For a few years now, I’ve been inspired and motivated by early retirement. We’re far from realizing that but I’d like to think we’re getting there, slowly. Using this site to chronicle our financial freedom journey I’ve been fortunate to meet a number of fine folks who are willing to share their financial independence financial stories with me. Today’s post is one of those stories….
- Name: pwm, from Canadian Money Forum
- Age: 66
- Family status: Married
- Retired since: 2005
- Retirement plans: Be retired as long as I worked
- Retirement worries: none whatsoever
Thanks for taking the time to chat with me pwm. How did you get started in investing?
My father was an investor. As a child, I remember hearing him talk about stocks such as BrasCan, and TransCanada Pipelines as early as 1958. We bought our first new house in 1972 when I was 23. When I sold that place in 1979 I had some cash which I could not immediately apply to my new mortgage so I opened an account with Richardson Greenshields and bought some stocks. That was in the days of $49 commissions on stock trades. What I soon found out was that my broker was mostly interested in churning my account to generate commissions, rather than improving my situation, and every time she called me with another of her schemes I lost money. She was fired, and another person took over my account that was somewhat better, but my overall experience with a full service broker left me completely discouraged. I was still convinced however, that in the long run, being an investor was the only way to achieve financial independence, and the experience with the stock broker was actually a good thing in a way. It was a very good learning experience for a young pup and it taught me a good lesson. I decided at that time that I would never again make an investment decision based on someone else’s recommendation. When you make a decision based on your own research and it goes wrong, you feel badly, but at least you learned something. If you made that same decision just because your broker suggested it, then you feel even worse. Not long after that, TD started its Green Line Investor Service which was the first discount broker in Canada so I moved my account to TD and have been there ever since. I make all my investment decisions based on my own research which includes reading financial articles, watching BNN, using online tools at TD Direct Investing (TDDI) and other web sites. I have no desire to talk to a financial advisor ever again. I’m a DIY type of individual in all aspects of my life; it’s just how I roll.
Sounds like you’ve learned a lot over the years. May I ask what your savings rate was prior to retirement?
After I paid off the mortgage on my second house in 1984 I started saving for retirement in earnest. It was probably around 20% of my gross salary.
That’s a good savings rate. What was your investing journey and approach? What did you invest in and why?
My wife quit work to raise our children and I had a huge aversion to debt, so I wanted to be mortgage free as soon as possible. Because of my bad experience with the brokerage, I concentrated on using GICs to save, so that I would be certain to have the required cash every year to pay down the principal on the mortgage. In those days GIC rates were in the 10% range.
(Mark: wow, not anymore!)
When I was debt free at age 35, from that point onward, all my available cash went into mutual funds, with TD funds, but also with Dynamic, Trimark, Templeton, Altamira and PH&N. I began to build a diversified portfolio of mostly equity funds, both foreign and domestic, as well as some bond funds. Around 1990 my company started an employee stock purchase plan. The company added ½ to your contribution and bought shares every month for you and the dividends were reinvested commission free every quarter. I signed up for the maximum payroll deduction of 5%. It seemed that it was likely to be a good bet going forward and it turned out to be the best financial decision of my life. 15 years later the stock had split 3 times and my shares were worth around $500k. It was the main reason I was able to retire at age 55. I worked in IT tech support, and was on call 24 X 7 X 365 with a pager for 25 years, worked almost every weekend, and couldn’t take holidays because I was the sole support for certain critical systems. I really would have preferred to work until at least age 60, but I just couldn’t take the stress any longer.
I don’t blame you for leaving early. Switching topics a bit, index investing using low-cost Exchange Traded Funds (ETFs) seems to be a sensible way to invest. What’s your take on that?
I completely agree with that premise. During the last several years I’ve sold off almost all of my mutual funds and have switched the money to ETFs. I still hold two mutual funds with low MERs that I consider to be worth keeping. All new money goes into ETFs.
What are your current income streams in retirement?
My company pension, Canada Pension Plan (CPP), and my wife’s Old Age Security (OAS) provide enough cash to live on. I’m delaying my OAS till age 70 while I reduce the size of my RRIF. If I were to take OAS now, I would have to pay back about 2/3 of it and my calculations show that delaying OAS will pay off if I live to at least an average age. The investment income is mostly dividends, so with the gross up my income is way over the OAS claw back threshold. My investment income is just reinvested, because we don’t really want anything we don’t already have. I suppose that living a frugal lifestyle for 45 years just becomes a way of life and remains the same in retirement. My children and grandchildren will enjoy a large inheritance someday.
