Retirement Numbers and Rules
Professionals from all walks of life and sectors have a knack for making the simple, extremely complex. Same goes for the financial industry. In the spirit of keeping things simple, I have updated some back-of-the-napkin examples about retirement numbers and rules to consider. These are good starting points for your retirement income planning journey but at the end of the day, when you need real math done, please consider a retirement income plan beyond these rules of thumb. I’ll link to my low-cost support at the end.
How much do you need to retire?
“It depends” is usually my answer.
Here are some updated retirement numbers and rules to consider answering that question.
Retirement Rule #1 – Rule of 20.
- The premise: for every $20 saved you can live off $1 in retirement.
Examples:
- On your retirement date: $300,000 saved and you can likely live off $15,000.
- On your retirement date: $500,000 saved and you can likely live off $25,000.
- On your retirement date: $1 million saved and you can likely live off $50,000.
This assumes your retirement date is in your early 60s, whereby you will also have government benefits flowing in soon too (e.g., Canada Pension Plan (CPP) and/or Old Age Security (OAS)).
Therefore, a 5% withdrawal rate with a $1 million portfolio is not an unreasonable withdrawal rate in your 60s, moving higher over time with inflation.
This rule makes some sense since you may recall the 4% safe withdrawal rate is still a decent starting point and more conservative at any earlier retirement age to ensure you don’t run out of money for the coming 30 years…
In fact, if you retire in your 60s, just following the 4% rule starting that could deliver years of underspending.
From the post:
So, 50% of the time (market returns willing) you will finish with almost X3 wealth on top of a lifetime of spending using the 4% rule.
“…the reality remains that by withdrawing at “only” a 4% initial withdrawal rate, the overwhelming majority of the time retirees just finish with a massive excess amount of assets left over!”
- The premise: take your anticipated retirement expenses (after-tax) and multiply this amount by 25 for your “retirement number”.
Example:
- I figure we could need $72,000 per year after-tax for our retirement spending with 3% sustained inflation starting in 2025 or 2026 when any part-time work is done.
- That means our “retirement number” is $1.8 million invested.
As someone who is a bit worried about having “enough” this rule could make sense but says nothing about variable spending needs.
A better approach, is likely following some sort of Variable Percentage Withdrawal (VPW) method.
I have a link below to some free VPW calculator tools in this post:
Retirement Rule #3 – Replace 50-70% of your income during retirement.
- The premise: take your 50-70% of your current full-time income and that’s what you’ll need in retirement. The thinking here is in retirement, some key expenses are gone: raising a family and/or paying your mortgage and/or saving for retirement since you’re in retirement.
Example:
- Let’s again use our desired $72,000 per year after-tax spending as our target, so pre-tax, while working, we are earning more than that today to cover our lifestyle needs.
The challenge I have with this rule is there is no accounting for inflation nor those dynamic spending needs I referenced above.
This rule assumes some spending today, ends in retirement: no mortgage, no saving for retirement but it is flawed in that it does not account for other expenses that may appear as a result: more travel, higher healthcare/aging costs.
I’ve included some of those considerations and more in our own Financial Independence Budget since I use a pretty robust inflation factor and conservative rate of return given we are close to 90% stocks and 10% fixed income/cash equivalents at the time of this update.
Retirement Numbers and Rules Summary
These are interesting rules of thumb but the most important work when it comes to determining your retirement number is figuring out what you’ll spend in retirement, and when.
Life can and does change.
So, consider my free playbook to guide your decision-making.
No course fee or newsletter to pay for below!
Without estimating your annual retirement expenditures and then revisiting those income assumptions year-after-year, I believe you can throw most retirement numbers and rules out the window – although these are decent starting points.
We have determined our financial independence budget that will begin later this year (2025) or early next year (2026). You will certainly need to determine yours too and I am happy to help anytime.
Any retirees out there want to comment? What rules of thumb did you start with to estimate your “retirement number”?
Mark
Want to your own low-cost retirement income projection?
Just reach out! I offer discounts when you do as a My Own Advisor reader for services that cost literally thousands of dollars less than the alternatives.
I am happy to offer discounts to DIY investors, by a DIY investor – anytime. 🙂
Check out my work along with my partner Joe at Cashflows & Portfolios.
My partner and I have been using various retirement projection tools over the years for our personal retirement income journeys and now we’re using these tools to help readers, DIY investors like you, with your personal retirement projections. We will answer your key retirement income planning questions like:
- Do you have enough to retire with your current lifestyle/spending?
