Top 10 Retirement Mistakes

Top 10 Retirement Mistakes

A few years ago, an article in the Financial Post caught my eye: mistakes retirees make when it comes to their investments.

More recently, the great folks at Visual Capitalist put together a graphic about the Top 10 Retirement Mistakes investors make. I thought for today’s post I’d review each one in that Top 10 list and highlight how I’m trying to navigate each potential issue (or not!), including what I’ve learned to date from other successful retirees that have been there, done that before me. 

Read on and feel free to compare notes in the comments section!

Top 10 Retirement Mistakes

Based on some survey data from the 2022 Natixis Global Survey, which polled 2,700 financial professionals across 16 countries between March and April 2022, here are the top retirement mistakes folks make:

Charted: Top 10 Retirement Planning Mistakes

And…

This is what I’m doing about them, in my own personal financial projections work. 

1. Underestimating the impact of inflation

According to 49% of financial planners, the largest mistake investors make is underestimating the sizable impact that inflation has on the value of retirement savings.

In Beat the Bank, author Larry Bates also hinted at the same wealth-killer to avoid (among other subjects). 

Larry suggested we need to understand and embrace three key wealth builders during our investing career: 

  1. amount,
  2. time, and
  3. rate of return. 

And…we need to steer far away from wealth killers: 

  1. fees,
  2. taxation, and last but not least,
  3. inflation. 

When it comes to our own financial projections, I include 3% sustained inflation. You can see how that 3% inflation is factored into our cashflow projections below; just as an example. 

My Own Advisor - Cashflow Projections February 2024

Image: from Cashflows & Portfolios projections work. 

We review our anticipated cashflow needs every few months while working full-time and I anticipate the same frequency will need to occur when part-time work begins too.

Based on what I’ve learned from every successful retiree, they know sustainable cashflow is king in retirement. 

What inflation estimate do you use for your retirement income planning needs?

2. Underestimating how long you will live

Yes, you do not want to outlive your money. Ha.

From the survey, 46% of advisors see the underestimating of life spans as the second-most-common retirement mistake. Makes sense: the longer you live, the more retirement savings you’ll need.

My wife and I run our projections to age 95.

Will we both live that long?

No idea. Probably not.

In Retirement Income for Life by Fred Vettese, he wrote:

“Drawing down one’s savings in retirement is something very few retirees do well, even with the help of professional advisors.”

This is because smart decumulation strategies are difficult to employ because retirees have, for the most part, conflicting goals. Retirees ideally want to have enough money to last a lifetime but at the same time, they want to enjoy the wealth they’ve worked so hard for.

Here are some things that Vettese suggests to optimize asset decumulation:

  1. Invest in passively managed funds to lower your investment costs and fees over time – keeping more of money working for you (versus in the hands of advisors of financial companies).
  2. Start your Canada Pension Plan (CPP) later in life – something I wrote about here.
  3. Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity (depending on your income needs).
  4. Make adjustments to your spending habits: consider variable withdrawals. In “good times” consider spending more. In bad times, when the market declines for a couple of years or remains flat, consider spending less.
  5. Consider the “nuclear” option of using a reverse mortgage, later in life.

Our personal “nuclear” option does not include a reverse mortgage that Vettese suggests but it does include home ownership or lack thereof – selling our home if/when we need to later in life and using up our Tax Free Savings Account (TFSAs) assets later in life as well.

This means we are likely keep our TFSA assets intact for the coming 10-20 years preferring to use and draw down other assets such as all RRSP/RRIF money and non-registered assets first. I’ll come back to this point later on. 

What age do you use for your retirement income planning needs?

3. Overestimating investment income

Maybe after mistake #2, it’s not surprising to read that some retirees (not all!) overestimate the income they need to retire on. 

I dunno. I mean, I would rather “have enough” than too little, to age 95 or otherwise. 

That said, we don’t want a large estate. That’s not a goal of ours. 

Based on our most recent Financial Independence Update we’ve assumed we’ll need about ~ $6,000 per month to fulfill our retirement income needs and wants, on average. Some months will require more spending. Some months could be less. We’ve assumed for now that spending will increase by inflation year-over-year (3%).

This also assumes we remain out of debt once we hit full retirement. We own our home now and are mortgage-free.

I’ve prepared a few free retirement income case studies on this site and if you want to spend about $6,000 per month on average like we do, I know roughly what you’ll need to have saved up.

Here is that case study.

How much do you need to retire on $6,000 per month?

It’s a lot of money for sure to have saved up…

The good news is, you don’t need to save that much. We haven’t. Time and compounding will do most of the work for you if save early and often, even in small amounts. 

To support our cashflow needs in retirement, while we are likely to “live off dividends” to some degree we will absolutely spend the investment capital over time since this approach doesn’t make sense for us in perpetuity.

Living off our investment income has always been more of a near-term mindset – to ensure we have some cashflow to supplement part-time work in our 50s that is greater than our expenses.

Here is my fun lil’ graphic:

Part-time work + dividends = FIWOOT

Have we overestimated the investment income we need to support our semi-retirement years?

I don’t think so but everyone needs to figure out their income needs and wants and find ways to fund it accordingly.

What assumptions have you made or did you make about your investment income sources?

4. Investing too conservatively

I’ll keep my reply more short and sweet on this one since I’ll explain more under point #5.

I’ve learned from other successful retirees that some of them:

  1. totally ignore the expert advice related to matching your age with your bond allocation %.
  2. ignore diversification principles that suggest you must invest in a % of international stocks.
  3. ignore 4% safe withdrawal rates. 

Instead, many retirees are just as aggressive by holding lots of equities in their retirement years as in their asset accumulation years. They keep a bias to U.S. stocks or U.S.-listed ETFs in particular that invest in the U.S. stock market for growth. They ignore any suggestions of safe withdrawal rates and instead use some form of variable percentage withdrawals over time.

In doing so, they’ve spent more money to enjoy a fulfilling retirement and in some cases, even with variable spending, their portfolio value is now higher in retirement than it was the day they retired!

Is your investing approach too conservative?

5. Setting unrealistic return expectations

In our personal projections, we’ve assumed between 5.5%-6% annualized long-term equity returns from our investment portfolio. 

That portfolio is mostly equities, although we do hold some cash and/or cash-alternative ETFs.

Are Cash-Alternative ETFs Right for You?

We don’t own any bonds. We don’t own any GICs. We don’t own any preferred shares. We have no plans to own any of these asset classes or products for the coming decade at least.

Based on our historical returns, including those from our moaty stocks, we have been exceeding 6% returns across all accounts in our portfolio but the financial future is always very cloudy. 

What investing return expectations do you have over time? Are they aligned to your objectives?

6. Forgetting healthcare costs

Like I mentioned above, healthcare in this country is a huge wildcard. I believe we are in a major healthcare crisis that needs to be resolved…

I started looking into healthcare benefits for retirees a few years ago, just to see what the costs might be down the line. 

I hope to update this post or related posts soon. 