You might already know from my site I’m a hybrid investor. What are your thoughts on my game plan?
It’s a good plan. I have a similar breakdown in my accounts. I own both common and preferred shares as well as ETFs. There’s zero MER when you own shares directly, but ETFs give you an inexpensive way to diversify outside Canada.
There is lots of debate in the personal finance community on investing using the TFSA first vs. RRSP first vs. simply paying down your mortgage. As someone who was financially free, what’s your take?
That’s an interesting question. I’ve read articles lately that suggest with interest rates at all-time lows, it makes sense to invest instead of paying off the mortgage. There may be some validity to that argument from a purely mathematical perspective, but it’s hard to quantify the non-financial value of being debt free and owning your own home. The security in knowing you always have a place to live regardless of unknown future events was worth a lot to me. In my case, with my wife not working and the entire financial responsibility of supporting my family resting on me, I made it my top priority to become debt free and pay down the principal on my mortgage before doing any serious long term investing. I just hated the idea of being in debt. It’s just how I was raised I suppose.
Regarding TFSA versus RRSP, it depends on your expected post retirement marginal tax rate and there are situations where the TFSA would be more advantageous. I started to max out my RRSPs after I was debt free, and have maxed out both our TFSAs of course. The only thing I would have done differently is to have made all my RRSP contributions to my wife’s spousal RRSP instead of splitting it evenly with my RRSP. That way all our RRIF withdrawals would be on her tax return. Even so, as it is with income splitting I can get 75% on her return, thanks to Jim Flaherty.
I’ve written about retirement withdrawal strategies on my site. What’s yours?
As I have said before, I don’t need to withdraw any capital and my dividends are strictly surplus money. My pensions are enough to live on and we have no debts of any kind. If I had to sell securities to live on, I would not exceed the 4% per year rule of thumb.
Any retirement worries? Anything about the market that keeps you up at night?
No worries. I’m almost 100% equities in my investment accounts and the swings in stock prices don’t bother me because I have no reason to have to sell anything. I look for bargains when prices are low. There will come a time when we will have to pay for healthcare but that’s why I’m increasing my investment accounts rather than draining my capital. My attitude is to first make plans for the worst possible situation, then having done that, there’s no point in worrying.
You’ve got things well in control, kudos to you. Any final words of wisdom for readers?
Yes I would like to share this thought. Two years ago I had a medical emergency, and had to have surgery. I was in the hospital for 16 days and it took two months to fully recover. While I was in the hospital I never once gave a single thought to my investments. The only thing that mattered to me at that time was getting better and being able to go home. It gave me a whole new perspective on what really matters in life. I realized how blessed I am to have a loving wife of 45 years, and 2 grown children who have been successful in their lives and are raising children of their own. I’m trying to experience every day to the fullest and appreciate the things I have rather than yearning for the next new toy. If you have food and shelter and security then your basic needs are being met and anything else is just a bonus. Good health is not just an important thing, it’s the only thing. I know it may sound trite, but I would urge people to remember the best things in life truly are free.
A big thanks for pwm from Canadian Money Forum for sharing this retirement essay. What do you make of his story and what questions do you have for him?
You can find more retirement essays from folks that have successfully “been there, done that” on this Retirement page here.
My only comment would be about how PWM spent 45 years with a frugal life and will continue it. If i compared myself with my siblings, i traveled, experienced life and spent more than them, but I also worked hard in a similar job to PWM, and although not as great financial as him, i do have a more comfortable retirement than my siblings because I worked hard, not because I was frugal. I do not regret it.
I just do not want people to think that they only have a choice between a frugal life and poverty. Work hard and save. If you want to extend the mortgage a bit more to do something you want to do, go ahead, you only have one life, and enough is good enough.
Great insights Tom and thanks for sharing them. I wish you well in retirement.
I wonder if it is not the “old” values that enabled PWM to succeed. He put his nose to the grindstone and succeeded. And it was not a uni education. I think that more younguns feel they are entitled to a job. They are being told get an education and make $100K a year.