- What will be your estate value based on your spending plans?
- Amongst your pension(s) or RRSPs or TFSAs or your taxable accounts, what accounts should you tap first to smooth out taxation impacts over time?
- Should you take CPP or OAS at age 65 or 70?
- And more!
Again, contact us anytime to learn more and get started.
Other popular case studies:
How much do you need to retire on $5,000 per month?
What you need to retire on $6,000 per month?
Mark
“What rules of thumb did you start with to estimate your “retirement number”?”
File this under the ‘Don’t do what I did” advice file.
I did no “planning” when it came to the timing of retirement. I knew I had my 18 years of pensionable service for my DB pension, the wife’s 27 years of pensionable service for her DB pension and my LIRA from ~17 years of pension credits. I knew these alone were probably sufficient to cover a decent retirement income. This allowed me to retire after meeting maximum pensionable credits at age 55. The wife was already disabled out and was eventually fired after 5 years on long-term disability. No planning or calculations were done and I don’t intend to do much of a plan looking forward. I believe we already have the bases pretty well covered.
The things I did do well (without any real knowledge of what exactly I was doing) was starting RRSPs real young (20 for me and 24 for the wife). My old man and the older guys at work who were a *lot* smarter than me were using them so monkey see, monkey do. I shoveled all I could into them whenever I could and used the rebate to pay down any mortgage debt I had if I could. The other thing I did was not waste a lot of money on *expensive* toys in my yoot (stereos, vehicles, etc etc). I saw no use in buying a new truck just for the polar bears to chew on it or the paint to get all scratched up driving off-road trails to go fishing. The boat was old and leaked a bit but it made no sense to buy a new one just to scrape it up dragging it over rocks and bouncing it around on the trails. This wasn’t a conscious “plan” but rather a small dose of good sense IMO.
In the end, it worked out well enough so….
Those are good income/base income sources, Lloyd!
I have found less “planning” is required with DB pensions overall vs. those that must save and invest all on their own.
You do seem to have many bases already covered.
With your lower-cost equity ETFs, I recall those churn out income and some growth = a nice mix for any retiree: XEI and/or XDIV.
I recall you own a smart mix of 40% GICs/HISAs + 60% equities via XEI, BAM, BIP, XDIV and a few smaller positions…
Overall, seems large doses of practicality and consistent living within your means has served you and your wife very well!!
Mark
My opinion is that “large doses of practicality” is a vital antidote for many diseases in the current world.
Congratulations Lloyd!
Ha, good stuff.
Mark
First, I want to say that I love these “living posts” that get revisited. I think it’s awesome that the first comment is from yesterday and the next one is from over 10 years ago. That says a lot about the value of this site!!
For us, “the number” will be the yield we get from our non-registered accounts, currently sitting at 5.99%. That’s what we will utilize every year. I’ve forecasted the average dividend growth rate at 3.26%. I’d like that number to be a bit higher, but I think it will be okay over the long term when compared with inflation. We will draw down our RSP’s over the first 10 or so years, and we will only use our TFSAs for the occasional budget shortfall or for an outsized expense (the usual suspects: windows, roof, furnace, around the world cruise, etc.), while we will continue to max our TFSA contributions every year.
We’re a little over two years away now. The other number is zero – for our mortgage! That is a priority over this next two years, and we should be able to do it!
~James
Ha, good stuff James.
It also means I’m getting old. LOL.
Generally speaking, since I see this A LOT with my work at Cashflows & Portfolios…if the yield and/or growth from your portfolio is > than withdrawal rate then you will have an estate issue or tax issue. Just the way it is.
While I have long since stated I prefer to “live off dividends” it’s more of a mindset vs. long-term plan for that reason.
Congrats on your mortgage work – good news the end is near!!
When we retired, we used the 4% rule. I chose a 60/40 portfolio. The 50th percentile of the chart below option 1 is more or less what has happened to us 20 years later. Have we deprived ourselves?? – No way. We have spent as much as we did when working. Made several trips around world. Golfed and sailed in warm places in winter. Have a fine home along with numerous cars and boats over the years.
Using the chart’s $1Million as a start, that would have given us $40k pa plus about $30k from OAS/CPP. This because we worked until we were almost 65. Retire early and this plan doesn’t apply! $70k was not bad 20+ years ago.
