The case for keeping stocks, period.
In general, the longer your time horizon, the more stocks you should hold in your portfolio.
Historically speaking, stocks have offered the highest returns of any major asset class over decades of investing. This means the younger you are, the longer your investing time horizon, the higher percentage of equity assets you should own to generate higher portfolio returns. Consider this informative page from Vanguard for reference.
But won’t a heavy weighting in stocks lead to more volatility? Yes. Look at the 100% stocks table for further information. The “best year” was outstanding but the “worst year” was dismal; albeit this was 87 years ago. You could expect to suffer more years “with a loss” but the upside coming out of those down years can be tremendous. (Consider the bull run we’ve been on for almost a decade now. Anyone that was sitting on cash after the financial crisis has definitely missed out!!)
Is volatility a good thing? Yes.
Because in your asset accumulation years you’ll have time on your side to recover from short-term stock setbacks when the market becomes indifferent. When the market tanks (even temporarily), you’ll have a chance to buy equities at cheaper prices. Consider it the same as your favourite beer or fruit or tickets for an event – on sale. You get the same goods at lower prices.
What about fixed income? To cushion the blow when equities tank?
I would argue if you’re not yet in retirement, rather you are saving for it, rest easy. For your future self you’ll have a chance to lean on your workplace pension for steady income. Don’t have a pension? Fine, I know, this is becoming rarer these days for Gen X and likely non-existent for Gen Y. Consider your future government benefits like Canada Pension Plan and Old Age Security as fixed income. This fixed income should provide about $1,000 per month (combined) for most senior Canadians if you start accessing these plans around age 65. This fixed income is inflation-protected.
I’ve made the case for your wealth building years (the one I’m actively in).
What about your wealth preservation years?
Today’s seniors face a perplexing investing dilemma. You need safety (for wealth preservation) and you need income. If you focus too much on safety you’ll generate very low returns for that assurance. Returns from guaranteed investment certificates (GICs) for example might provide 1% real return. Depending upon the size of your particular nest egg, that portfolio of GICs could be a serious loser to inflation. Not to mention – you might exhaust your fixed income assets far too early in life.
What to do?
Consider this option – have a cash wedge instead. I intend to employ some form of this approach so I can keep most of my assets in stocks as I get older. Although I wouldn’t necessarily advocate a 100% equities approach for my 60 or 70-year-old future self, I do foresee a future whereby I have a decent years’ worth of cash ready to spend, some form of fixed income to rely on, and the rest in dividend paying stocks and low-cost Exchange Traded Funds (ETFs) to provide both income and growth throughout retirement to fight any longevity and inflation risk.
A portfolio of mostly stocks, some bonds and some cash still might not be enough for some seniors to sleep well at night.
So, if you have no pension in your future consider another option – annuities in retirement – basically your own DIY pension. Using annuities in retirement is well-documented in this book Pensionize Your Nest Egg as well as another book I recently reviewed here. (You may recall an annuity is an insurance contract to exchange a lump sum of money for a lifetime of monthly income.) In both books, authors suggest you can consider adding annuities to your retirement portfolio around the same time you start your Registered Retirement Income Fund (RRIF). This way, you can keep a good portion of your assets, including stocks, inside your RRIF growing tax-deferred AND you’ll get some monthly guaranteed income via the insurance contract (on top of CPP and OAS I already mentioned above). Basically, the annuity can be another fixed-income anchor so in your 70s, 80s and beyond, you shift the portfolio risk away from you and to the insurance company.
As a 40-something, our plan is to employ some sort of bucket-approach to generating retirement income. No doubt our plan might change as my thinking about portfolio management matures but I believe some form of this portfolio design, with a heavy dose of equities, will work for us.
Although some financial planners might make the case that some elderly folks should not be in stocks at all, I would say those retirees represent the extreme minority. This means I believe holding a combination of cash (at least one years’ worth of expenses), some fixed-income assets, and of course keeping a good dose of stocks for as long as possible is likely to serve the modern and aspiring retiree very well.
What are your thoughts about holding stocks in retirement? As a retiree, I’d love to hear from you. Can you share your real-life experiences? What do you make of my cash wedge approach? What % do you hold in stocks today? Thanks for reading and being a fan.