My youngest went to trade school and got shovelled a lot of crap about making $30hr when he got out. That did not happen. He got $16 which as far as I am concerned was pretty good for an inexperienced HVAC technician. He was dutifully sending out his resume by e-mail to all sorts of places with no replies. I picked him up one Friday afternoon and we physically went and applied for work. We did several that day. The first place called him back the next week and he started his career. He is making close to that $100K now after getting experience and working and taking more courses so he would be more valuable for what he knows and his work ethics.
An education does not entitle us to anything. Unless you are working for family you have to hope someone will hire you. After that it is up to you to prove that 1) you can do the job 2) you can do the job right 3) you can make the company you work for enough money to pay your salary 4) you want to improve and further your knowledge.
My daughter is still studying. She just had to apply to continue her education. That actually cost a couple of $Ks just for the travel and interviews. YES! You read right, she had to pay to be interviewed to see if she would be accepted to continue her education. Next year is a big year as she has an exam that will cost $4.5K to write. Your read right again. She has to pay to write the exam.
All that to say that your education only shows that you have an aptitude to learn. Nothing more. It entitles you to nothing.
I also did like PWM in one aspect. I was much relieved to clear my morgage and get the albatross from around the neck. Morgage was @ 14% and I had child support as well. I hunkered down and paid my dues.
As to me, I had little motivation for my high school finals. My father had just died and my mother was on her death bed. I had other things to think about. Like how was I going to live. So I do not even have a high school education.
I advised my company I was going to retire as of Jan this year. They want me to keep on working. Why? Probably because there are not very many of the “entitled” would are willing to do some work on weekends and be gone from home for the week and sometimes two weeks in a row. It takes a team to do that unless you are single. And even a lot of the un-attached do not want to “work’ like that. Part of the old school. And still valid.
My net worth? In the seven figures. Not too bad for a high school dropout – technically. I have taken many courses in my career. I don’t worry about my supposed education level. I can hold a conversation with a lot of “bright” minds because I never stopped to learn.
I like Jimi Hendrix and The Doors, etc, as well as Vivaldi and Mozart. I appreciate Brit Floyd as well as the Montreal Symphony Orchestra.
I consider myself fortunate in that my education has not limited my life’s experience and its many educational facets.
We have lived and are living through fortuante times and are truely lucky of where we live – Canada
That we can even converse here is exceptional. There are many mor ethan us who do not have the means or at thime the knowledge to do what we are doing.
Enjoy it. Be happy. Be humble.
That idiot next to you may some day say something that you had never thought about. And it may change your life.
My rant for today
I thought the same Ricardo when I read pwm’s answers to my questions, he did indeed, put his nose to the grindstone and succeeded. Rather well.
You are also correct in your rant that entitlement is not just about some Boomers, it applies to my Gen X cohort and the Gen Y younger set than me.
There is absolutely nothing wrong with “trade school”. To be honest, I think in hindsight that would have been an excellent career path for me. I have already encouraged our nieces and nephews to STRONGLY consider trades as a career path. Good money, stable work, and you can own your business and get some significant tax benefits in doing so. Although we are in a knowledge industry now, there will always be a need for skilled tradesmen and women.
Just my take of course…
You are more than welcome to share the odd rant here.
Pwm, I would have have one comment to make. I’m very glad your company stock purchase plan worked out so well, but it is a risky strategy to have a high percentage of your net worth in a single stock which is then compounded by having your job at that company. If the company had been Kodak or Enron the outcome would have been very bad. A safer strategy is to take the company’s matching offer, then divest and diversify, either a diversified stock portfolio (if you must!), or my preference would be globally diversified index funds. It’s important not to confuse outcome with strategy. Nevertheless, your success is an inspiring story with many pearls of wisdom. Thank you.
That’s a very inspiring story. Fantastic job pwm. Kudos to you with your investing savvy, the early debt retirement and perseverance at your job.
It’s nice to see someone so successful, appreciative and humble.
Well written RBull 🙂
I know this is sort of off topics but I think that’s one of the cool things of these blogs.
I’m weighing in on the Gary & Lloyd “best generation” discussion. It happens to be one of my favourites. 🙂
As mentioned, I’m 63 so part of the boomers. I without a doubt think that our generation has had it easier than any generation ever. We grew up in simple times where family was generally a priority. Our parents worked really hard to give us a better life than they had. Sure we had 18-20% interest rates but let’s not forget that housing was way cheaper. Also, it looks like all the government programs will last for most of our lifetimes.