Our 60/40 morphed into about 70/30 as yields in excess of the 4%+ inflation draw were re-invested. Equities were in Canadian dividend stocks. We are now back to a safe 55/45 with the 45 including high yielding preferreds.
Some seem to imply that having about 2.5x the $1million is too much after 20 years?? Well if you still draw 4%, that will give you $100k plus OAS/CPP, maybe $140k. Twice the nominal value of what you had to start but only a little more than same buying value with inflaftion at 3% and higher taxes. Maybe a bit more than you now need, but that allows you to draw a bit less and build a fund that would cover possibility of retirement/nursing homes (have you priced those?). Or if you are lucky enough to maintain good health, provide a nice legacy for family members or even charities. What is bad about that? Sure the CRA will also benefit, they helped you get there.
This approach is possible with a 60/40 portfolio if suitable equities are chosen along with fixed income that provides a real return after taxes, and gambling on growth of high flying equity indexes avoided.
Amazing, Graham.
You’re one of the few folks I know that uses a 60/40 portfolio.
Quite the lifestyle: “…. We have spent as much as we did when working. Made several trips around world. Golfed and sailed in warm places in winter. Have a fine home along with numerous cars and boats over the years.”
Curious, did you simply “sell off” 4% of your portfolio every year and live off that when you speak of the 4% rule?
Other withdrawal approaches?
Yes, for folks that have done well, not uncommon in my retirement income planning work to see folks with $1M in RRSPs, wanting to spend about $72k or so per year, and be able to live off 4% age 60+ rather easily once you include CPP + OAS income streams.
How many Canadian stocks do you own now? U.S. %?
As you may know, we invest in both individual stocks + low-cost ETFs for extra diversification.
Further, if you have sold off 4% of your portfolio every year + inflation, seems based on good stock market returns that you might have MORE $$ now to spend some 20 years later than when you retired. I know some folks that have used a withdrawal rate of 3-4% in retirement and they now have MUCH more money 10+ years later in their portfolio than when they retired since their portfolio has been making 7%+ over the last 10+ years but they are only withdrawing 3-4%.
You seem to be a great case study for the art of possible. 🙂
So, in conclusion, seems you would agree with this?
https://www.myownadvisor.ca/weekend-reading-beyond-60-40-portfolios/
This reader could have a 60/40, likely “bank” on earning at least 6% over time from owning 60/40 mix and therefore withdraw 4-5% from their portfolio rather easily throughout retirement – never run out. The math seems to work and having readers like you validate that is great. 🙂
Mark
I had almost finished replying, and somehow my reply “disappeared”. Must have hit a wrong key???
Anyway, I am surprised you know only few that use the 60/40 allocation. When I retired, that was an agressive equity allocation for a 65 yr old. Moving to 80/20 or 90/10, as I see some have, adds a huge amount of risk. Fixed income does NOT mean bonds or the bond part of an asset allocation ETF. Our “fixed income” allocation has always had a yield that beat inflation+ taxes.
We have never had much in the US markets and right now almost nothing. We have about 22 dividend paing TSX stocks plus 30 in preferreds & 15% in GICS&Corporate Bonds. No bond ETFs.
Having more money in retirement years is NOT a bad thing. In fact it is neccessary if you want to draw 4% + inflation. And it could provide some peace of mind when markets crash as they recently have. Drawing down your portfolio may be neccessary for some, but living off portfolio income and building a reserve for possible late life issues or just for a leagacy, is possible even if you have only $1million to star + OAS/CPP.
Well, got this (your reply)!
Well, maybe to correct myself a bit, I guess I know more folks that hold 70/30 or 80/20 than 60/40.
I have about 90/10 now in semi-retirement/part-time work mode but that’s also because I have some income coming at age 65 via a small DB pension = I’ve always considered that a big bond.
https://www.myownadvisor.ca/got-a-defined-benefit-pension-plan-consider-yourself-lucky-then-consider-it-a-big-bond/
But, that said, I am growing my cash/cash equivalents position in 2025. I have since turned off all DRIPs except my LIRA and with our TFSAs; turning off all DRIPs such that cash builds up inside the RRSPs and the taxable accounts for future withdrawals and spending.
Interesting about the: “….We have never had much in the US markets and right now almost nothing.”
I prefer to own some ETFs that capture the growth of the U.S. market.
My boring XAW is up about 10% annualized over the last 10-years. Very happy with that.