Healthcare Insurance Benefits for Retirees in Canada

While we are not yet in retirement let alone semi-retirement, we anticipate we’ll spend a bit more money in our ‘go-go years’ vs. the ‘slower-go years’. To combat healthcare costs in the future, we’re actually going to keep TFSA assets intact until our 70s or 80s, and use those tax-free assets as needed for long-term care expenses. This way, there are no tax consequences involved and our money will go further if and when we need it as part of any “nuclear” retirement income option beyond our home.

Have you budgeted for long-term healthcare expenses?

7. Failing to understand income sources

I’ve probably exhausted this point by now but we intend to have the following key personal income sources to tap in our retirement income plan, beyond government benefits, when we’re no longer working at all. Your mileage may vary:

  1. Personal assets (RRSPs, TFSAs, Non-Reg. Accounts).
  2. My small workplace defined benefit pension.
  3. My wife’s defined contribution pension. 

Any successful retirement income plan I’ve seen from those older than me, who have been there, done that per se, put a focus on personal retirement income planning over and above what any government benefits might provide.

This means, while successful retirees don’t discount the (eventual) income they will earn from Old Age Security (OAS) or our Canada Pension Plan (CPP) in particular, they don’t fully depend on these benefits either. 

Have you tallied your retirement income sources?

8. Relying too heavily on public benefits

Aligned to point #7, while we will rely on our government benefits, we will do so mostly from a position of inflation protection.

Given both government benefits include some inflation protection (CPI), I personally consider CPP and OAS very bond-like. For this reason, I have a tilt towards equities in our personal portfolio and likely always will. This tilt exposes me/us to more market volatility but it should also provide us with better (higher) returns over time than fixed income.

I believe the more you can tilt your portfolio to hold more equities during retirement, including those that pay dividends or distributions, the more retirement income you could potentially generate. At least, this is our plan…

How much are you leaning on CPP or OAS benefits? 

9. Underestimating real estate costs

I’ll also keep my reply more short and sweet on this one: we intend to remain mortgage-free and we don’t intend to use our home as a retirement nest egg.

Are you going to use your home to fund your retirement?

10. Investing too aggressively

While some investors might argue I have too much of a bias to dividend paying stocks, this approach along with some growth-oriented ETFs is helping us meet our income objectives. 

January 2024 Dividend Income Update

To ensure we shield ourselves from any major market calamity, since stock markets can and will correct from time to time, we will keep a modest cash wedge as we enter semi-retirement. 

How long do stock market corrections last?

How much cash or cash equivalents you need to keep in your portfolio can vary of course but we feel this is a decent starting point. 

How much cash should you keep?

Are you going to employ some sort of cash wedge or fixed-income % in your retirement income plan? 

Top 10 Retirement Mistakes Summary

I don’t have all the answers but I’d like to believe we’ve done more good things than not over our DIY investing years to get ourselves organized for what might lie ahead.

There is always more work to do.

As we approach some semi-retirement considerstions that I will write about next month (!) we simply hope to mitigate any retirement planning mistakes along the way. I’ll keep you posted…

Thanks for reading and I hope you got something out of this post that might be of value to your tailored plan or financial projections.

Mark

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

82 Responses to "Top 10 Retirement Mistakes"

  1. Variable Percentage Withdrawal is something people should look into more. Each year, I run the numbers with the easy spreadsheet and it shows how much can safely be withdrawn in that particular year. It takes a bit of time to get one’s head around the idea, but it makes a lot of sense, and is much better than trying to balance lifestyle over several decades using, for example, a fixed 4% withdrawal rate.

    “Variable percentage withdrawal (VPW) is a method which adapts portfolio withdrawal amounts to the retiree’s retirement horizon, asset allocation, and portfolio returns during retirement. It combines the best ideas of the constant-dollar, constant-percentage, and 1/N withdrawal methods to allow the retiree to spend most of the portfolio using return-adjusted withdrawals. By adapting withdrawals to market returns, VPW will never prematurely deplete the portfolio.”

    https://www.finiki.org/wiki/Variable_percentage_withdrawal
    https://www.finiki.org/wiki/Variable_percentage_withdrawal#VPW_Accumulation_And_Retirement_Worksheet

    Reply
  2. This has sure been one fantastic discussion. A few additional points.

    WRT Graham’s not wanting to give the CRA any extra money early – it’s important to note that generating extra taxable dividend income does indeed mean giving the CRA more dough up front but in our case living in AB, we pay 27.2% (including the OAS clawback) which means we’re still keeping an extra 72.8% of the money so are still way ahead in the short term.

    As an aside, I checked out BC and ON with 2024 taxtips and the marginal rate on dividend income for both provinces for our case is 26.2% (so even better then AB). I was also quite shocked to see that we pay 41.34% more overall tax each than we would if we lived in BC and 22.52% more than ON. Alberta’s 10% flat rate is a killer in those lower brackets.

    WRT Paul’s fabulous TFSA returns – it got me thinking about our TFSA strategy and I’ve decided to follow Paul (with a big thanks). I’ve always been saying that we are dividend income investors and don’t really care about total returns but that’s a bad assumption for the TFSA. It is really unlikely that we will ever have to withdraw from our TFSAs so the real goal is to grow them as much as possible for our heirs. To keep it simple and more conservative, we are going to just buy a 2-3 ETFs starting in Jan 2025 (already done our 2024). I’ll have to do some more investigation but my starting thinking is a combo of VDY, VEQT, VFV, XAW, etc.

    WRT Graham’s comment on taxtips being too simple for things like pension income splitting – we always split my RRIF withdrawal 50/50 so all I do is put my wife’s half in the “pension income eligible for pension tax credit” field. She then gets the tax credit and everything works like a charm. I really like the taxtips simple calculator as it has all the input fields we need (other than charity, which I know will be a certain tax savings) and is so easy to do what ifs on the key inputs.

    Ciao
    Don

    Reply
    1. WRT Paul’s fabulous TFSA returns… yes, I know a few folks that have more than $200k per TFSA these days; a few couples approaching $400k now. Incredible.

      Our plan has us spending about $75k or so from our portfolio, but even then, that might not put too much of any dent into our TFSAs.

      I’ve done some projections work on our portfolio and we would never touch our TFSAs if we intend to spend $65k per year assuming 6% returns over time and 3% inflation. We own a few growth-oriented assets inside our TFSA purposely: CP, CNR, BN, XAW as well.

      I own about 30 CDN stocks at last count so we own XAW to be lazy and diversify away from Canadian content for growth. QQQ is our tech growth kicker…about 2% of our portfolio but we don’t own that in our TFSA.

      I don’t mind VDY but I happen to own all top-10 VDY stocks anyhow. 🙂
      Mark

      Reply
    2. Lloyd (63, retired at 55) · Edit

      WRT to simplifying the TFSA, the wife’s TFSA went from 9 or 10 stocks to just REI, XEI, XDIV, TD Dow e-series with TDB9150 as a bucket for the distributions. Could consolidate the two ETFs but it would cost her $19.98 so I can’t be bothered. (I know it ain’t rational to balk over the $20 but be willing to pay the MERs.) For some reason we never DRIPped this account and I’m too lazy to call in now. I can re-invest every January with the annual contribution.