The mistake I quite often see, is that many boomers are spoiled and think they’re entitled. They then passed this on to their kids and spoiled them even more. Rather than spending family time, they’d rather just buy their kids all the latest gadgets. Along that lines, I think smartphones and all the social media are the worst invention of all time. People are forgetting how to just live life. It’s now often being lived by “how will this look when I post it”. Bad, bad, bad stuff!!
I think the world is basically going to hell in a hand basket. For the first time in a long time, I see the next generations having it worse than the previous.
Anyway, that’s my view from my lazy boy here in Calgary while relaxing after my t-shirt & shorts run listening to the Beatles Blue Album. 🙂
“I think the world is basically going to hell in a hand basket. For the first time in a long time, I see the next generations having it worse than the previous”
That’s probably been said by every generation of the next. I’m 74 and have probably made many of the same comments about the way our grand kids are being brought up. I think its each generations responsibility to take care of their own and not be overly worried if they don’t do things as we might.
When I hear of the 164% debt of disposable income I wonder if my words will come back at me!
Actually, one of my Dad’s favourite sayings to me was: “Donny boy, you’ve got it made” so beg to differ on it. I think living through the Dirty Thirties and WWII made him think things were getting better. He could see many more opportunities for me than he had. In the end, I really think it worked out that way. I’ve definitely had an unbelievably good life thus far.
I do think that we are just heading for a low point in society for a large number of reasons but eventually things will start to improve again. It seems to happen over and over again throughout our history.
These conversations have inspired me for another few posts. I’ll see where I get with them, I’ve considered interviewing family (parents) on this subject – it will be interesting to get their take.
I also think Don, we’re at a somewhat low point for society but human nature has a way of messing things up but also being very resilient. I just don’t how long we’ll stay in one state or another 🙂
“I think the world is basically going to hell in a hand basket.”
I’m not quite so pessimistic but recognizing that there is a problem is the first step to solving it. This can be fixed but it’s gonna take some work and all hands on deck methinks. In any event, great conversation all. I’d love nothing more than to sit with everyone over some coffee for a few hours at the local coffee shop so that we could solve all the country’s problems. I bet we could put a dent in them!
I often wonder how it will all shake down for our generation. All I can do on the personal finance front as an early 40-something is save, invest and simply live my life. After I address that, I will be happy to solve world issues 😉
World problem solving every day – 08:30 at Tim Hortons
I am the person who Mark interviewed for this article. First off, thanks to everyone for their complements. I’m flattered. I have to say that I never believed my success was due to my great investment skills, or my towering genius. I’m humble enough to recognize that I was merely extremely fortunate in life. Lucky to have been born to caring parents, in Canada, one of the finest countries in the whole world, and also at a time when there were limitless opportunities for young people. I got my first real job at age 21 with a high school diploma which lasted 35 years and had a DB pension plan and chances for advancement. Now, having said that, I don’t feel obliged to feel guilty or to apologize for my good luck as if I had something to do with it. However I agree with Lloyd that young people today are not so lucky. More people from the “baby boom” generation should understand this fact and appreciate that things are not the same for young people starting out today.
Great to hear from you pwm. Your story was inspiring to me because it told the tale of a very successful story from modest perspective. You’ve had good fortune, sure, but also made your way as well – that is something to be proud of.
Great story with a lot of good advice, especially an aversion to debt, all with a human touch. And, yes, certainly, without your health you have nothing.
Well said Grant. Thanks for reading.
Great stuff PWM. Very well done and congratulations.
I’m a 63 year DIY retiree without any pension plan living off our dividend income. We’re very similar in a lot of ways.
The only part I would never have done was stick with a job where I was always on call. I worked really hard (> 2500 hrs of unpaid overtime when I retired) but my weekends were generally sacred. My wife and I did a ton of outdoor stuff with our kids on the weekends (camping, hiking, biking, x-c skiing, etc). I think this is incredibly important especially now when many parents seem to be ignoring their kids (distracted by social media etc).