But, with all the recent risks that come with the U.S. market, like you, happy to own about 25+ CDN stocks right now for income and growth.
We are also very similar in that we own no bonds/no bond ETFs.
I might buy up some GICs in the coming years inside my corporation for safety.
I agree with you:
“Having more money in retirement years is NOT a bad thing.” I have mentioned many times on this site I would rather have a tax problem to navigate in retirement than not at all. 🙂
Have you adjusted your withdrawal rate over the years?
My personal plan is likely to spend the dividends and distributions from the RRSPs + taxable accounts in the early years + make some early withdraws from the corporation if we are not working part-time.
That should be after-tax income of about $70k-$75k in 2026 and slightly higher in 2027. I haven’t thought about 2028 yet. 🙂
I appreciate your detiled comments and experience,
Mark
Hey Mark,
Great post and update. New comments are always enjoyed.
Make sure to stash your cash to spend in the following year. Ie; all dividends/distributions/ interest, etc earned in 2025 is banked for spending in 2026 (and so on). This way you neednt worry about when the next dividend payment arrives to pay your bills. A year before I retired, I turned off all drips and banked the cash for spending in year one of retirement. You’re in a good position to start that now. On December 31, its comforting to have all your money ready to deploy the following year. Market volatility? Who cares!
All the best
That’s actually kind of my thinking. 🙂
In 2025/now:
1. Turned DRIPs off (except my LIRA, x2 TFSAs).
2. Allow dividends and distributions to add up/build up over time as cash/fixed income, inside Non-Regs. and RRSPs, so that,
3. Spend the dividends and distributions in the following years.
We have our cash/cash equivalents ready for all 2026 spending – not intending to sell anything.
With DRIPs off – we are close to having all cash/cash equivalents ready for all 2027 spending. Should be ready later this year. Again, won’t need to sell anything hopefully in 2027 to cover spending since saved in advance. We want to spend $72k per year in 2026; maybe a bit more in 2027. We shall see.
If DRIPs remain off, other than maybe selling a few stocks (? TBC) then cash building up from late-2025 to early 2028 might be ready for another year or so of spending in 2028. 🙂
So, I like your thinking. Ha.
Your comments are always appreciated back.
How are things? How is the portfolio holding up?
Mark
As an additional note, if the dividends are growing over the years, so will your principal and in the long run, at about the same rate. By re-investing the dividends and adding more money, buying when prices are reasonable, your total returns will be high.
Many don’t consider Yield on Cost a valid measure of your actual return, but I do. If you take your initial investments, add dividend re-investment and the additional monies invested as your Total Cost, then by following the DG strategy, in 15-20 yrs your YOC will probably be over double digit. Yes inflation is a factor, but who considers inflation when they look at the interest they get from fixed investments, such as bonds or gic’s.
That’s exactly my plan: try to reinvest the dividends when prices are reasonable.
I think for many of my holdings, my YOC is in the double-digits but I know for cash flow Henry, as do you, it’s current yield that matters. It will be interesting to see if I can stick to the plan long-term.
The rules are a good guide during your early years, but like many have said, concentrate on the Cash Flow or Income your investments generate. Invest during your accumulation phase for income and watch it grow till you are ready for retirement.
I’m 72 with 100% equity DG stocks and no pension other than cpp & oas. Our dividends currently generate over $70,000 but I’m still re-investing most of them. Too bad the gov’t didn’t introduce tfsa years ago.
Stick with large, non-cyclical, DG companies, and re-invest the dividends till you need them in retirement. Don’t think about how much you need to save ($500,000, $1 Mill, etc), but rather how the money you save and have saved generates income and is the income growing. Bonds, Mutual funds and even etf’s don’t generate much income.
Thanks for the great comment Henry, I enjoy learning from people like yourself who have been there and done that. With part of my investing approach being dividend investing, I’m definitely focused on cash flow for retirement; building it now actually – so check out my most recent post.
That’s very impressive Henry: “Our dividends currently generate over $70,000”. Yes, for you, too bad about the TFSA. Do you use this account now?
I figure a $1 M portfolio yielding 4-5% should suit me just fine in retirement, the challenge is saving that much! I stay away from bonds, dividend stocks and equity ETFs only.
Your portfolio will grow to the 1Mill, rather than saving that much, if you invest regularily when valued priced, re-invest the div and avoid cyclicals. The problems with etf’s is you are buying a bundle where many of the stocks held are cyclical, non-dividend growers and very small yield.