      My TFSA still has 4 individual holdings (one being that dastardly AQN – grrrr) with XEI, XIC, TD DOW e-series and a 5-year GIC. I’ll probably work on simplifying it as well but it is DRIPped so I have to be mindful of timing.

      I really enjoy this discussion. Lot’s of thought provoking commentary.

      Reply
      1. re: TFSA – ya, I could see the simplification inside the TFSA over time. We’re a handful of CDN stocks there + XAW.

        Lloyd, what are your thoughts on TD Investment Savings Account TDB8150, paying 4.5%+? as a non-registered account?

        Mark

        Reply
        1. Lloyd (63, retired at 55) · Edit

          I use TDB8150 in 5 accounts including the non-reg. Sops up the left-over cash and pays monthly. Sure there is a time delay on transactions, but it’s easy enough to work with that. I’d not bet on that rate staying there though. But any interest earned at any rate is better than zero interest earned.

          We mostly use the Hubert 1 year quarterly term for the bulk of our funds that we might need on short notice.

          Reply
          1. Good stuff, re: taxable. RBC and other brokerges seem to have similar products.

            What are your tax implications on that? i.e., do you just get T3 or likely T5 (Investment Income) every year on that to pay any taxes on interest earned?

            I hear ya with better than zero. 🙂
            Mark

            Reply
            1. Lloyd (63, retired at 55) · Edit

              Yup, fully taxed in the non-reg investment account. I don’t get too worked up about paying taxes much anymore. I know it isn’t generally popular, but I have a sense of obligation to put back.

              Reply
              1. LOL. Yes, thought so, but better that or another ISA (Interest Savings Account) earning 4% vs. nothing.

                Once I get my act together this year and make my RRSP contributions in March and April, my attention will turn to some taxable investing potentially….later on in 2024. We’ll see!

                Thanks again,
                Mark

                Reply
  3. Hi Mark, in answer to your questions:

    1. What inflation estimate do you use?
    Same as you, 3%, but I test our plan to survive a sustained rate of 8% for the next 25+ years.

    2. What age do you use for your retirement income planning needs?
    I just run our projection to age 86 because it’s fewer columns in my spreadsheet! By then it’s all pension and annuity income anyway, so there’s little chance of running out of money, regardless of how long we live.

    3. Assumptions about your investment income sources?
    By good fortune, our combined investment and pension income is greater than we had planned for some ten years ago. However, we have seen our spending increase rapidly in the past few years, including high inflation, five RESPs that were not in the original plan, and the very recent decision to spend more on travel and experiences. We like the “give with a warm hand” and “die with zero” philosophies.

    4. Is your investing approach too conservative?
    Currently at 75/25, but aiming for 85/15 by age 67. We could easily shift to 90/10, but we’ll see how much cash we want to hold. Note that about 50% of our income is from a work pension plan.

    5. What investing return expectations do you have?
    Our rate of return is based on a document, “Expected Returns”, posted annually by PWL Capital, of The Rational Reminder Podcast fame. It lists different rates for different assets. I adjust for my higher inflation assumption to arrive at 6.74%. It’s a number, and probably safer than using what I’d like it to be.

    6. Have you budgeted for long-term healthcare expenses?
    Because we live in Canada (a communist country 😊), we’re much less concerned about this than if we lived in the US. The current plan is to leave our home to our kids to fight over, plus a few bags of money, but in the event that our healthcare costs increase, we’ll draw on those resources for our own care; sorry kids!

    7. Have you tallied your retirement income sources?
    I’ve obsessed over this down to the tiniest detail, so yes, including all pension sources, dividends, drawdown strategies, tax deductions, tax credits, credit card cashbacks, and so on. I can’t see any way to squeeze more out, but I continue looking to try and find something I may have missed.

    8. How much are you leaning on CPP or OAS benefits?
    These pensions will become a notable proportion (60%) of our income beyond age 70, but we’re close enough that we don’t see any of them being wrapped up by the time we get there; also, we won’t have touched our TFSAs by that point, so they’ll be available to cover the loss of some government pension income.

    9. Are you going to use your home to fund your retirement?
    No, that’s not in our plans at all, other than it being the asset of last resort.

    10. Are you going to employ some sort of cash wedge or fixed-income?
    Yes, see my answer to question 4. The fixed income portion is approximately 50% cash/GICs and 50% aggregate bond ETF.

    11. An issue raised by Lloyd: Contingency in the event of the loss of a spouse?
    After adjusting for the reduced cost of only one person left standing, we have long-term life insurance policies to fill the gap caused by the loss of, and reduction of pension income. Each of us has said we would downsize the property too, reducing costs and releasing some capital.

    —–

    Now, if we do get 8% inflation for 25 years, the investment ROR is 2%. the work pension plan folds, CPP and OAS are shut down, and one of us has high healthcare costs. Then we will run into a few problems!

    Bob

    Reply
    1. Great stuff, Bob.

      A few thoughts/replies!

      3. Great to read – make so much sense: ” “give with a warm hand” and “die with zero” philosophies.”

      5. What investing return expectations do you have?
      You might be interested in this, as well, since nobody knows what the rates of return will really be.
      https://www.fpcanada.ca/docs/default-source/standards/2023-pag—english.pdf?sfvrsn=911e63c0_3

      8. How much are you leaning on CPP or OAS benefits?
      Nothing wrong with that and certainly if you haven’t touched your TFSAs by your 70s, you’re in GREAT financial shape.

      Very well done.
      Mark

      Reply
  4. Another mistake is failing to consider the impact of taxation and this may be especially true when one partner passes.
    The comments on inflation triggered my curiosity so a did a little research.
    Like most retirees I have multiple sources of income. Mine include CPP. OAS, DB pension, RRIF, non reg. 82% of my income has some form of inflation protection while 18% does not. The 18% represent personal assets that could have a small inflation adjustment but I chose not too.
    Over the last six years CPP payouts has increased approx 19%, my pension has increased 12.5% while my working colleagues salaries have only received 3.75%.
    My retirement income is more stable and has better inflation protection then was my working income. Crazy.

    Reply
    1. That’s a great point re: survivorship. I suspect it’s in the financial list of mistakes somewhere and I know we need to combat it as well.

      This is why I currently have, will have, will always have my wife’s DC pension in indexed funds to focus on growth and simplicity for her + her CPP + her OAS income – as we age. Sure, there will be a few stocks to manage in our taxable account and TFSAs as well, but RRSPs/RRIFs will be gone in the coming decades so the rest of the individual stocks will be “small potatoes” compared to her other income streams should I pass away before her. I hope that doesn’t happen of course but you never know when your time is up.

