Weekend Reading – Books on #FIRE, cheap stocks, RRSPs are worth it, change is hard, and more #moneystuff
Welcome to my latest Weekend Reading edition where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
In a recent post, I shared this new, major financial milestone in our lives. Simply awesome we’re only another year or so away from earning $2,000 per month in tax-free (thanks TFSA!) and tax-efficient dividend income…for life. A reminder this dividend income does not include any RRSP withdrawals. Those withdrawals will eventually occur, just not right now. I hope to share many more posts about how I intend to use dividend income and withdrawals from various accounts (such as our RRSPs) to effectively pay for most of my living expenses, for life. This should allow us to work as we please.
With “RRSP season” well underway, with more and more people saying “RRSPs don’t matter” and/or “RRSPs are a tax grab” it certainly makes me reflect and reply that many Canadians simply don’t understand the wealth building power behind this investment account – if used wisely.
Alas, I wrote this post to help clarify things: RRSPs facts you must remember this tax year and beyond!
In only a few instances, could one legitimately argue “RRSPs don’t matter” to them.
RRSPs matter to us
I know for us…they absolutely matter since the money working inside our RRSP accounts has been compounding away for years. That money will help us fund more great vacation experiences like this:
My view from Belize villa this morning, San Pedro, Ambergris Caye.
Have a great weekend and I look forward to your comments on the site, about Belize, travel, RRSPs, dividend paying stocks or really anything else! Wish me luck since I’m swimming with sharks today!!!
Great stuff here from Collaborative Fund: History is only interesting because nothing is inevitable. Morgan’s thesis is: “…you can’t help but wonder what we are confident in today that will look foolish in the future.”
Passionate about financial independence and early retirement? ExploreFI Canada listed their top books on this subject. “These books are on FIRE!”
Many of these books are great. I’ve read most of them. Then again, one could argue because change is ultimately about behaviour maybe you don’t need any more money advice. Thoughts?
Even after a recent, healthy dividend raise, Mat Litalien says Manulife offers value now (it’s cheap), growth and more dividends in the future.
Speaking of dividends, RBC increased their dividend today by 3%. Great to see a raise when you’re on vacation in the sun!
Rob Carrick has some thoughts on how to avoid financial stress.
Matthew Freeman highlighted yet another dividend increase to this millennial’s growing income stream. Well done!
Yes, you know how I feel about RRSPs in general so here are a few other posts that can help you optimize the benefits of this account beyond my new article this week.
Before you automatically convert your RRSP assets to a RRIF, consider this.
Dale Roberts wrote about using your TFSA and RRSP to play retirement portfolio catch-up!
Giveaways and Deals!
Don’t forget as part of my Weekend Reading you can enter to win FREE TurboTax software to help you with your tax needs.
Even if you don’t win the free software codes and you want to get started on your taxes now, don’t forget just by being a fan of this site you can take advantage of my 15% discount on TurboTax Canada software until April 30, 2020. Awesome right?
(2020 deal over)
Save, invest in low-cost products, and prosper!
Use my Deals page where I can save you money, as in hundreds of dollars with Bank of Montreal, Questrade, or you can have $50,000 managed free for a year with ModernAdvisor.
Reader question of the week (adapted for site)
In a recent weekend reading the following quote caught my eye: “The only time you should be worried about a correction is if you need the money within the next five years and haven’t made an appropriate plan to access the cash.”
What did you mean by that?
I am 68 years old and my portfolio has done quite well during the last year. I feel however there is going to be a major market correction (cause unknown at this point) and would like to put a plan in place to access the recent growth (still within my RRSP). I have raised this with my financial advisor who says to stay invested (modest growth profile) however I don’t feel I have a plan in place that addresses my needs in the next 1-5 years.
Overall I am happy with my financial advisor’s advice but feel that changes are needed.
Good on you to take more ownership over your money. To clarify, that quote was from Boomer & Echo’s site, check out the link above, but I do happen to agree with him with a few clarifications on my end/my perspective:
- I think any money you absolutely need/absolutely depend on in the next 1-2 years should likely be in cash or some form of fixed income. Cash could be while you’re saving for a house when younger (i.e., you really need that down payment) or cash that is potentially set aside during retirement. I say this for the latter because who knows what the future holds and I think any combination of a basic emergency fund + cash on hand to combat at least a 12-month major market calamity or other should be readily accessible. Cash should be there when you need it or least expect to need it. I just think that’s smart planning.
- We hope to keep one years worth of cash as we enter semi-retirement in the coming years. This cash will act as our emergency fund/cash wedge. Check out the post but the graphic below is our current thinking. Creating some form of “bucket approach” for your retirement income stream might work well for you.
- Any money you might need in years 3-5 should likely be maintained in some form of fixed income and/or in the form of assets that should deliver dependable income. I believe the worst thing you can likely do in any potential market meltdown is sell lots of equities. You need to stay invested. So, that means you need to consider a blend of bonds and stocks (equities) that you don’t panic sell when things get rough. Rather, use of mix of bonds and stocks to stick to a withdrawal plan that mitigates portfolio ruin in retirement.
- Lastly, if you are worried about a major market correction in terms of what to invest in, it could be a sign your risk appetite is not as high as you think. If you’re worried about a 10% or even a 20% market decline in your stocks; you believe you’ll ask your advisor to sell some equity funds or other, then you probably need more bonds in your portfolio to cushion those risks.
I hope this offers some context to that statement, why I liked it, and how you can tailor your portfolio to mitigate stock market risk.
Readers, I have your other questions in my inbox and I hope to get to them in the coming weeks!