Not to mention, what the fee will be with etf’s if your portfolio is a Million or a portion of a Million. Every dollar paid in fees is that less compounding of your money for retirement.
Thanks again Henry, this is why I do not like high-priced mutual funds or having to pay other people to manage my money. The more I spend on them, the less I can invest and keep for me.
I hope it will Henry, in another 14-15 years I hope. I would really like to retire early while I have my health and can do things.
Your raise a good point about ETFs, you get the growers and laggards. The challenge with individual stock picking is always finding the growers.
We max out our tfsa each year by transferring in shares of our highest dividend yield stocks.
Are you transferring in from your non-reg. account or RRSP or RRIF Henry?
I think my plan is to wind down the RRSP and move assets to TFSA, if room, and non-registered if not. Especially the CDN stocks I own in the RRSP that are not part of these dividend income updates.
When we draw down from our rrif’s I transfer shares to equal the tfsa max.
Gotcha. Seems like a good plan, RRIFs > TFSAs.
Henry,
You’re the guy I’d like to speak to. I’m preparing retirement income to be able to have an income in 2 yrs, currently age 69. Would be interested in hearing about your portfolio.
Janet
Henry’s a pretty sharp guy 🙂 Henry, care to offer a guest post about your portfolio and rationale behind it?
Mark
I’ve never thought about calculating my money to decide when to retire. Right now 60 is what I have in mind, but maybe I’d be able to retire eary… Thanks for sharing!
No problem, glad you enjoyed the post.
Rule no 1 was to tell our son that we would be spending his inheritance in retirement.
For several years before retirement we tracked expenses on a spreadsheet, easily done and it let us see how much was needed, how much was work life related (x coffees and lunch each day!). There is the target income after retirement and I suggest anyone can do that at any age.
Nothing magical after that it became a simple formula. We have $1m, if we invest safely at 3% in a world where expenses increase annually by 4%, will we have enough coming in to keep us going until mid 90s?
Lifestyle changes, in vogue bucket list projects, that is another discussion that we needed to have.
@Richard, I have no problem if my parents decide to spend my inheritance, it’s their retirement!
I think I’ll do the same when I get older, more diligently track expenses and find out where we are at. This way I know my burn rate. I figure a $1 M portfolio + pensions and of course, no debt should do it. Even if inflation runs close to 4% in retirement, if the portfolio can yield 4% each year generated by dividends and distributions I shouldn’t have to touch the capital. At least that’s the plan, so I need to save a bunch.
While this certainly is some food for thought. I’m inclined to go with the rule of replacing 50%-75% of your income to be on the safe side. After all, in retirement I’m not planning on having a mortgage and I won’t be saving a large portion of my income for retirement. Those are the 2 largest “expenses” in my monthly budget, representing over 50% of our family income. With that out of the way, even with some travelling and hobbies, I think we could easily get by on 50% of our current income or less.
Thanks for the comment, good to hear from you.
I agree, I think replacing 50%-75% of your income is certainly “safe”, for most GenXers anyhow. I know right now, lump sum payments on the mortgage, the mortgage itself and saving for retirement accounts close to 50% of our after-tax income. That will all be gone in another 20 years.
we have been retired for 8 years! i can’t believe how fast time goes by. in the 10 years leading up to retirement i thought $30,000. per annum would be great. however, after retirement things changed — travel, 6 months in a warmer climate (in a 5th wheel) and having fun with our grand children bumped that amount up to $55,000. per annum. thanks to our wonderful country we receive cpp & oas which has bailed us out. our portfolio is 75/25 (stocks/bonds) because we need income. rules are good but as mark writes BUT things change and they can change very quickly. my last comment is ” use your TFSA for gosh sakes — it’s a gift!!!
That TFSA is a gift!
Retired for 8 years Gary, that’s great! I think a 75/25 equity/bond split has treated you very well in recent years and you can reap the rewards of that with markets at an all-time high now. I think my wife and I will get some CPP and OAS, but we’re not counting on it in retirement. Those government programs will be icing on the cake for us and hopefully we can do the same as you Gary, use those programs to live it up a bit and travel to warmer climates for a few months each winter.
Thanks for the comment!
Agreed about TFSA.
We retired a few years ago and are living on just oas and cpp income, topped up by some other pensions. Our tax rate is impressively low at the moment.
