March 2023 Dividend Income Update
Welcome to a new monthly dividend income update…
New readers to this site will learn more about my hybrid approach to investing through these updates. Long-standing subscribers will also learn about some portfolio additions too!
Read on and enjoy!
Time flies, but my approach stays the same…
Funny and interesting to look back at years of writing and blogging.
This month, I looked back at what I wrote in March 2013, a fond 10 years ago on this site.
In that post, I found my hybrid approach to investing was alive and well then too: investing in many Canadian and U.S. stocks for dividend growth while being mindful to index invest beyond Canadian and U.S. borders.
I had plans to pay off my/our mortgage and live debt-free by around age 50.
I already owned some Enbridge stock (my first dividend paying stock I purchased) among others, with the expectation to buy more stocks over time.
I also commented on the merits of the Tax Free Savings Account (TFSA) for income investing, the ability to earn thousands of dollars of tax-free income, eventually. I mentioned if I/we invested wisely, I predicted we should have:
“…an increasing pipeline of retirement income coming thanks to profitable blue-chip companies like banks, telcoms, energy producers, Real Estate Investment Trusts (REITs) and retailers.”
Thanks to the TFSA, a good portion of this retirement income will eventually be tax-free.
March 2023 Dividend Income Update
- We’ve maxed out contributions to those aforementioned TFSAs every single year.
- We’ve maxed out our Registered Retirement Savings Plans (RRSPs) to date as well.
- We’ve done a bit of taxable investing, although not a lot, since 1. and 2. take priority in that order.
- We’ve moved, paid down debt, and continue to march towards financial freedom by slaying the mortgage dragon.
The journey is far from complete but we are getting very close to realizing some major financial milestones:
- With every passing month, our TFSA dividend income moves automatically higher thanks to reinvested dividends and distributions from the assets we own. We’re now averaging over $1,000 per month in tax-free income (that is not even included in these updates – more on that below.)
- With maxed out RRSP accounts; assets churning out dividends and low-yielding distributions we believe we have the opportunity to “live off dividends and distributions” in the coming years as we work part-time. From a recent Ottawa Share Club meeting slide deck:
- With diligent mortgage payments over the years (although we could kill the mortgage tomorrow if we wanted to, with taxable assets, but choose not to), at 1.69% our mortgage obligation could be finally done within the next 12 months.
While debates rage on, our approach stays the same…
So many things in the personal finance and investing community can be polarizing to some people:
Do you invest or pay down your mortgage?
Do you max out your TFSA vs. RRSP first?
Do you invest for income or growth/capital gains?
And the list goes on.
Instead of being all this or all that on any subject above, I think you need to find out what works for you and move forward accordingly.
In a chapter of The Psychology of Money, author Morgan Housel reminded readers that it’s OK to be different and better still, it’s more than OK to remain different as long as you have a plan:
“…few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are. The main thing I can recommend is going out of your way to identify what game you’re playing.”
March 2023 Dividend Income Update Summary
At the start of 2023, I made some changes to how I/we report (part of) our portfolio income.
1. I removed all/any TFSA income from these updates. This is because our semi-retirement drawdown plan has us avoiding any early TFSA withdrawals. We will withdraw income/assets from our RRSPs and taxable accounts over many years before tapping tax-free income. That’s our thinking for many reasons.
2. Based on #1, I will include taxable investment income and projected RRSP income in these updates. Meaning, if our plan is to “live off dividends” from taxable accounts and slowly drawdown the RRSP assets, well, it’s helpful for you the reader to know what I’m dealing with and why in pretty much real-time.
Here is our updated Projected Annual Dividend Income (PADI) to report for March 2023:
Here is our chart:
To put this new monthy update into perspective:
- That’s averaging $3,399 per month or about $112 per day
- I’m forecasting about a 6-7% year-over-year income increase between 2022 and 2023 (which may be conservative, we will see!)
- We don’t intend to invest any money inside our taxable accounts at all, this year. We are focused instead on maxing out our TFSAs (first, like we do every year (now done)) and then maxing out our RRSP contributions very soon. After that, our plan is to save for 2024 TFSA contributions later this year and be ready to roll for new TFSA contribution room available to us as of January 2024. This is directly aligned to our previously posted 2023 financial goals. We’ll also travel a bit this year as well and we’re saving some funds for that in advance.
The bump from last month can be attributed to a few companies that paid us higher dividends and I/we made a small purchase of CNQ stock when it was trading at just over $69. CNQ is up 10%+ since that purchase date at the time of this post.