      Mark

      Reply
  5. Lots to consider. I understand that when people do get into financial trouble it wasn’t one event that occurred is was usually two, three or more in succession. The one thing that could be added is to have a plan when your finances/investment strategy goes off course. Taking charge when you need to and shifting your plan will at least let you sleep at night even as things go bad.

    Lots of comments to re-read. I very much appreciate the comments which show how the reader has invested. Thanks Mark for the blog as being transparent on your investments is contagious and obviously for the good of the readers.

    Reply
    1. Lloyd (63, retired at 55) · Edit

      “Taking charge when you need to and shifting your plan will at least let you sleep at night even as things go bad.”

      This was a large factor for us. At 49 I was set to retire at 50, planned to use the RRSP to bridge to an unpenalized partial pension at 60. Then the stuff hit the fan and I felt it was prudent to continue working to 55 to get an extra 5 years of pensionable earnings and the unpenalized pension at 55.

      Sometimes plans don’t work out.

      Reply
  6. Some comments on your 10 points:
    1. Inflation: It is what it is. Just adjust spending to match if need be. Actual could be anything. We saw double digit inflation at one time. Bigger issue when retired than when working.
    2. Longevity: 95 is a good number. For us, that’s only about 12 years!
    3. Overestimating Income Needed: Not really an issue for us – we have the data 🙂
    4a. Started with average of 40% Fixed Income. As equities grew ratio dropped to 25%, now 42% but includes preferreds as pseudo fixed income and they pay dividends!
    4b. We have 20+% of portfolio in preferreds. 1/2 of these are perpetuals and yield 6-10% on our cost and will do so forever, unless called. Better Total Return than many equities. A no-brainer in recent times. But you do need to take the time to understand preferreds.
    4c. We started off using the 4% rule as a rough guide as to how much we would be able to draw. However, in 20 years we have only drawn 4% three times due to purchase of new car. Average draw – Yrs 1-10: 3%; 11-15: 3.75%; 16-23: 2.3%(covid?)
    5. Unrealistic Income estimate: Over 20 years 6% Total Return for our approx 65/35 portfolio. Fixed income yield may be slightly lower, but it is always there. Dividends may be reliable, but Total Return of equities are not.
    6. Heath Care is important: Don’t discount possibility of one spouse needing to go into nursing home while other stays in home. There are some very expensive medications that are not covered by provinces. Don’t be concerned about building a large nest egg while in retirement. You may need it.
    7/8: CPP and some OAS are part of the income we rely on in part for living expenses along with dividends. We still accumulate income to cover unpredictable life events. If they don’t happen, our kids can use any money left after CRA gets their share!
    9. Mortgage paid, no debt. Almost an essential once retired.
    10. An all equity portfolio is in my mind far too risky and volatile. Fixed income is safer and can have good yields plus provide a good cushion. I never invested in any fixed income that did not have a positive REAL return, preferably after tax 🙂 Over 20 years, we have drawn about the same as the amount we started with. Yet our portfolio is now double that starting amount.

    Sorry – Likely more above than you were asking for 🙂

    Reply
    1. All good, Graham. I enjoy your takes.

      A few thoughts…

      3. Overestimating Income Needed – how did you arrive at your data?

      4c. I don’t mind the 4% rule as a starting point, it’s very good (as a starting point) just not very productive long-term to only focus on 4% + inflation over time.

      https://www.myownadvisor.ca/why-the-4-rule-is-actually-still-a-decent-rule-of-thumb/

      5. Unrealistic Income estimate = “over 20 years 6% Total Return for our approx 65/35 portfolio..”. That’s very good.
      I would agree with you 100% = “Dividends may be reliable, but Total Return of equities are not.” There is a hope for capital gains but you don’t know when it will happen nor how much?!

      9. “Mortgage paid, no debt. Almost an essential once retired.” Yup. We hope to never have a mortgage again.

      Awesome stuff,
      Mark

      Reply
      1. Thanks Mark for response and questions:
        3. My wife has kept a record of our expenses for years. In retirement these would not change much. Some would be reduced, others increase. We allowed for 2 or 3 months away in winter (including golf ;)) Main change was that our self employment income ended!

        4. The 4% rule is a very general rule. Most of us could live off 4% of 1Million plus OAS/CPP. 4% of $2million even better. But 4% of 1/2 million not so great. We aimed at 4%, but were fortunate that in first 3 months of DIY investing our portfolio grew by about 20%. As a result, 3% was sufficient.

        5. Couldn’t find anything on line, so I recently made a chart that compared Total returns of TSX60 components over 5,10,15,20 yrs. Illustrates why chasing dividend yield may not be the best approach. For example RY with 4.18% div yield had double digit TRs over all periods. BNS not so good! (2.9% over past 5 years, despite current 6.6% yield))

        Reply
        1. Regarding point 5 – I think you’re right, in general, that chasing yield, just for the sake of yield may not be the best approach. On the other hand the BTSX strategy has been proven to beat the TSX60 (XIU) more often than not, and definitely over the periods that you mentioned. So, while I would agree there are individual examples where chasing yield is not optimal, utilizing a strategy like BTSX can be one way to beat the index much of the time.

          Reply
          1. Hi James,
            I had a look at the current BTSX top 10. They were AQN, BCE, BNS, CM, EMA, ENB, POW, PPL, T, TRP. (I actually own 8 of those) I then looked at the Total Returns over 10 years of those Top Ten vs all TSX components and vs XIU. (ending 31/12/2023). I chose 10 yrs as I feel distant past performance is not as meaningful, but could also have looked at other time frames.

            Only one, EMA had a better total return than XIU. 10.05% vs 8.02%. The others ranged from 7.75% (PPL) down to 4.37% (BNS). Average was 7.06% vs 8.02% for XIU. I think we can do better!

            The following top performers (based on double digit Total Returns and dividends > 4%) were excluded. CNQ, NA, BMO, RY,SLF, FTS. (I own 5 of those 🙂 )

            I did this study because I have been trying to simplify our portfolio. XIU is the simplest choice, but it has a number of components that drag it down. It seems to me that we need to look at both dividend yield (assuming we need this for cash flow) as well as Total Return so as to weed out the underperformers.

            A quick look came up with T, EMA, CM, TD, BMO, CNQ, FTS, SLF, RY, NA. Equal allocation to each of these would result in 5.42% yield and 10.54% Total Return which would easily beat the index. ( we own all except SLF). No need for equal allocation if you want to boost cash flow a little.

            I have too much in BCE and BNS and will try and trim these. Will replace and add to CNR/CP because dividends are getting clawed back in taxable accounts 🙁

            To be honest, I don’t like the BTSX approach. I think is overly simplistic and you don’t end up with some of the TSX60s best stocks. And you have to do a lot of rebalancing and trading.

            Reply
            1. I agree with all of your points, and I don’t advocate for a pure BTSX strategy – I was just trying to make the point that a basket of good quality companies that pay a healthy dividend (in some cases because their share price has been beat up – essentially the thought process behind BTSX) can and do out-perform the XIU index.