We we drawing from our rrsp accounts to put into tfsa accounts while our tax levels are low. Better that than to pay more tax on rrif withdrawals when they become mandatory.
Your plan sounds pretty good to me, withdraw from RRSP in lowest-tax years and fund the TFSA with it if you don’t need to spend (all) that money. This way, you can avoid mandatory RRIF withdrawals and get your TFSA (tax-free growth and income) working for you sooner.
Congrats on the low tax rate with invested assets, nicely done.
I think for a personal finance blogger, I’m much less focused on retirement savings numbers than most. I prefer to keep my expenses in check, save what I can, and work on developing revenue streams that will hopefully last into the future even when I “retire”.
If there’s still decent money coming in during my later years, I won’t need to have a magic number saved to get by.
I still want to have a large nest egg for my later years, but it isn’t my biggest priority now.
You might be Stephen, I’m thinking about my “enough” number frequently, maybe too much 🙂
Your desire to keep expenses in check is always a smart move. Combine that with more income streams and you’re well on your way to financial freedom.
I think the $50 000 is probably for a couple, in which case if the savings were optimized using spousal rrsps etc (and now there’s pension splittling for older retirees) the taxes would leave about $22 000 each or 44 000. And that’s before the age amount.
I’m not sure most people have a fixed plan for retirement saving. I think many just figure if their RRSP still has room then they are failing. Unfortunately, I think that may lead some people to giving up, but I hope I’m wrong.
I was hoping you’d write Bet. My RRSP is also maxed out of contribution room, that should be done in another couple of years. My wife has lots of RRSP contribution room, hopefully we can contribute to that more in the years to come.
We definitely have a fixed plan for retirement saving, we consider it a bill payment of sorts to “pay ourselves first”. I too, wonder how many others do this…
Mark
Moving from the accumulation phase to the distribution phase of retirement investing is not easy! I’m near there. Asset allocation needs to change in that process. How? My own plan is not to retire until my minimum retirement living expenses (MRLE) can be met solely through riskless investments: CPP/OAS + gov’t bonds/GICs. This is presently difficult for me to achieve for obvious reasons (low rates!), but I’m getting there by re-evaluating my MRLE and saving more. So, I need to change the date of retirement somewhat. After achieving that, then I can have other risky assets such as equities and my preference is dividend etfs for inflation protection. But relying on equities (even dividend producing ones) to meet one’s MRLE can be a disaster because if a market downturn occurs at the beginning of one’s retirement and is prolonged then one can be in serious trouble! Equities are great when you are young but not always your friend in retirement.
Thanks for the great comment Harvey. We share a similar philosophy I think….I’m hoping to have our pensions provide for the majority of our expenses, at least >50%. This is my fixed-income. I’m looking at a combo. of dividend-paying, income-producing stocks and ETFs for the rest (50%). I figure a 50/50 equity/bond split is probably a pretty good one for a retiree. Anything I get from CPP and OAS is considered a bonus. I hope to write a post about that in the coming weeks.
You are in a very enviable position to have pensions (plural) excluding OAS/CPP to meet most of your retirement living expenses. You really then don’t need to take on risk! Unless you have a need to build an inheritance portfolio I might just then stick to a riskless portfolio excluding equities entirely and when interest rates rise you will be even happier! Well done.
Thanks Harvey and yes, we are lucky but you never know when things will change so that’s why I continue to save and invest on my own. If things work out, we hope to have 2 pensions worth 20-25 years each to rely on around age 55. That’s our fixed-income. We should have RRSP assets and TFSA assets, although we’ll spend the RRSPs first and turn that into non-registered income or tax-free dividend income. The plan is for no debt as well. We hope to start taking advantage of CPP and OAS around age 60 and 67 respectively but intend not to rely on that income for living expenses; that money will be taken and turned into non-registered income or put into the TFSA as contribution room rises. We’ll see…lots have to come together in the next 14-15 years to make this happen 🙂
Rules or not, I think the TFSA is a huge gift from the government that our generation seriously underestimates. Since it’s only $5500 per year max contribution, many people tent to write it off as minor or not important for retirement. But it really starts to add up over the years. Im hoping I can strike a balance between my TFSA and RRSP (using my RRSP for expenses and TFSA for ‘play’ money) when I retire – something previous generations weren’t able to do
I’ve written about the same and agree with you Dan, the TFSA is a gift every Canadian should take advantage of. The RRSP, not so much. I look forward to reading on your site how you manage those accounts.