Forgot to mention same site claims:
23 yrs of raises. their site confirms 17 yrs continuous at least
Thanks, RBull. Sorry if it should be obvious, but where on the website http://www.dividendgrowthinvestingandretirement.com/ I can get this information? Did not find the exact spot.
You’re welcome May,
Under Canadian Dividend All Stars>download list- goes to excel. May need to provide email.
I’ve found it a valuable resource. Do some verification to make sure you’re satisfied!
Don’t own either stocks yet. I tend to avoid low-yield, higher growers to date but I intend to buy some SAP at some point.
I don’t own any of the 3 either. Probably a mistake. They are big growers and conservative with payouts. Policies for MRU, SAP 25-30% of earnings in dividends. Not sure of CNR policy but payout is in same range (low).
May, some more clear instructions:
Under Canadian Dividend All Stars>All Star list download>click on bolded type below “CDASL April 30, 2018”
LIst is updated monthly a few days into next month.
Thanks a lot.
Currently I am still in save and invest phase, so I don’t mind. Also, these are very stable stocks.
You are welcome. I think that is a great resource.
I’m okay with moderate growth and like stability especially with big dividend growth. I might look deeper at these for TFSAs. Our slightly higher payers are in unregistered that we utiitize dividends from.
I made a mistake on another post. I adjusted VPW assumptions on Equity from 5.0% to 4.0% (not 4.6%) to be more conservative and because of my investing mediocrity.
Mark I it would be great to be able to edit these posts.
Understood…I can edit them for you 🙂 VPW post coming soon, an overview one anyhow!
No worries on the edits. My stuff isn’t that critical – LOL.
Sounds good. Time for another pull on my West Coast IPA.
Those are very tasty beers…IPA are my favourite.
I like ’em too.
Make and have copious volumes at my home brewery..LOL
Red and Ambers and IPAs are my favourites…just in case you’re in Ottawa eventually 🙂
Ha, I was there 3 times in my life.
All three to run the Ottawa marathon. It’s where I achieved my Boston qualifier time back in spring ’02, so special for me.
Or if you’re ever on the Eastern Shore of NS! 140 litres of beer here right now!
Probably a lifer here now Toronto>Germany>Winnipeg>Halifax area (38 yrs)
From 2017 back to 2002 with thanks to
$1.6500 $1.5000 $1.2500 $1.0000 $0.8600 $0.7500 $0.6500 $0.5400 $0.5050 $0.4600 $0.4200 $0.3250 $0.2500 $0.1950 $0.1675 $0.1425
$0.6500 $0.5600 $0.4667 $0.4000 $0.3333 $0.2792 $0.2492 $0.2158 $0.1792 $0.1633 $0.1500 $0.1383 $0.1283 $0.1083 $0.0883 $0.0700
$0.6200 $0.5700 $0.5300 $0.4900 $0.4400 $0.3150 $0.2850 $0.2400 $0.2175 $0.2100 $0.1800 $0.1500 $0.1350 $0.1125 $0.0900 $0.0750
@cannew I agree with you that selling shares is not the same as holding the shares and just spend the generated income. I also agree with you it would be ideal if we could live on only the generated income and not touch the capital. What I don’t know is whether or not I will be OK with only spending the generated income. If we try to be very frugal, maybe. But we may want to enjoy things we like a little bit, we may want to spend more on travel while we still can, we may want to support our kids when they are in need. Under these circumstances, we may want to dig into the capital too. Personally, if I need to choose between being able to travel and supporting the kids when they truly need it, or leaving a big estate after our death (when it may not that much in need any more as my kids most likely will already be in retirement too), I would choose the first. However, with digging into capital, here comes the question whether we will run out of money or not while we are still alive. I consider VPW is a good tool to answer that question.
Things change. Who knows, maybe we get really lucky and will have a really big nest egg at the time we actually retire and just throw VPW out of window. Knowledge is power. It’s always good to know what kind of options we have.
@May: It doesn’t have to be a choice between one or the other. What we found, after we chose the Income strategy, our Income grew rather rapidly once we got over the $600k invested. Yes we were still adding funds and yes we chased yield a few time, but the income kept growing. The financial crisis helped as we bought several at very low prices and were able to reinvest the div’s at low prices. The fractional shares bought also helped, as I believe it added about 15% to 20% more shares. Then there comes a point when your Income exceeds expenses and it still keeps growing. Finally when we retired fully and no longer added funds (other than to sell some we didn’t want and reinvest in our core stocks) we continue to reinvest about 60% of the div’s to further grow our income. At this point we draw part of our div’s, and at various times sell shares if we wish (I bought a new car last year and decided I wanted $100k in a savings account). Both those actions dropped our income slightly, but we’ll be back to the previous level this year. The real comfort is not the level of income, but that I don’t expect the income to drop if and when the next crisis comes.