              My own portfolio is listed elsewhere in this conversation and it includes both former and present members of the BTSX and some other “income boosters” that I think make sense in the small proportions that we own them.

              I also like your mention about how dividends are forcing you into clawback territory and shifting to a name that is more likely to return capital gains versus dividends is potentially a good strategy (it might matter how much capital gains you trigger, which has always been my concern with having to sell BTSX names in my non-registered account.

              Thanks for the discussion!

              Reply
              1. Yes. Dividend income is grossed up by 38% in calculating the taxable income that OAS clawback (Pension Recovery Tax) is based on.

                Other investment income like capital gains and interest are not. After that calculation, the dividend tax credit is applied. This does not mean that it is not worthwhile earning dividends, but depending on your overall income, at some point capital gains may be better.

                Mark sometimes talks about Total Return ETFs like HXT that pay no dividends, but instead, turn them into capital gains that don’t need to be paid until you sell. Those would be useful when clawback has been reached and you have sufficient dividend income. I chose to buy CP and CNR for this purpose. They pay a very small dividend and will hopefully continue to grow!

                Reply
                1. Great answer…you read my mind.

                  HXT is a great fund but I like owning CDN payers in my taxable/our taxable and we do.

                  We have been buying more lower-yield, higher-growth stocks over time there = non-reg. Taxable investing includes stocks like TOU, WCN, EQB, ATD and others….CNR and CP are excellent candidates too. You’d need A LOT of taxable dividends from those lower-yielding stocks to worry about OAS clawbacks = excellent problem to have! 🙂

                  Mark

                  Reply
                2. Yes, of course I know all of this.
                  But it is important to not confuse those who don’t, by saying your dividends are clawed back. It is your OAS that is lost.
                  When our OAS is clawed back I may look into the other ETFs, but for now I am managing our income to be just below the clawback amount every year. We do not have any mandatory Registered withdrawals at this point.

                  Reply
            2. Hey Graham

              You’ve obviously put lots of thought into your investing. Good stuff.

              In terms of the BTSX, I think it’s a starting point for investigating potential dividend stock buys, either as a first time or for adding to existing holdings. I would never use it to re-balance as we generally don’t sell a stock unless something has changed with the company (like a divy cut)

              In terms of swapping dividend income stocks to something with the idea of getting more capital gains, I think that is quite a risky proposition. Dividend income is way more reliable than capital gains so I think it makes tax planning easier.

              As an aside, my wife & I tried to draw down our RRSPs before we started OAS but the market was having a good run at the time so even though we withdrew a significant amount, our RRSPs kept growing. Once we started OAS, we decided to just let the final estate taxes end up what they end up. I always say to the kids, just be thankful you’re going to get a big inheritance and live with the tax bill. 🙂

              For now, that means, aside from paying our expenses, giving some early inheritance, and giving to charity, we just continue to buy more of what we already own with the extra dividend cash. We get about a 15% OAS clawback (which I can easily live with).

              Ciao
              Don

              Reply
              1. Hi Don,
                You said: “In terms of swapping dividend income stocks to something with the idea of getting more capital gains, I think that is quite a risky proposition. ”

                Just to clarify – We are doing this, because we are both at the OAS clawback threshhold. We have more than enough for two 80-somethings to live off. We would not be selling growth stocks to generate more income.

                We have to withdraw something like $70k from RRIFs this year and as we know, the percentage increases as we age. Other than TFSA contributions and cash for taxes, gifts and donations, a good part of that needs to find a home in the unregistered accounts. Seems it is better to put it growth stocks and delay taxes at least for now. Once one of us is gone, the plan falls apart 🙂

                Reply
                1. Hey Graham

                  You had explained the logic behind your plan really well in the earlier post so I did understand what you are trying to do. We are pretty much in the same boat as you, just a little younger (71 and 67) with only my RRIF so far and will wait the 5 years for my wife’s conversion. We both have pretty large non-registered accounts that generate quite large dividend income so we are into clawback territory (~15%).

                  I did a taxtips test on our marginal rate for extra dividend income and with the OAS clawback factored in, the total marginal rate is 27.2% (live in AB). At least for now, I figure this rate is still well worth generating additional non-registered dividend income. I also like the idea that we are paying our taxes as we go rather than postponing it until we pass away and paying a higher rate as our estate will most likely be in the top tax bracket.

                  The entire discussion on this post is incredibly interesting with so many factors to consider and so many well thought out plans.

                  Thanks for all your comments and take care
                  Don

                  Reply
                  1. Trying to figure out the best strategy at least keeps the mind active!

                    My plan is to aim at maximum tax efficiency. One or both of us may need part of our savings if we need to move to a retirement or extended care home. Rather us have the money available than give it to the CRA early 🙂

                    If we don’t need it, the estate will be taxed at max rate regardless. The larger it is, the more both the heirs and the CRA will get! We may gift some in later years if kids or grandkids have a need, To some extent, we do that now.

                    I have looked at the tax-tips calculator, but what I have done instead, is use Studio Tax or Genutax for what-if analyses. They have the advantage of being able to take into account other factors such as income splitting.

                    Thanks for the discussion. Hope Mark doesn’t mind us using his room 😉

                    Reply
                    1. Keep discussing. I enjoy reading and hearing the thoughts. Helps me work through our own plan too 🙂

                      Our plan, I think you know, in a nutshell:

                      1. “Live off dividends” generated by taxable accounts + RRSPs in the semi-retirement years/part-time work years ~ 5+ years.
                      2. 5+ years start selling off RRSP/RRIF assets, income splitting, etc. along with being strategic with capital gains (taxables).
                      3. Over time sell off all RRSP/RRIF assets before 70 leaving in our 70s = small taxable income stream + pensions + CPP x2 + OAS x2 + TFSAx x2 as we need them…

                      Our drawdown order is largely NRT (non-reg. dividends) > RRSPs/RRIFs > TFSAs until the end.

                      https://www.myownadvisor.ca/financial-independence-update/

                      We figure we need/want ~ $70k-$75k to fund our retirement plan with 3% sustained inflation.
                      Mark

                    2. I also use Studio Tax. Each year, when I finalize the numbers, I save a new version of the file, (update our birthdates to make us appear “older”) and then update / replace the numbers with what I’m planning to have happen in retirement. Yes, the brackets will change over the next 3-4 years, but it gives me a great way to pre-plan and take into account some income splitting. It’s not that difficult to come up with some fictional RIF slips, update the T5’s and T3’s to what we expect and see how things will play out.

            3. I don’t mind BTSX approach but I don’t follow it perfectly and I don’t know anyone that does – i.e., selling the stocks not in BTSX every year. Good in theory but could be expensive with transations, etc.

              I like your quick look:

              “A quick look came up with T, EMA, CM, TD, BMO, CNQ, FTS, SLF, RY, NA. Equal allocation to each of these would result in 5.42% yield and 10.54% Total Return which would easily beat the index. ( we own all except SLF). No need for equal allocation if you want to boost cash flow a little.”