The other piece of advice I would have for young people is just invest in a few ETFs and big cap dividend growth companies and ignore all the day to day market stuff and focus on your families. (and get the heck off your smartphones – you don’t need to be connected all the time. I’m proof as I don’t even have a cell phone and survive quite nicely 🙂
Thanks for sharing Don G.
I appreciate your advice: “just invest in a few ETFs and big cap dividend growth companies and ignore all the day to day market stuff and focus on your families.”
That seems to be very wise advice and I’m trying to follow it!
I applaud Mr PMW for his achievements. I also recognize that the baby boomer generation had it pretty easy in Canada. Especially the leading edge Boomers. We have to acknowledge that things are different for the younger generation and may not be quite so easy. Good planning is even more important now than ever and starting young is the Holy Grail as far as I’m concerned.
WHOA!!! “THE LEADING EDGE HAD IT EASIER”. I don’t think so. 18% mortgage rates, very low wages etc. A lot of today’s young and not so young people are up to their ears in debt because of low interest rates and the instant gratification mentality. There where no credit cards, line’s of credit so we had to save for washers and dryers and all the other conveniences that are expected in todays society. “Good planning and starting early” — I totally agree with you on this!
A grade twelve drop out could get a government job for life and any grade twelve graduate could get a job anywhere. Absolutely no chance of that now. The millennium generation was and are still being told to spend absurd amounts of money on educations that us boomers never needed. It was the leading edge boomers that caused many of the inflation problems we had in this country. I’m a tail end boomer, we did okay, but the leading edge boomers had it made and continue to have it made.
You make some very good points Lloyd but we’ll agree to disagree on the fact that leading edge boomers have it made. I have many friends in nursing homes on the governments tab because they couldn’t afford a safety net. I’m in my 70th year and we are doing OK without a pension but I don’t think we have it made.
Interesting you point out that there are nursing homes on the governments tabs available now, I guess we will have to see what happens to the tail end boomers and the generations behind us. I don’t think we (tail enders) or the younger folks will have anywhere near the resources (medical, government, social housing, etc) that are available now. I fear the pot will be well and truly empty when we get to 70. This is why it behooves the younger crowd to be much better prepared to go it alone and not count on the kind of support that is still available now.
You make some very good points Lloyd. I find that women are more in need than men. When I started full time work women where mostly in clerical jobs and thus no benefits. Now , I see single elderly ladies trying to get by on OAS. GIS and perhaps a small amount of CPP. It’s sad when I see a few of my government retired entitled male friends with huge pensions that some day will be unaffordable. I read yesterday that there are more of our population over 65 (14%) than under 14. This post has brought out a lot of strong opinions — great work Mark and thank you.
Good sharing by all. I also see many elderly woman disadvantaged. It was certainly a different time in the 60s and 70s, when many middle-aged woman were not really encouraged to work. It seems like such a foreign concept to me as a younger pup 🙂
Excellent point Gary, I failed to account for boomer women. When I was a volunteer driver for the local Seniors Centre I often met elderly ladies who were barely getting by. I know several guys that have great pensions as well but they fail to take into consideration that when they pass, their spouse will only get a 50% survivor pension. And now that I think about it, I’m not sure if the survivor pension is eligible to keep the health benefit part of the pension plan. I never looked into it because both my wife and I have medical benefits in our respective pension plans. It is important for couples to take such matters into consideration when they are doing their financial planning. It’s not fair to leave a spouse in a bad situation. I guess that is where Mark’s plan will shine. Definitely food for thought.
Thanks Lloyd. I think our generation (X) has some troubles but the ones behind us are going to be in a mess if they don’t pay themselves first, early, and often; as you say the Holy Grail of investing.
I think your generation got it the worst Mark. Boomers got great jobs and they aren’t giving them up until now and for the next ten years or so. The younger millennials have a slight chance now that we boomers are retiring, but your generation is almost considered too old now for the jobs we are beginning to leave. I did my part by getting out at 55 and going into farming to subsidize my pension. A young guy with a ton of education debt got my position.
Potentially Lloyd. I know when I graduated University in the mid- to late-90s, there were no jobs to be had. I got lucky after I took a college diploma program after my degree; I got my foot into the door of a growing company. I’ve been employed full-time ever since.