I look forward to sharing my next update for April including any new transactions!
My February 2023 Dividend Income Update.
This is my standing Dividend page whereby I list some of my stocks and why I own them, including ones that Beat the TSX.
How much do you need to retire on $6,000 per month at age 50?
- “End 2022” – actual income earned.
- “PADI Update” – this is our Projected Annual Dividend Income (PADI) for the year assuming no dividends are cut, no dividends are reinvested, and no new purchases are made inside these accounts.
- “2023 Forecast” – assumes some dividend increases may occur and/or some new purchases are made this year, inside the RRSP in particular.
- I/we report U.S. $ income and Canadian $ income at par (1:1) for simplicity even though it’s not perfectly accurate let alone there are future taxation implications associated with taxable investing and RRSP withdrawals. Your mileage may vary.
I see there are already some posts about non-TFSA dividends only being reported now. You could post the total dividends you receive from all accounts and also total post dividends less TFSA. At a glance, I found this confusing. Had to go back and re-read what you put. I get what you’re saying…ie not spending those TFSA dividends but isn’t there total dividends and total dividends less what’s being withdrawn?
I don’t post all income for privacy reasons.
I now report RRSP x2 accounts + Taxable x2 accoounts dividend income each month = these monthly updates.
I am not intending to spend any TFSA dividends or distributions for the next 10-20 years so little value in reporting that now.
I hope that helps?
Do you have an opinion on the evolve funds?
They have a few boutique ETFs for sure, Donald but I don’t own any at this time. Really depends on your investing approach I think (i.e., crypto ETFs) but I do believe for some higher yield ETFs those products have some merit vs. just cash. I am considering some higher yield ETFs to park some money myself. See this Weekend Reading edition coming out soon for more new details too.
Congratulations on staying the course for so many years! Great that your plans are coming to fruition.
Thanks very much JF.
Hope your investing journey is going well, too!
Great work on getting so close to your semi-retirement.
I wondered what your plans are for your corporation during your decumulation phase. Earlier withdrawals than later? Big chunk withdrawals or smaller long term ones?
Hope all is well with you, cheers, Alice
Thanks very much. I think, Alice (not sure yet?!) the plan is to slowly spend some cash / pay myself a dividend from the corporation over a few years (5-10 years) and keep the corporation balance modest. It will be small chunks since in semi-retirement, part of my cash wedge will be there too.
We’re in the process of accumulating our desired cash wedge now to have that in place for mid-2024.
My corporation balance is not very large to be honest but a good mechanism to divert taxation to that entity vs. personal at this time.
Great update. And congrats on the 10 year anniversary. You have no doubt helped so many along this journey. Kudos to you.
If I read correctly, your div updates now do NOT include divs from your TFSA any longer? So even more impressive if that is the case!
Correct. Since our plan is to live off dividends and distributions from RRSPs + Taxable accounts, and not touch any existing TFSA assets for the coming decade or more, then it makes sense to only report what I intend to live from while working part-time as part of my semi-retirement plan. At least, I think that makes sense to me 🙂
Do let me know your thoughts since that was my reporting change starting as of Jan. 1, 2023 here.
TFSA assets should compound away for the coming 10-20 years. That is my hope since I may/we may need that money someday.
Sure, it makes sense. Though you could technically also dip into TFSA dividends and choose not to re-invest them if you had to. Your new measure certainly gives you added flexibility. Side note, I’ll make changes to how I track ours too. I currently lump all non-reg and TFSA together. Opportunity to parse that out further. Thanks Mark!
Track them all, Bipin! I do – I just don’t disclose everything, all the time, for privacy reasons.
Continued success and stay in touch!
When I paid off my mortgage, I starting investing 75% of what the payments used to be and used 25% for lifestyle and vacations.
What is your plan once you pay off your mortgage Mark?
Good question 🙂
Well, I think once the mortgage is done, we’ll likely move to part-time work.
Without debt to service, costing us $2k per month, we won’t need as much income (to cover mortgage) to live.
Part-time work is essential still in our 50s since we aspire to leave most of the investment capital intact (with RRSPs, Taxable), I figure we can live off that for a few years.
When we get to our 60s and 70s, a small workplace pension will kick-in, + CPPx2 + OASx2 will kick in as well. We can likely stop all work (part-time work I mean) by age 60 for sure.
The idea for us is really once all debt is done, once we’re not servicing a mortgage, to work part-time and live off dividends per se.