You live on only 40% of your dividends? Wow, amazing!
Hopefully we paid more attention to investment and chose the investment strategy early on. This year I really saw how our forwarding income from investment growing with market down. The year to date organic growth already more than 4% and we are not half year over yet. Looks like no problem to achieve my target of 6% organic income growth for this year.
Hopefully we will be in similar situation as you when we fully retire. We had some low yield stocks like MRU and SAP. At the time of retirement, we might switch to stocks with higher yield to increase income.
@May: Both SAP & MRU over the long term may provide higher growth, if they continue as they have. I don’t like to make specific suggestions, but I bought CJR and some REIT’s for yield and would have been better sticking with lower yield and growth. That’s why I’ve cut back to just 12 stocks. I feel they will continue to raise their div by 5% to 10%, which increases my income, regardless of the market.
40% plus cpp/oas covers all our basic costs, including spending 3-4 months in Arizona.
I might or might not switch depending on the situation when I retire. If I already have enough generated income, I will keep low yield high growth stocks. But if I don’t have enough generated income, then I might want to switch to increase the generated income. Assume I have $100K in MRU, SAP, CP and CNR, yield is around 1.5%, if I switch them to stocks which yields 4%, then I will have $2500 more income. If I don’t lack this amount, then I might keep them.
I think I am very lucky to get valuable tips here from seasoned investors like you and many others. I do not chase high yield. Actually I avoid high yield stocks without growth.
I’ve never bought MRU, CNR or SAP so I looked up their dividend history and Yahoo showed that all three cut their dividend in 2014. CP held their dividend for 4 yrs. Guess Ave Yield (3%-5%) and ave growth (5%-8%), with no cuts is my preference.
Got mine at:
Set time period back to 2009 and Show to dividends Only
In Sep 2013 div was .43
In Dec 2013 div was ..215
But again they must be wrong as RBull shows below. Sorry for misleading you.
@cannew No problem. Thanks for checking for me. CNR has a 2:1 split in 2013. It makes perfect sense it’s 0.43 for one share before the split, and only for one share after the split. I found yahoo is not the only one making this kind of mistake.
Not hard to get caught on this. Very hard to find good sources. I normally also look at companies list of distributions to verify. Some have all and some only for short period.
Variable percentage withdrawal (VPW) is a withdrawal method that adapts to the retiree’s retirement horizon, asset allocation, and portfolio …Thanks Google.
And for the Canadian version – FINIKI
I keep getting to the part where it states…”Around age 80, if you’re still alive, it is important to consider using part …” and break out laughing. So if around 80, if I’m dead, it ain’t that important to consider it? hahahahaha
Seriously though, I’ll have to read up on this some more.
LOL. I hope we all make it to age 80 in good health 🙂
Good luck with the reading and playing around with it.
“LOL. I hope we all make it to age 80 in good health ?”
That’s for sure!!!
VPW: Actually the % shown in the chart, are fairly close to the RRIF min withdrawal rates. The example suggest that someone with a $1.2Mil portfolio…. Anyone ending with a $1.2Mil portfolio should not have to worry about VPW. Had they invested for Income over time they could have easily generated $50k to $75k per year (and grow each year). Add just cpp/oas and they could ignore VPW.
Well, it really depends on when you retire and what’s your expenses (which then depends on where you live). 1.2M will not be enough for us if we retire within 10 years. My kids will still not be independent yet and unfortunately we live in Metro Vancouver where everything is expensive.
Vancouver is crazy expensive May and with kids, I could see how you’d need or want more than $1.2M nest egg.
We hope to have $1 M as you know, personal portfolio, (no debt) without any kids and that excludes our pensions.
May: Remember it how much income your portfolio generates, not the size. Others keep telling me Selling shares is the same, but if the market crashes, I’ll stick with dividends rather than selling
IMO, VPW has nothing to do with how someone chooses to invest their assets. That’s a different issue.