              I happen to own every one of those stocks. In some cases, owned those stocks for almost 15 years.
              If you swap out SLF or EMA and add in WCN or CNR for each, you’ll love the results 🙂

              Can’t forget to own lower-yield and higher growth stocks like WCN, CNR, CP and DOL as a few examples.
              Mark

              Reply
              1. Right! (I did by a railroad for each of our unregistered accounts!)

                My example was just to illustrate that there could be a better way of choosing stocks than blindly holding the top ten dividend payers. My spreadsheet also identified low yield high growth stocks, some of which I knew nothing about! For example Constellation Software with 0.14% dividend yield but about 40% Total Return for 15 years. I would buy some but share price was $3710 last time I looked! :). Another was WSP (22%TR for 10 years). One of the largest engineering firms in the world. Yet, even as an engineer, I knew nothing about them.

                Another thing I don’t like about BSTX, is that it excludes very good dividend payers that are not in the TSX60. Like EIF and RUS, both of which we hold, and some others. I might switch my spreadsheet to XIC holdings so other top stocks are included in Dividend-Total Return comparison.

                Reply
                1. Smart call on the rails. If I have more $$ for taxable this year (need to max out RRSPs first), then CNR and CP are near the top of my list.

                  Ya, $CSU going wild. Serial acquisition team there. My goodness.

                  I hear ya with BTSX, it’s a bit narrow for me. I own WCN not in that list but total return for me has been great and would only buy more over time too, after the rails: CNR and CP at my top priorities for non-registered.

                  I appreciate all your detailed comments. You’ve done tremendously well with your investing. 🙂

                  Off to grab a beer – all these comments and replies made me thristy! Ha.

                  Enjoy the weekend, chat soon.
                  Mark

                  Reply
          2. I like BTSX, those stocks will tend to beat the TSX in most years but not all years. BTSX is struggling now with higher interest rates hurting capital intensive companies like utilities and telcos. A very good time to buy those stocks in fact, when there is a bit of hurt.

            I looked at the 2024 list and I own 8 of 10.
            https://www.myownadvisor.ca/beat-the-tsx/

            Mark

            Reply
        2. Love it. Big golf fan here.

          As for 4% rule, yes, most Canadians/households with $1M in the bank at age 65 with CPP x2 + OAS x2 would be doing more than fine. Of course, a $2M portfolio is better but that’s a lot of spending for someone in their 60s+ …. but good on them! 🙂

          Reply
  7. Thank everyone for input.
    I would add: Not being prepared (are we ever?) or making provision for crises in close family, especially when children are involved. eg; cruel surprise divorce & related legal decisions, sudden death of breadwinner w/o will and/or life insurance, poor decisions of aged parents/in-laws & health/education issues on all of the above.

    Reply
  8. Why even have the word ‘retiree’ in there? These are lessons in life whether you are 30 or 75. All very salient points and the earlier in life they are grasped and managed the more successful and worry-free you should be. A good place to start is in the high school curriculum or even senior public grades. A little bit of financial literacy can reap the best rewards.

    Reply
  9. Lloyd (63, retired at 55) · Edit

    I pondered this darn post last night. I’ve pondered it again this morning. All told, at least a couple of hours of pondering. I still can’t come up with a coherent/cogent thought process I can articulate.

    But I will say, classifying something as a mistake or not can have large variances depending upon one’s circumstances. I’ve had more than a few things I’ve done/am doing judged as mistakes by others. They might be correct, they might not. But it seemed like a good idea at the time.

    Good article Mark, it made me think (a lot). It would be a *great* coffee shop discussion.

    Reply
    1. Ha, Lloyd, you probably don’t need to consider these things since you have “enough” income from various sources. Well done. These retirement mistakes are mostly worries that folks have who cannot make expenses meet easily – so they need to optimize/work harder than most to make it all work. That’s not really you from what I understand.

      I hope to avoid these misktakes where I can!
      Mark

      Reply
  10. Hey CJ

    Thanks on the comment.

    This approach isn’t for everyone especially the part about income being more important than total returns. It seems there’s quite a few people with portfolios > $1M that prefer to spend a bunch of time on things like drawdown strategies, figuring out when to sell to create income, fretting about current markets, worrying about running out of money, etc.

    Then there’s the “pure” income investors like a few of us here and of course, the master of it all – Henry Mah.

    Take care
    Don

    Reply
    1. Based on what the financial industry has established, some have turned this subject into a beast. Sadly.

      The most successful retirees I know basically have investment income > expenses (whatever those investments are; usually a bias to a basket of stocks) and then they don’t really care about CPP or OAS start dates in particular, rather, it just “fits” into their plan to take these benefits at more traditional retirement ages (such as age 65) when they see fit. They don’t keep years of cash or cash equivalents because they don’t need to. They don’t worry about debt because they don’t have any.

      I can appreciate everyone is not in that situation but anyone I know that has investment income > expenses really doesn’t have much of a drawdown strategy per se – they are simply living life and enjoying it and gifting money to their children and grandchildren to enjoy.

      Something to think about or what I think about!
      Mark

      Reply
  11. Lloyd (63, retired at 55) · Edit

    oooh, one of those deep-thought provoking posts. 😉

    Gonna need a couple of reads and some more coffee to fully digest.

    One mistake I would have added is failure to fully consider the spouse’s situation upon the demise of a partner. If I die first – huge ramifications for spouse. If spouse dies first – should be a cake walk for me. YMMV

    Reply
    1. Lloyd, yes, that is a very important thing to consider.
      My husband has a small, defined benefit pension from a long ago employer (left them 25 years ago). Non-indexed–well might be, but I doubt to see any indexing. But when it came time to choose options, we chose 100 percent continuing to spouse upon death option. It was really a small amount to do this, probably because we are the same age.

      Reply
      1. Lloyd (63, retired at 55) · Edit

        We never had that option (100% survivor pension). We were allowed to choose between 50% or 60% survivor benefits. But then one also has to consider survivor benefits of CPP and OAS as well (abysmal).

        I used to do volunteer income taxes at the Senior’s Resource Council whence I was but a yoot. Seeing some of the elderly ladies getting taken to the cleaners by the loss/severe cut of their husbands’ pensions was an eye opener. I ain’t gonna let *that* happen.

        Reply
        1. Good point Lloyd about the survivors pension benefit. We had the option, so chose 100% survivor pension for both mine and my wife’s. I you never know who’s gonna go first and how soon (or not🤞).

          Reply
          1. Lloyd (63, retired at 55) · Edit

            The 100% issue was actually the deciding factor in taking the commuted value when I was offered it in ’99.

            If I die last, it will have been a mistake. If I die first, huge win! 🙂 🙂

            Reply
  12. So difficult to estimate how long you will live. I read about many looking at their family history, but I find that kinda meaningless.
    Three of my grandparents lived into their nineties, the fourth was killed as a pedestrian in his late 60s. Yet both my parents succumbed to cancer in their 60s, my very healthy mom only 61, my dad five years later. So what to think? for me, its anything after 60 is borrowed time.