Dividends that I report (in these updates) already cover expenses today like property taxes, house/condo maintenance and groceries without touching the capital at all ($3k).
That excludes TFSA assets., that excludes that small workplace pension, it also ignores future CPP and future OAS too like I mentioned.
We figure part-time work is likely to cover lifestyle and vacations.
Thoughts? Happy to discuss!
One of the biggest challenges I struggle with about retirement is how will I fill my day and still have purpose in my life. Sitting at home watching TV is not really an option for me. I know I need to keep active and while my wife and I will travel more especially when its cold her in January and February that still leaves a lot of time. Looking for some good charities that need volunteers to give back. I know you have your column here but have you actually went through the exercise of considering what you want to do in retirement and what will make you happy? I find the financial part easier than the giving life purpose in retirement and doing things that will make us happy.
It’s part of the reason why I need to work part-time: I need the income still (to fund a certain lifestyle I desire) and I need structure to transition to.
If I just wanted to be at home most of the time/do less, I could retire now but that’s not me. It’s not just financial, it’s about experiences and purposes in life. Always has been.
I have identified in a few posts what I will do in semi-retirement, those include but are not limited to:
-volunteer work, including my current company potentially and other organizations I believe in (like Ottawa Mission for an example).
-some time to grow this business/other businesses like the work I do at Cashflows & Portfolios.
-travel, including locally.
-winter – more walking/hiking/get back into skiing.
-spring/summer/fall- more golfing, biking.
-additional time to spend with parents/support them as they age (in their mid-70s now).
-potentially looking at writing a book.
“I find the financial part easier than the giving life purpose in retirement and doing things that will make us happy.”
I hear ya. 100%.
Thoughts on my initial list? Not much TV there! 🙂
Great job Mark. I made a purchase in March with some of the dividend income I had received and this put me over the $5k per month in dividends. This does include some from my TFSA. My dividend income is broken down as 64% in a RRSP, 24% in a LIF, 8% in a TFSA, and 4% in a margin account. At the moment I am drawing the minimum payment from my LIF which is less than half of the dividends I generate in my LIF each month. Because I took a 4 month contract at the end of last year into the first month of this year I built up a cash balance that I have been using to live from at the moment without touching my investments.
$5k per month in dividend income is very impressive. Wow, great work.
That’s a bit of my hope as well, with my employer, I hope to continue working with them part-time but you never know. They may not agree to that so I have to be ready to make changes but I don’t want to work full-time until I’m 55 or 60. So, I hope to potentially do what you have done; maybe some contract work, part-time work such that we don’t need to touch too much capital from investments for living expenses.
That’s the thinking anyhow!
Hi Mark ~ Great post as always! Possibly a dumb question, but asking because all my investments are enrolled in DRIPs so all dividends/distributions are reinvested. In order for you to “live off dividends and distributions in the coming years as you work part-time”, I’m assuming that the investments generating that income aren’t DRIPping. Instead, I assume the dividends/distributions are paid to you directly (or dumped into the “cash” portion of your portfolio account) so that you will withdraw them to fund living expenses. Have I got that right and if not, can you fill in the blanks for me please? All the best, and thank you very much, Barbara
Never any dumb questions!
Related to DRIPs, this is what I have done, including very recently:
1. No DRIPs/no dividend reinvestment plans running inside my taxable / our taxable accounts. All income flowing-in as cash.
2. Both accounts, all assets inside TFSAs (x2), now DRIPping and no intention of stopping DRIPs. Long-term compounding!
3. As of early 2023, I have/will be stopping all DRIPs inside our RRSPs and my LIRA. Instead, I’m going to let the cash build up over time as part of my cash wedge for semi-retirement planning and the ability to live off dividends/withdraw dividends as cash as I please.
Great questions, made updates here:
What do you make of my decisions?
Thanks for the scoop and for outlining your strategy, Mark! I particularly like the refinements in (3), to stop the DRIPs in the LIRA and use it to fund your cash wedge. I will likely do the same in due course. Cheers, BW.
Thanks. This way, I figure dividends build up as cash, I withdraw the cash/spend as I please each year, and continue to rinse and repeat over time until I decide in future years to start selling some of the assets.
Hi Mark , my question is that once you semi retire are you planning on adding 13k to your tfsa every year ? My tfsa pays me approx 17k a year with a 13 k deposit is 30 k a year I will have to cover through my rrsp and Corp. This is my second year of semi retirement and let me know your thoughts. Thanks
Hey Jeff, nice to hear from you.