VPW is a withdrawal strategy for those who choose to utilize a combination of income generated and capital from investments to generate cash flow, in addition to any other applicable income sources. It comes down to – do you want (or can you afford) to live on investment income alone however it is generated and leave capital untouched. Or do you want to reduce or deplete your investment assets over time per the strategy. I think the point of it is so people choosing or needing to do this don’t have to worry. The alternative that might leave millions unused (and potentially heavily taxed if for beneficiaries) along with an ongoing reduction in lifestyle might not be for everyone. For some they see this as safer and they may really want to leave a big legacy. IMHO, there are many valid reasons for either choice and if people have given good consideration to this that’s a good thing.
Well, yes and no RBull since VPW does take into consideration the asset mix (e.g., stocks vs. bonds). No?
I’ve largely defined VPW (post now in draft!!) as (as per my draft post):
VPW = The essence of this approach is to compute an income payment required to deplete your portfolio at N years assuming asset allocation and portfolio returns during retirement. For example, N years could be age 99 or 100. This method uses variable (and increasing) percentage (hence the name) to determine withdrawals from a portfolio during retirement. Each year, the withdrawal is determined by multiplying that year’s percentage by the current portfolio balance at the time of withdrawal. Consider VPW as return-adjusted withdrawals working in a defined timeline.
I will be linking to Bogleheads and finiki in the article 🙂
“I think the point of it is so people choosing or needing to do this don’t have to worry.” Exactly!
Yes, I worded that incorrectly. What I meant is whether to use the strategy or not is not based on how you invest. It’s useful if you plan to utilize capital as well as income generated from investments.
The asset mix inputs are there and definitely make a difference to the outputs. The geographic equity inputs also make a difference as I’ve played around with them.
VPW = “It’s useful if you plan to utilize capital as well as income generated from investments.” Gotcha 🙂
An excellent resource and I intend to link to it in my future overview of VPW.
I hope to post an overview article in the coming weeks LA ED. Thanks for being a fan.
Hi Mark, re holding stocks in retirement….doing this with my father in law….100% equities only but every stock pays a dividend. Part of the selection process was to review which stocks cut their dividends in 08/09. Those that didn’t cut then are unlikely to cut in the future (yes I know nothing is 100% guaranteed). But it’s working out…BMO, CWB, FTS, IPL, RY, SLF, T, TRP, RCI.b, TECK.b (made an exception this name re dividend) AAR.un (sadly being taken private soon), US side: AAPL, CSX, INTC, GE (made an exception given family history), FUN. No stock is > 10% of portfolio. Dividend income grows every year and with cpp and oas, my father in law is cash flow positive every month. He can’t get more interest income with a 10 yr fixed bond yielding 2.5% beyond the 2.5% but telus is increasing their div 7-9%/yr till 2019, Fts has committed to 6% increases for several years. He won’t have to eat into capital unless he has to go to a retirement home and then that’s ok. He doesn’t worry about the portfolio, he’s encouraged with the quarterly dividend payments. Cheers, Jim
Great to hear from you Jim. I hope you subscribe and follow along 🙂
I own a number of those CDN stocks and always intend to. There is absolutely a psychological benefit to seeing that income flow in. It helps me stay calm and more patient.
I think it was Wade Pfau (https://retirementresearcher.com/) who, a few years ago, theorized it was a much better retirement strategy to actually increase your stock holdings (% of portfolio) as you move through retirement vs. the tried (tired?) and true trap of loading up on fixed income instruments.
Yes, a gliding equity path. There is a tremendous amount of retirement research done and information published. I have been following him for years and receive their weekly newsletter.
Thanks again for Wade’s link. I need to read up on his stuff, very detailed and insightful dude.
Off topic but is anyone else missing their NA DRIP for May 1st? Mine hasn’t shown up yet and 22 days seems a tad ridiculous. If it’s everyone then I ain’t too concerned. If it’s just me then I guess I better start some whining!
@Lloyd: Are you referring to NA with Computershare? We have our Div’s deposited and it came in so I would have thought the drip would have been completed.
No, I’m with TDDI. I guess I’ll have to give them a call. I’ve seen a delay of a max of six or seven days for a DRIP transaction but never 22. Anything that isn’t DRIPped shows up on the distribution date.
Then the obvious question is: was the div sufficient to buy one share?
um…yes, I’m expecting 12.