I’m not a retiree (I’m still in my 20s) but I don’t think it’s every too early to have a plan. Of course, things will change often, but at least if you have a plan that you are working toward, even if you have to adapt it, you are making progress!
Plans will change, for sure, but having no plan at all you’re largely doomed. This goes for many things in life IMO. Keep up your progress.
Rule of one: one dollar saved is another dollar you’ll have in retirement 🙂
True, if inflation doesn’t matter 🙂
I’ve been trying to figure out a sports analogy to describe how much you need for retirement. The best I came up with was that your working years is like the regular season and you just need to get yourself in position to make the playoffs. That means establishing good savings habits, avoiding debt, investing for the long term.
Once you get to the playoffs (say, 5-10 years from retirement) you can fine-tune your game in order to make a championship run. Now you can determine what kind of expenses you’ll have in retirement, and whether you need to work longer, save more, etc.
That’s about as far as I got, so I’m not sure what makes a Stanley Cup champion in retirement. I guess, “it depends”, is still fitting 🙂
Ah, c’mon Robb…no more “it depends”! Kidding aside, I think a good analogy is golf. The front nine, you are in your accumulation years. The back nine, you’re in your spending years. There are no guarantees the game on the front nine will be the same as the back nine, but if you practice and play well enough, your nines should be consistent. Either nine, if played poorly enough, can lead to disaster.
I believe for us, a $1 M investment portfolio, a paid off home (no debt goes without saying), and workplace some pension income is “enough”.
It would be interesting to hear from retirees what their projections were and what the reality is now.
Thanks for the comment.
I started my spreadsheet in 2009, 9 years before retiring. The plan was dividend income for retirement. All equities that pay dividends. Investing is like watching a snowball rolling down the hill, it gets bigger slowly but gathers speed and volume. My projections were 62K of dividends by 2017 when I wanted to retire. The actual number was 79K that year. This along with CPP and OAS was more that we needed. Today the dividends are more than 3 times that and still growing. Still all equities. No plan changes, no portfolio rebalancing. Just more dividends and more spending. Don’t have to sell any shares for income.
I believe ETF’s are much slower growing because the mix of stocks is too great. Just buy a few good companies on your own and watch what happens.
Great stuff, Div. Very impressive.
Ya, my thoughts have always been to largely “live off dividends” but I also conclude that some growth (beyond price appreciation from my collection of individual stocks) is important too.
Sure, QQQ has tanked in value but only a small % of my growth story and has done well over the last 5+ years for me. Still up over 100% in the last 5-years. Hard to find that with many Canadian stocks = not up nearly that much.
Back to the CDN stocks, I recall we likely own many of the same ones. The “usual suspects” I recall which are the top-holdings in XIU, XEI, VDY ETFs, etc.
I recall one of the great success stories here, like you, is Don. He’s been retired for 12 years, owns just 12 TSX stocks in his portfolio and that now generates something like double what he can reasonably spend. Amazing…
If I added up all accounts we own, we’d have much more dividend income than what I report but I keep some stuff private due to cyber reasons and such.
I can attest that investing is a bit like a snowball, I’ve seen the portfolio grow quite a bit/dividend income grow quite a bit over the years. It is my hope that years from now, our portfolio will be similar to yours, if we largely keep the equities (stocks + ETFs intact) and just minimize selling shares then once my DB pension income comes online in my 60s, + CPP + OAS, we should be fine.
Do you have any long-term plans to trim the portfolio? Simplify holdings? Other? Seems if you keep the portfolio intact for decades to come you’ll have a fairly large estate issue to navigate – which is fine of course but leaving a large estate is not in our plans for my wife and I.
Great to chat.
Mark
I love reading posts like this. Can I ask what you’re invested in to compare it to my list of Blue chip dividend stocks. A good success story is also an opportunity to learn.
thanks
Lou
I think for most people they’ll be best served by just saving as much as they can for now and then reevaluate/refine once they’re within 10 years of retirement. I’m not too worried about an overall portfolio value since I’m focusing on dividend growth investing. It’s all about the cash flow in retirement. The rules of thumb are good general guidelines but none of them are worth anything if you don’t save a large portion of your income.
Agreed JC, for me as well, it’s all about cash flow…replacing as much income as I can in retirement as during my working years. Rules of thumb are just that, at least they are something to strive for.