Thinking the following:
1. Work part-time/slow down from full-time work. Priority #1 in the next 12-18 months.
2. Whatever we cannot fund from #1, make RRSP/RRIF withdrawals slowly.
3. If we need more income, spend taxable dividends.
4. We won’t be touching TFSAs (ideally?) for the coming 10-20 years. Not sure yet if we have enough $$ to max out those accounts beyond 2025 but we’ll see. Either way, TFSA $$ should double every 10 years so figuring $12k per year in TFSA income now is likely going to be about $40k+ per year in 20 years to drawdown.
I will wind down any corp. funds (not too much right now really) over the coming 10 years or so. Most of work I do with clients at Cashflows & Portfolios has clients slowly winding down corp over many years, folks usually pay themselves a dividend and also total income includes RRSP/RRIF withdrawals. Tax smart that way unless you have a plan to sell corp. and/or build generational wealth for family.
Hope that helps a bit?
What are some of the options for higher interest in an RRSP. We have our investments with Questrade and non registered cash with EQ bank. Are there products available with Questrade for higher interest? I know they have GIC’s but the funds will be tied up for the term.
I’ve been thinking about the CASH ETF, Kevin, for myself. I would need to check if you can buy it with Questrade. You can email them of course.
I haven’t pulled the trigger yet but likely to do so. I keep some non-reg. cash myself/ourselves in a savings account since I like being strategic when it comes to market prices going lower from time to time and it’s basically an emergency fund for us. We keep our emergency fund at this amount for now and have done so for about 6-7 years.
Everything else, beyond my corporation cash/assets is invested.
We also wrote this article, you might want to check out to see if Questrade offers these as well?
I invest in Questrade, and they do indeed provide access to the CASH ETF (CASH.TO). When my dividends come in, I buy CASH.TO. There is no minimum or buy fee, but there is a fee for selling, so it’s important to be confident that you’ll receive more in interest than the sell fee.
I wouldn’t use CASH.TO as a store for massive amounts of cash because it won’t be CDIC-insured.
I thought so, great stuff. Yes, Questrade charges $5 or something for commissions to sell, not buy.
I wouldn’t use CASH ETF for large sums either but maybe $10k or so could be good.
Great, smart points Bob!
Hi Barbara, once you decide to live off your dividend income you stop the DRIPs. In my case I have my investments in TD Waterhouse, but I still use my CIBC checking account for paying bills etc (I know, it would make sense to move to TD for my checking account). I was able to have TD link my RRIF, LIF and TFSA accounts to my CIBC account, so from the WebBbroker site I can transfer cash from these accounts to my CIBC account. I’m not sure if all discount brokers will link to external accounts.
Great stuff, Howard.
I’m a bit different in that I will continue my DRIPs for my/our TFSAs, since not touching those TFSA assets for another 10-20 years?, but I see your point and I will do the same. Once I need the cash for withdrawals, from RRSPs + Taxables, then stop all DRIPs, let the cash accumulate and withdraw the cash to spend keeping all assets intact.
Nice process, Howard. I have my parents set-up for RRIF withdrawals as cash, to their chequing, they spend from there. I will do the same at some point.
Don’t know if you do much trading but CIBC has a lower fee than TD for trades.
Seeing you aready have a CIBC account it might be worth your while to transfer.
A good review and projection.
When you say dividend income from your RRSP, I’m guessing you’re stating that’s what’s generating internally for your calculations to produce asset withdrawal from the RRSP. I know you (as most do who read this blog) know withdrawals are treated as regular income.
Thanks very much, Jeff.
Well, what will happen is I will withdraw all dividends and distributions paid to me/us, as cash, pay my withholding taxes as required and live off that with my taxable income + part-time work. Yes, fully aware, RRSP withdrawals are taxed as income but such is the nature of the account!
I hope that helps clarify.
You are on a roll, Mark. Wish you even greater success in the future. You are well on your path to becoming multi-millionnaire!!!
LOL. We’ll see, Ken but overall, time to think about some form of semi-retirement for sure soon based on our life plans!!
I apprecite the kind words.
I would hope that your 2023 increases by more than $1.3K between now and the end of the year Mark. I think your low balling it. Can’t trust these computers!
Yeah, I’m quite conservative at times!
Looking great Mark. Keep it up and stay on the same path with investing/debt. 👍
Thanks very much, Deane!!
Enjoy that trip. Seems very, very nice.