    Inflation, how visible to me here on holiday in Mexico. I first took my teen daughter in 2010 and enjoyed the canned Margaritas from the store at 10 pesos. Now the same can is 27 pesos, and with the super peso that is greater than 100 percent increase in Canadian funds too. I’ve used those cans as an indicator of Mexican inflation all those years!

    Reply
    1. I agree, Barbara, in that we need to take any time we have as a blessing. I hope I will continue to have good health for the coming decades but you never know. Even more incentive to start any sort of semi-retirement / part-time work in the coming year. That’s the plan for both of us…about 90% there related to our goals. Feels good.

      Mark

      Reply
  13. I know I keep saying the same thing but this is for readers that may not have seen some of my previous posts.

    It’s also mainly targeted at retirees with around $1.2M or more in total investments.

    All a person has to do is have a portfolio consisting of 12 or so TSX listed dividend income/growth stocks. Forget the diversification, fixed income, etc and forget worrying about stock prices and total return.

    The example below is the full list of main stocks my wife & I actually hold (but our share count is different).

    Ticker Shares Price Total Div/yr Div$ Yield%
    BCE 1952 51.23 100,000 3.990 7,788 7.79
    BMO 782 127.92 100,000 6.040 4,722 4.72
    BNS 1559 64.13 100,000 4.240 6,612 6.61
    CPX 2677 37.36 100,000 2.460 6,585 6.58
    EMA 2079 48.09 100,000 2.870 5,968 5.97
    ENB 2148 46.56 100,000 3.660 7,861 7.86
    KEY 3009 33.23 100,000 2.000 6,019 6.02
    PPL 2198 45.50 100,000 2.670 5,868 5.87
    RY 754 132.55 100,000 5.520 4,164 4.16
    T 4132 24.20 100,000 1.504 6,217 6.22
    TD 1240 80.66 100,000 4.080 5,058 5.06
    TRP 1863 53.69 100,000 3.840 7,152 7.15
    Totals 1,200,000 74,013 6.17

    You can see that the portfolio generates $74k in dividends. Add in OAS and CPP and most people would be off to the races and never have to sell anything, worry about drawdown strategies, etc.

    I know some people don’t want to pass away with a large portfolio but if they don’t have any heirs, they could just leave it all to charity.

    Also, some people may be worried about inflation. The table below shows the 2023 dividends by stock and the % increase as well as the average increase of 4.54% (which should stay ahead of even bad inflation).

    Ticker 22.12 23.12 % Incr
    BCE 3.680 3.870 5.16
    BMO 5.720 6.040 5.59
    BNS 4.120 4.240 2.91
    CPX 2.320 2.460 6.03
    EMA 2.760 2.870 3.99
    ENB 3.550 3.660 3.10
    KEY 1.920 2.000 4.17
    PPL 2.610 2.670 2.30
    RY 5.280 5.520 4.55
    T 1.404 1.504 7.12
    TD 3.840 4.080 6.25
    TRP 3.600 3.720 3.33
    Average increase% 4.54

    Anyway, it’s what my wife & I are doing. We’ve been retired for 10.5 years and it’s working like a charm.

    Ciao
    Don G

    Reply
      1. Hey James

        Too cool!! I love hearing about others with a similar approach and holdings. It’s taken us a bit of time to get to this point and this set of holdings but my wife & I are tinkled pink with what we now have and have no plans to sell any of it.

        Our plan with our extra dividend income is to add to what we already own, continue to gift more early inheritance to the kids & grandkids, and give more to charity.

        All the best with your investments
        Don

        Reply
          1. Hey Mark,

            About to breach $53,000 this week with the last of our RRSP contributions! For Don’s entertainment, without amounts, here is our aggregated portfolio. (I’m pretty sure Don knows me as dileas elsewhere)

            AQN, ARE, BCE, BMO, CM, CPX, BNS, EIT.UN, ENB, ENS, FTN, GDNP (ouch), MFC, POW, PPL, QIPT (working on divesting now), SRU.UN

            I’m hopefully adding Telus to the list today with my wife’s RSP contribution and dispensing of the QIPT in her RSP account. I sure wish that worked out better than it did!

            Reply
            1. That’s very impressive… We own a bunch of similar names but again, not too surprising knowing many of those names make our economy run…

              Haven’t even heard of QIPT / Quipt Home Medical ? but decent 5-year gain?!

              I tend to stick to larger cap stocks but that doesn’t mean I don’t have a few other (smaller) players. One includes $WCP.

              Congratuations on your income stream thus far!!
              Mark

              Reply
              1. QIPT was a mistake overall – long story. We’re up 12% overall – but that’s terrible for the duration we’ve held it. It’s one of those classic growth by acquisition stories that never realized its potential. I regret holding it this long (there were opportunities to sell at prices 25% higher than today). We still have 4.37% of the portfolio in it after selling the shares from my wife’s RSP today.

                I always worry I’ll regret selling and that it might actually rise to it’s often speculated highs, but the amount of relief I got today from selling my wife’s shares should be what guides me with what is left.

                On that note, with the adjustments to my wife’s RSP, our go forward dividend income is now $53,700. It should be no problem to get to $60,000 by year’s end, but it’ll depend on whether my wife gets full time employment this coming September (and perhaps what POW and the banks do with their dividend raises). My income pretty much carries us, hers is what gives us the room to invest, vacation, and meet our other needs.

                Reply
                1. Hey, if you pick individual stocks, the way I see, you’ll always have a few mistakes – pretty much impossible to avoid. This is why indexing works for many, you don’t guess. You get all the winners (and losers) by default.

                  The opportunity to get to about $60k per year in dividend income is pretty epic IMO. I would assume with little debt, that should cover most daily expenses. Kudos.
                  Mark

                  Reply
            2. Hey James

              I didn’t make the dileas connection but good to know and very cool. How has everything been going? Still on target for retiring at 60? That was my age when I pulled the pin and have been incredibly happy to have not waited. These first 10 years of retirement have been a total blast.

              Definitely a lot of similarities in our holdings and good stuff on your annual divy income.

              As I mentioned to Mark, those are our 12 stocks but aren’t our actual portfolio values. I just wanted to show what a portfolio of $1.2M could generate in divy income using our stocks. The table came form Excel but all the formatting was lost when I pasted it into the post so it was hard to read. Our actual portfolio is significantly larger and generates way more annual divy income so we are totally on easy street. 🙂

              Take her easy
              Don

              Reply
              1. Hi Don,

                Yes, still on track for me at 60 and my wife at 58. She will hit her 85 factor as a teacher at that time. While she has a more modest DB pension than most teachers due to her working part time it will definitely serve as our “bond” for our portfolio, allowing us the ability to stay fully invested in our other accounts. The plan is to melt down our RSPs, which are not that big from 60-70, while my wife takes her OAS and maybe CPP at 65 (to replace her bridge benefit) while I wait until 70 for both. Combined with our non-registered dividends, it all looks pretty good and we’ll keep our TFSAs aside for any unplanned expenses as well as helping the kids along the way.