We had transferred all our NA to Computershare, only to received a div after the transfer. We received $2.10 this qtr and just got another 0.0332 of a share. Guess every fraction helps.
Any incentive or designs to move your Computershare NA stock or other dividend stocks to a TFSA at some point cannew?
TFSA is max’d out and we transfer In Kind from our RRIF’s each Jan. The Computershare holdings are the dividends we draw down. No fees.
TDDI is always late Lloyd. I will check mine though.
I called TDDI, they didn’t know why it wasn’t posted but it would be posted today and show up in the account tomorrow. I informed them I was concerned and that I really don’t want to be having to worry about this stuff. They were certainly apologetic but this shouldn’t happen.
Sounds like a worthy complaint. G/L with it.
I have written and ragged on RBCDI hard a few months ago when they had their system down (TDDI did too) saying it is absolutely unacceptable and too much money could be at stake. Customers and shareholders shouldn’t have to put up with inadequate infrastructure and customer service when there is significant robust earnings.
I’ve often found some brokerages have delays on payments.
Sorry, I wasn’t referring to payment delays.
It was when their trading platform “broke” in January and was down for a half day+. Phones lines were also impossibly busy as a result and obviously it was a terrible situation. They were talking about unusual trading volumes etc and I told them this is nothing compared to if the market has any kind of meltdown coming. Imagine….. volumes will be WAY MORE. No one would be able to buy or sell = VERY BAD. TD was similar. RBCDI has done some upgrades with more bandwidth/capacity or whatever its called, tested etc and expect it to suffice in the future.
As we know TSX also has had issues.
Gotcha and yes, very bad. Not a good customer experience.
Mark, I meant to include a sample of the email notification I get with RBCDI re each dividends/distributions. I haven’t verified dates against company site or always confirm payment made is on time, however haven’t noticed them being late.
“Dividend Distribution Announcement
BMO has announced the following dividend1 distribution:
• Payment amount per share $0.96 CAD
• Payment date August 28, 2018
• Record date August 1, 2018
• Ex-dividend date July 31, 2018
What this means
You will receive the dividend payment if you hold BMO prior to the ex-dividend date and do not sell BMO until on or after the ex-dividend date.
Regular cash dividends will be reflected in your account on the payment date. Stock dividends and dividend reinvestments can take up to five business days.
Interested in learning more about dividend distributions? Click here. “
Checked about 20 payments. Tedious. Most were there on time, maybe 4-5 there next day.
Will check the few drips I have another day!
Yeah, dividends are not usually deposited same day into accounts…there is sometimes a holding period and I have found it can depend on what type of DRIP or dividend plan is running, i.e., treasury or market for DRIPs anyhow.
The distribution was there this morning as promised.
@May, I think you make good points on the VPW, capital, base income rationale for you. We are on side with that in our case too. For some to be safer with dividends only or less, it may be a good choice, for health, for leaving a legacy etc.; they’re very personal choices. We’re probably somewhere in between living well below vs living large up to the maximum that may be possible. You’re unlikley to get to to any of these places now though with only fixed income or little equity.
For VPW I called it “best case scenario”- the suggested amount being the most we would consider taking unless otherwise for some emergency. (It doesn’t matter too much as all future years will get adjusted down if there was an “overdraw” made and there is always some ebb & flow based on market returns/asset balance too)
We don’t budget (just track monthly spend totals) but most of the difference in spending with us is travel amount and some for home expenses. The rest is fairly constant. So far we operate in a range below VPW and below our overall investment income generated (no capital yet).
Some VPW details: I have adjusted the default equity return lower (4.6% from 5.00% because I’m a bad investor LOL) and raised our best before date to 99 (originally set at 95), all to be more conservative. I think it’s important to be careful with the assumptions including your asset mix to get appropriate outputs as you can see a big difference otherwise. Using 4 full calendar years of retirement (including 4 mths of PT working in first year) our numbers:
Revised VPW asssumptions: Spent/withdrew 79.5% of VPW suggested avg over 4 yrs
Default VPW assumptions: Spent/withdrew 67.1% of VPW suggested avg over 4 yrs
We are 5 mths now into year 5 and doing an additional full year estimate for the 2 categories above would be:
Spent/withdrew est. over 5 yrs 77.4%
Spent/withdrew est. over 5 yrs 65.2%
The other important piece is OAS & CPP are not included in the above so when we have these our overall income would rise accordingly (minus spouse’s pension bridge adjustment) beyond VPW investment withdrawals. Something to consider with our withdrawals/spending now. So all this to say we have intentions of spending capital but its maybe harder to do for more conservative people, especially as I hoped (luck) to get through the first 5 years of retirement without a notable market correction………
I hear you on FI. I’ll almost certainly always have some but probably less in coming years with govt pensions to offset and more confidence in our spending patterns/lifestyle in retirement.
