs in their 60s and well before they have to by age 71 for tax reasons but also to enjoy the money they worked so hard for 🙂
Love the questions!
Well, the goal of the dividend income updates (each month) was always and remains – to try and reach $30k with only our TFSAs + my taxable account, this way, coupled with RRSP withdrawls, my DB pension, my wife’s DC pension and then government benefits – we should have “enough”.
Here’s our plan for about 2024, give or take:
1. Work part-time.
2. Live off dividends from taxable account.
3. Withdraw from RRSPs, slowly, for 20 years.
Doing 1, 2, and 3 should be “enough” in our 50s until age 60 or so – whereby we don’t even touch TFSAs at all; we don’t touch any pension money, we don’t touch government benefits because we are too young to do so. The TFSA assets are there if we need it for semi-retirement.
Every year, to your question, I/we will have new TFSA contribution room. Our plan is to slowly wind down RRSPs/RRIFs and move any money we don’t spend from RRSPs/RRIFs to TFSAs. I/we may also slowly move some non-registered assets to our TFSAs as well.
Ulimately, a few decades from now, it is our hope that as long as the TFSA is around, most of our retirement dividend income will be from the following sources:
1. TFSAs – no tax
2. x2 CPP – minimal tax
3. x2 OAS – minimal tax.
I don’t expect to have any RRSPs/RRIFs, LIRAs/LIFs, etc. in my 80s and beyond. Just some fat tax-free TFSAs, CPP and OAS income for both of us.
Capital gains are OK for me in semi-retirement when my total income is a bit lower than now. Capital gains are an efficient form of taxation – especially when they are done strategically when your income is low. 🙂
Hope that helps and provides some insights!
Mark- Always enjoy your info- glad to see you steadly going up! Keep it up and keep us posted.
Very kind Ed, thanks very much and will keep going!
Great. Always good to read your updates and see progress!
Well, I have to try and catch up to others 🙂
Thanks for the kind words and continued motivation.