                Reply
                1. Deja vu!! James, that is almost exactly my wife and my situation and strategy, although we are a few years ahead of you (been retired 2 yrs and wife 6 months). Last year I started aggressively drawing down our RRSP/RRIF’s before I reach 70 and start CPP and before my wife starts her OAS, CPP and Social Security (she is American, will be nice to have steady US$ income), when our income will significantly increase.

                  And Don, our main holdings are very, very close yours. We also hold ones Mark mentioned (ATD, CNQ, CNR, DOL, & WCN plus a S&P etf) in our TFSA which will be the account of last resort to be tapped (if ever). We are also big fans of Henry Mah’s approach. I am about 75% of the way to converting what was a growth strategy to the far less stressful, much lower maintenance income growth strategy. I expect to be 90% of the way there by year end.

                  Cheers

                  Reply
                  1. Great work, Paul. I’m biased of course, but those lower-yielding stocks can offer higher growth for sure – including nice dividend raises from time to time.

                    CNR was 7% this year.
                    WCN was 12% in October 2023 and likely to raise another 5-10% this year.
                    CNQ should raise by 5-10% in the coming months.

                    Having an S&P 500 ETF as a growth kicker seems like a bit of icing on the cake. 🙂

                    Very well done and keep me posted on your income journey.
                    Mark

                    Reply
                  2. Hey Paul

                    Always good stuff following your posts.

                    I have seen that we have similar holdings and strategy with the two minor differences being low yield/high div growth (LYHG) and oil & gas producers.

                    In the past, I did consider adding the odd LYHG, I did a spreadsheet to track dividends for a 5% yield with a 3% growth rate vs a 2% yield with a 10% growth rate. It would take 15 years for the LYHG to generate the same annual dividend income and 24 years for the accumulated dividends to match. There’s also the additional income that would have been generated by re-investing the extra annual dividend income.

                    On the O&G side, we got torched in 2014-2016 with divy cuts and capital losses so i decided that anything directly related to a commodity would no longer be a long term option for us. Having said that, I think CNQ is the best of all of them. I actually did some mine planning consulting to them for 5 years in the early Horizon oil sands days and saw what a great company they were and what fantastic management and assets they had. I’ve also noticed that their yield is quite high and their growth has been solid. It’s obviously been a terrific investment from all angles.

                    All the best in the rest of your conversion to the income side
                    Don

                    Reply
                    1. Hi Don,

                      That is a very interesting analysis you did on the dividend income from LYHG stocks versus more typical blue chip dividend stocks.

                      The main reason I have decided to continue to hold the LYHG stocks is not so much for the dividends but rather for their capital appreciation. I have decided my TFSA account will continue to be a growth account composed of low maintenance, hold for ever type stocks/ETF’s. At this stage of my life, I don’t want the hassle/burden or volatility of an actively managed account and we will have more than enough dividend income from our Cash and RRIF accounts along with CPP, OAS, SS and workplace pensions to cover our needs and desires. I feel LYHG stocks and a S&P index ETF are good candidates for our TFSA. For instance, I bought CNR about 15 years ago (early 2009) and without re-investing the dividends (I thought dividends were pretty trivial at the time…live and eventually learn) it is now 7.4 times initial investment. An online calculator indicates if I had DRIPed the stock, it’d be 10 times by now (oops!). Punching ATD, DOL and WCN into the same stock return calculator indicates if I had purchased them at the same time, they’d all have far outstripped CNR’s returns. XIU (TSX index ETF) returned 3.6 times with dividends re-invested for the same period and IVV (S&P index ETF) 7.2 times with dividends re-invested. The same trend between the LYHG stocks and 2 index’s held for the last 10 and 20 year investment periods which kinda begs why I even have a S&P index ETF in my TFSA (hmm). The other plus for me, is that the LYHG stocks were less volatile than the two indexes.

                      As for O&G stocks, for reasons you mention, I’ve not invested much in that sector over the years. CNQ is the one exception and at this point it is a legacy of my former capital appreciation focus in our Cash account. I plan to sell it in the not to distant future and reallocate the funds to existing dividend growth stocks.

                      It is great reading your posts and interacting with you.

                      Cheers – Paul

              2. Inspiration for the rest of us, Don:

                “Our actual portfolio is significantly larger and generates way more annual divy income so we are totally on easy street.”

                🙂
                Mark

                Reply
        1. Nice to see your inclusion of charity. With declining donors, and declining gifts in Canada this is a huge problem. A nice tax efficient solution is to donate shares with a large capital gain (and low payout) to a donor advised fund. You get immediate tax receipt for full amount (that can be carried forward over five years) pay NO CAPITAL Gains (less advantageous in 2024), get a significant tax reduction for current and future years, and get to donate to charities that need your generosity now. Interesting link below:
          https://www.globenewswire.com/news-release/2023/12/13/2795543/0/en/CanadaHelps-Releases-Year-End-Report-Highlighting-2023-Giving-Trends-and-Revealing-Canada-s-Most-Generous-Cities.html

          Reply
      2. Ha. I think many DIY stock investors in Canada tend to own the same stocks, albeit I have a few exceptions such as WCN, CNR, CP and ATD to name a few. CNQ as well now that I think of it.
        Mark

        Reply
    1. Outstanding, Don.

      I’m glad you posted this. I have a few readers/commenters who are a bit shy to post similar details.

      They have done VERY well with saving and investing; they too share their portfolios with me and I can attest each one of them – when over $1M invested, have no fears of running out of money as long as dividends are paid, let alone increase over time. In fact, they have even more $$ now 5 or even 10 years into retirement with a similar approach.

      I happen to own most of those companies in your list. I don’t KEY at all. KEY is down in price since 2014 (10 years) but the income has been good for many years, I will say that. 🙂

      Again, there are absolutely a few folks that own income stocks/dividend growth stocks and they sleep very well at night.
      Mark

      Reply
      1. Hey Mark

        Thanks.

        Just to be clear, the table is stocks that we own but our actual share count is different. The table has a share count to show what a person would own of each stock at yesterday’s price if they held an exact $100k of each.

        Not that it matters much but the Jan 1, 2014 price I see for KEY is $31.97 so it is a little ahead. We got in a few years later and our average buy price is $30.46. At this point, my favs in the midstream space are both KEY and PPL (as long as they stay away from TMX). I have high hopes for KEY on the income front now that there KAPS project is completed.

        Ciao
        Don

        Reply
        1. The KEY price I tracked down for Jan 1, 2014 factored in the 2:1 stock split that KEY did on Apr 1, 2015. The KEY pre-split price would have been $63.93.

          Again, not that it really matters.

          Ciao
          Don

          Reply
        2. Yes, a fine example which I have appreciated. It will be interesting WHEN (not IF?) TMX comes online. Not a fan of that project…? What a wild ride that has been, my goodness…

          Mark

          Reply

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