On the subject of Boomers, it is rather annoying (if I can use that word) that some Boomers in their late-60s and early-70s continue to work in full time jobs that are preventing many Millennials from getting a start. They continue to work for a host of reasons I guess but I know some of them don’t want for anything. If you did your part at 55, and had the financial means to support your family, good on you. Dare I say this but I find some Boomers are entitled and selfish when it comes their jobs. A job doesn’t entitle you to anything. Just my $0.02!
I agree 100% with you Mark. Boomers (and I am one) have difficulty acknowledging that we are a big problem. The selfishness of my generation is not something to be proud of. We are screwing up pretty badly.
I wouldn’t say screwed up but I do feel there is a strong sense of entitlement amongst (some) Boomers. Some Boomers realize they had it very good. Others (Boomers) don’t take enough time to reflect how fortunate they were, lucky or otherwise. The same could be said for my generation (Gen X) though.
The healthcare and fiscal challenges on our economy will be massive in another 10-15 years I suspect; demographics of course are a big reason. I could be wrong, but I don’t think so. This is why I’m preparing now for years from now. I want to be more in financial control of our future. This you know from reading my blog Lloyd.
Born in 1942 I’m the tail end of War Babies, but grew up mainly during Boomers. I don’t it’s the boomers wanting to continue to work which is a major problem. I applaud them because it they are working because they enjoy it or continue to provide a useful service, in many cases because there are no qualified replacements for them. Good for them.
There has always (accept for the depression years) being jobs available for those who want to work. They may not be the jobs they want or ones they consider Minimum wage jobs, but they are there. In fact by taking those menial and applying oneself, there is a good chance for advancement and even into management. Having achieved some success often motivates one to work even harder.
Not that success should be the ultimate goal for everyone, we all have different standards and ideas of what is important.
I have no problem with folks in their 60s or 70s staying in the workforce if a) they love their job and b) they are productive at it. I’m not an ageist at all. The problem I have is Boomers who feel entitled to keep their jobs and they are “owed” their jobs. That attitude sucks, maybe that’s just me. Unfortunately I work with and know of a few Boomers who feel entitled, as in the company owes them something. It bothers me. Maybe it shouldn’t but it does cannew.
Success breeds success for sure but I take issue with folks regardless of age who want for little and feel entitled for something. Everything worth having in life takes a little bit of work, regardless of age or circumstance.
That was an inspirational interview – thank you pwm!
I thought his experiences and advice was excellent. How are your investing plans for 2016 coming along Marko?
Life is good with me Mark☺. I went from cash to Vanguard and BMO ETF’s via TD DI midway through 2015. I’m 55 FI/45 equities so I am only down 4.51% ($32K) YTD. I have a 3 year cash wedge with nominal expenses so I have no worries or stress. I spend my days backcountry skiing or snowshoeing with my dogs❄.
Great to hear Marko. That’s great, a 3-year cash wedge. That’s impressive. I hope I can do the same as you someday. Speaking of which, I’m going to get back into skiing this winter. Going to try and go in a few weeks.
Great interview! Health is the MOST important thing next to the health of our kids and grand kids (the only thing we worry about). While I haven’t been as successful as PMW with his incredible savings; he has his priorities right.
PWM absolutely has his priorities straight, I thought his contributions were excellent. Thanks for reading Gary.
Awesome interview! Thanks for sharing pwn!
Also, since you’re an old guy ( 🙂 ) can you remind all these young pups that mortgage interest rates can go to 18%?
Thanks for the feedback Glenn. Appreciated and hopefully more success stories like this to come in 2016.
Love the interview. I agree with PMW that health is the best thing in life. That is why along with financial investments we have to find time to do exercise and eat healthy. I am in mid forties and trying to be follow some of your suggestions.
Thanks BRS. PWM was spot on with his health comment. I’m going to ride my exercise bike tonight!
Congratulations to PMW on achieving their retirement goal. Certainly you worked for it but were lucky to have worked for a company that offered a great investment opportunity. Being able to reinvest most of your dividend income is the mark that you won’t ever run out of money or will have the money should it be needed.
That’s one of the keys I took away from pwm’s post: “The company added ½ to your contribution and bought shares every month for you and the dividends were reinvested commission free every quarter.” The ability to reinvest dividends in a stock purchase plans was huge for him. He certainly didn’t sit on that though, he also had a 20% savings rate for a few decades. Good on him.