LOL, I should have waited on this until Marks VPW post!
You are quite ahead of the game. Congrats.
I guess if you continue to spend even less than income generated from your portfolio, I guess you will be more and more ahead, and at one point, using VPW will become unnecessary? I can see you are very self-controlled on spending.
Thank you. Like others on here including you we seem to be doing fine. Always easy when markets have been good for a long stretch, corporate earnings strong, dividends rising etc.
I’m using VPW as a basic reference point but not something we’re strictly following (obviously). Not really sure what we’ll do into the future but hopefully we’ll continue to have decent options ahead.
I have been flipped back and forth with how to generate income in my retirement years. I began to seriously plan for retirement last year when my DH was out of job. I realized we might be forced to retire early and we better to be prepared and hopefully retirement will be our choice on our terms instead of being forced and unprepared. My original thought is not to touch capital if I could manage. But after lots of readings regarding to retirement plan, I feel it’s an unnecessary restriction. If we never touch any capital, no doubt the nest egg will become really big when we die. It’s a nice thought to leave a big estate for kids, grandkids and charities, but why it has to be after our death? Also, life is short, why not enjoy it a bit more while we still can even if it means we need to dig into some capital?
I have changed my calculation for retirement ever since. Is it possible for us not to touch capital in retirement? MAYBE. But I no longer feel it’s a MUST. Now I feel I have more options and at the same time it makes retirement plan more complicated. I really like the VPW concept. It makes lots of sense and provides lots of options. Mark, you really need to write a blog about it.
@RBull, I imagine our retirement plan and life will be more like yours. We will use VPW to calculate worst case scenario and that will be the maximum we allow ourselves to spend for a given year. I will still targeting to have passive income (dividends/interests) covering basic expenses (minimum required for living) but I will not limit myself to not touching capital any more. Basically I will budget for a range of expense for each year and how much to spend will depends on what we want for that year as long as it falls into this range. So I figure my portfolio will always have some place for fixed income. At one point maybe I will also buy annuities.
“Also, life is short, why not enjoy it a bit more while we still can even if it means we need to dig into some capital?”
Absolutely, balance in life is key. We strive for it. Otherwise, we wouldn’t have purchased a condo in the city!
I will write about the VPW concept in the coming weeks…just busy with a few other things right now 🙂
I agree overall people saving for retirement need to have significant exposure to equities, especially if they have no work pension. The asset allocation/percent of equities, what types of equities and how much diversification, whether to focus on income and/or growth, or utilizing capital etc is up for each person to decide based on many factors. This also may change in retirement vs in savings/accumulation years as it did for us.
Those with a DB pension may be in better shape than some without one, but what Lloyd demonstrates is that could change on a dime for the spouse based on terms of the pension. Lots of people with a DB pension may not saved much otherwise.
Available cash is what matters however the way I see it for many people that will mean more than income generated from equity dividends. It will be cash flow generated from all investment types, work pension if applicable and govt benefits – including investment income generated and selling of some or most capital. Many will need to dig into capital and some will also want to (our plans). To that end I think Lloyd is right that it’s not really a simple subject and no one fits all solution for life.
All fair points. “Many will need to dig into capital and some will also want to (our plans).”
I hope our 1-year of cash + pensions (fixed-income) will allow for a higher % of equities. We’ll see!
I think it will certainly could and will, and it could here too. I believe you’ll be seeing an increase here in the coming years.
Work pension = over 50% of our “withdrawal/spend” and maybe ~25% of our “assets” so considering a 60/40 EQ/FI on our other investment assets we are tipped heavily to FI, at least the way some would look at it! This would increase a fair bit more with OAS/CPP.
Have you estimated your CPP and OAS incomes yet RBull? Curious.
