Reader Questions – Saving and Investing Updates

Reader Questions – Saving and Investing Updates

I appreciate hearing from you and receiving your saving and investing questions so I can share some updates.

I’ll be the first person to acknowledge our saving and investing approach might not be suitable to everyone however I believe things are working out pretty well so far thanks to the following – some multi-decade saving and investing discipline:

• We put a high priority on saving for investing purposes each month.
• We keep our money management fees very, very low. We don’t trade stocks or ETFs. 
• We have a plan to kill off our mortgage debt prior to semi-retirement. 

Saving and Investing Updates

I originally posted this article back in the summer of 2022 but I wanted to update it since even over a year, things change, including more reader saving and investing questions in my inbox to answer!

(Reader questions are in bold, my answers follow.)

Mark, can you remind me how you built your dividend income portfolio? What stocks you own and why?

You bet 🙂

See link here.

How I built my dividend portfolio

Mark, I notice your dividend income updates keep going up even when the broader stock market is going down or sideways. How is that possible? Can you comment on that for me? I think that’s probably because: 1) you invest new money, and/or 2) you reinvest all your dividends and distributions often and/or 3) you’re counting your dividend or distribution increases as well. Is that correct?

Yes, yes and yes!

Let me answer each one of your questions or points. 

1. Yes, my/our dividend income is going up over time thanks in part to new money added to our TFSAs, first, every year and then some taxable investing if possible. In fact, every year, since 2009, my wife and I have been maxing out our TFSA contribution room. After the TFSA is maxed out, and after all RRSP contributions are made, if we have any money leftover we invest from time-to-time in our taxable account although that is very infrequently since there is only so much money to go around…

A gentle reminder:

Managing the refund well is the linchpin in the RRSP vs. TFSA debate

2. Yes, the chart below is consistently on the rise over time thanks to reinvested dividends but only inside our TFSAs. I try to avoid interrupting the power of compounding!

From our May 2023 Dividend Income Update:

3. Yes, we are fortunate that many of the stocks we own increase their dividends year after year – even coming out of a pandemic! So, when dividend increases happen, that tends to increase the dividend income year-over-year as well. 

Mark, I read your post about how much do you need to retire on $5,000 per month or $60,000 per year with great interest – that’s my target! Honestly though, do you think most Canadians can either save that much up OR could even retire on that with higher inflation?

Thanks for reading and here is that post you referenced in case others want to read it too!

How much do you need to retire on $5,000 per month?

In terms of your first question, my answer is yes on the condition that many Canadians need a modest, sustained salary coupled with long-term investing discipline to realize that investing goal.

(I suspect that double-double is rare for some Canadians however….)

In that case study, my case study couple needed the following saved up by age 50 to spend $5k per month throughout retirement:

• x2 TFSAs = about $150,000 each ($300k total).
• x2 RRSPs = about $400,000 each ($800k total). 
• x1 Joint Non-Registered Account (Rebecca from case study) = $250,000. 

___$1,350 million. 

These seem like very big numbers in many accounts, I can appreciate that, but like I mentioned in my answer above, you don’t actually need to save that much money for retirement since time invested and the power of compounding does much of the work for you…

As for your second question, “it depends”!

I know some retirees that live on $4,000 or so, per month, debt-free, quite nicely. 

Here is a good example of retirement on a lower income:

Can you retire early on a lower income?

I know other retirees have told me they couldn’t possibly imagine living on less than $6,000 or $7,000 per month. 

I wrote years ago I believe it depends on what you spend to determine your “enough number”.

I still feel that way today.

Consider what you spend for your enough number

I also like this sketch 🙂

Reference: The Behavior Gap.

Here are some other detailed case studies on my site if you want to benchmark where you’re at and where you might be headed:

1. This couple has $1.2 million saved up for retirement but no company pensions. Can they retire?
2. This couple wants to spend at least $50,000 per year in retirement. How much do they need?

Mark, I know you get a 42% income boost by deferring your Canada Pension Plan (CPP) benefit from age 65 to age 70. Are you going to take CPP at age 70?

Correct, and yes. That’s largely our plan ahead. 

We are very likely to take both OAS benefits at age 65, CPP at age 70. 

I’ll keep you posted!

What are your thoughts on inflation? Is higher inflation here to stay?

Yes, I’ve been planning for that since late-2021: This is how I’m investing for higher inflation.

As you approach semi-retirement, are you going to change your portfolio? Own more ETFs? Own more stocks? Own more bonds? Other?

Not in my plan at least!

Here are other saving and investing updates:

1. I will continue to own low-cost ETFs for some extra diversification beyond Canadian borders.
2. I don’t see any reason to change my current stock holdings. I keep most of my dividend stock holdings updated on this page here.
3. Beyond investing, we’ll simply kill off the mortgage debt remaining. Our balance is under $35,000 at the time of this post. Once the debt is gone, within a year (??), I believe my wife and I will be in a financial position to consider part-time work / work in semi-retirement. 

I/we have no plans to own any bonds near-term. 

There is a case to own bonds, I just don’t have any plans to do so.

Reminders from the article:

“Bonds haven’t helped offset losses in the stock market this year. And high inflation has been a double-whammy against fixed income assets. But bonds can still play a role in a well-diversified portfolio. They can still protect against deflation and disinflation in the economy.”

Do you invest in any preferred shares?

Actually, I do not. This is the reasoning behind that. 

How often do you check your portfolio?

Probably about once per week or at least every two weeks – largely to tally my growing dividend income. Ha.

Readers, keep your questions coming. I enjoy trying to keep up to every email, every comment and every interaction on Twitter with me.

In future Reader Questions editions, I’ll dive deeper into sharing just how much total income I think our portfolio could generate, and what we need to earn, to start semi-retirement with. 

Thanks for reading and sharing. Drop me another question or comment below!

Mark