Pension bridge reduction@65=(~9.1K)
Wow, that’s a great deal from both programs. Big jump for the deferred CPP eh? Did you use Service Canada’s calculator for those?
No, I used holypotato calculator and also calculated them myself using a formula dogger1953 had info on for a reply. I have a third one also a spreadsheet but can’t remember source. The amounts used are the dogger formula. I figure accurate to within $200 per year ea. on CPP so good enough for now.
When we get to 64 I’ll call service canada to do 3 scenarios (think they do these for free) probably 65, 67, 70 or something like that. Their online thing doesn’t seem to work for those with a lot of dropout years etc. Deferred 70 amount not as much as I thought but likely again due to shorter careers, years of self employed not contributing, variable pay etc.
Yes, a nice amount. @65 factoring pension reduction we’ll still have 26k /yr more in todays $.
This is not a simple either/or subject. There will be numerous scenarios where what may be fine for one person or couple is totally out of line for another. Then, throw in emotions and personalities and you have the potential for a heck of a stew.
It is also good to keep in mind the big picture. For example, I know of two guys I worked with who were entitled to a really nice, 70% of best of six salary, indexed to inflation, DB pension with a health plan. Set for life right? Well, unfortunately, for their spouses, they up and died leaving the spouse with 50% of that 70%.
In my case, a family medical issue changed my plans and then changed again. It isn’t always cut and dried.
@Lloyd: Yes, lost of options, but in the end its Available Cash that matters. For those with DB’s life is much easier, for those without lots of savings and planning is required. Should medical/mental/other issues arise, stable and growing cash is even more important. Should we have a major market correction new problems arise for those investing for growth and indexing. I don’t have answers for all or a best choice, just what has worked for us and continues to work.
Agreed…my post wasn’t trying to say it’s all or nothing, rather, I believe there is a strong case to be made that owning stocks long-term is very beneficial to investors of all ages. No doubt things change over time and who knows, maybe I’ll own a basket of GICs and stocks eventually!
“What are your thoughts about holding stocks in retirement? ”
Regardless when a person begins Income investing, by the time they retire they will know who much income their investments are generating, if it will then know if it will meet their needs and how much is the growth rate is. They can then decide how to offset what they need. Should they then convert to fixed income? I would doubt it unless the dividend income is so small the majority will be from selling. In which case they did not save enough during the accum phase, started way too late or they Chased High Yield and the companies cut their dividend.
For those retirees who don’t need to sell than keeping income generating stocks will ensure their income and capital continues to grow.
“For those retirees who don’t need to sell than keeping income generating stocks will ensure their income and capital continues to grow.” I’m hoping that will be me in another 5-10 years.
As I read through this post you make several good points, but as usual the overall discussion relates to the Market Value of stocks. Yes, value or capital growth is important, but almost meaningless, IMO, during the time one is investing. When buying stocks the lower the price the better, but will that price mean you will generate a 5%, 9% or 14% return? You won’t know till you compare the price you paid to the yearend price. Even all this Best, Worst, Average, etc listed are calculated after the year has past. In other word you are looking back to see how you did and it means nothing looking forward. Here’s an example: The TSX at Jan 5, 2017 was 15496. At Dec 28, 2017 it was 16209 up 4.60%. However by Apr 20, 2018 it was 15484 or down 4.47% (from Jan 18) and about the same as Jan 5, 2017. Now that may not match a stock one bought but those Best, Worst, etc come from the TSX Index not individual stocks.
So what would be meaningful to an investor? Again IMO I’d suggest an investor ask, How Much Income can I get from buying a stock and will the income grow even if I don’t buy more shares? If the income one seeks is higher than obtainable from other sources (FI), has a history of growing and is reasonably safe than it would seem to be a good investment. The other benefit is the income received should not be affected by the market changes in price. Anyone in the accumulation phase should consider 100% individual equities when investing for income. I consider investments separate from savings which one needs for short term and unforeseen events.
Income stocks are fairly easy to identify, income received is easy to measure/monitor and forecasting the next year’s income will probably be accurate.
“Now that may not match a stock one bought but those Best, Worst, etc come from the TSX Index not individual stocks.” Well, the TSX is a horrible index for diversification as you know. Those Vanguard stats rely on the S&P 500 and other broad indexes, a much more diversified index.
I absolutely consider savings different than investing. I mentioned as much here and we share that approach: