Welcome to my latest weekend edition when I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
In case you missed last week’s edition, the totally out of control real estate edition, you can find that here.
On that note, I’m sure we’re going to see real estate continue to do it’s thing. Here is a fun one from Toronto recently: this house below (without any bedrooms) just sold for over $1 million.
The real estate top is a LONG ways away I think…
Highlighting this edition, I share some of my Financial Independence (FI) drawdown strategies to everyone on the Explore FI Canada podcast. We had a great time on the show and I want to thank the hosts for having me! If you want to hear what I have to say, about my personal FI drawdown plan, what accounts I’m going to drawdown first, when and why – to tailor your plan – have a listen! I welcome any thoughts you have on what I said during the show including how it helps your plan, even if you do something totally different.
Personal finance is personal!
I’ve long mentioned on this site that asset accumulation is the easy part. The semi-retirement or retirement drawdown part is far more complex – but I think I have my approach figured out. I’ve done that with thanks to some dedicated thinking-time on this subject, writing about it in some of the articles below, and with the use of some free calculators and tools on my site.
Need some free calculators and tools? Then check out my Helpful Sites page!
Since I’ve got a pretty good handle on my semi-retirement plan, I’m offering financial projections to my readership. As mentioned on the podcast, hit me up on my partner site at Cashflows & Portfolios to see what we can do for you to demystify your retirement drawdown questions such as:
- When should you take CPP or OAS to generate the most retirement income?
- Do you have enough to retire / when can you retire?
- How much can you spend in retirement (and not run out of money)?
- What and how much should you withdraw from each account for the highest tax efficiency and estate value?
- And more!
Our services are professional, cost-friendly and most importantly – value-added! I look forward to helping as many people as possible unpack these questions. No doubt I’ll write much more about my FI drawdown strategy as the plan comes into full effect in the coming years.
On Cashflows & Portfolios this week we discussed what is index investing and why should it matter to you.
A shoutout to Savvy New Canadians for this post: how much to save for retirement by the age.
For other 40-somethings, I felt this was good advice from his post:
“At age 40, you should have saved three times your annual salary, and this increases to 4× your income just about the time you hit that age that defines mid-life or “midlife crisis”. Not to scare you, but if you are not yet saving at this point, you will need to double up. Investment timeframe is no longer your friend. Continue to invest. Ensure you are not paying too much in investment fees. If you have a self-managed portfolio, ensure it is rebalanced at least 1-2 times each year.”
Big ERN still feels, despite the recent pandemic financial crisis, emergency funds are still useless. Mind you, he did concede the following:
“But just to be sure, I certainly concede this: there is a consistent underperformance of the stock market relative to the money market if you need your money during a recession, 1991 and 2020 being the only exceptions. If your job security is indeed strongly correlated with the economy one could still justify a less aggressive approach. But for all others, you’re doing better with the stock market in three-quarters of the historical simulation periods!”
MoneySense highlighted some alternatives to bonds with interest rates being so low.
I know for us, we intend to keep some cash entering semi-retirement and maintain our bias to equities throughout retirement.
On my dedicated Retirement page, that includes dozens of essays, early retirement success stories and retirement case studies, I profiled Ross Grant who consistently Beat the TSX (BTSX) with this strategy.
Dale Roberts profiled a continuation of sorts, of Ross’ journey, on another site I follow: Matt Poyner’s excellent site: dividendstrategy.ca.
Tawcan is doing rather well to say the least with his investments. “Last month, we deployed over $20,000 to purchase dividend paying stocks and ETF. Not surprisingly, April was a much quieter month when it came to dividend transactions.” Wow.
Epic work at Dividend Growth Investing & Retirement here. DGI&R developed 25-year charts of the low, average and high dividend yields for 100 Canadian dividend growth stocks – simply amazing.
Last but not least, in case you missed it, this was an update on our 2021 Financial Goals.
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Reader question of the week (adapted slightly for the site):
I am an avid reader and fan of your websites. We are of similar age and of similar mindset in how to invest. I have some questions regarding Canadian stocks that pay dividends in USD. For example: one of our favourites AQN. I recall you own that too!?
Anyhow, I was wondering whether you journal these stocks so that your dividends remain in USD or you let your broker convert them every quarter to Canadian dollars.
I guess my bigger question is – if you do journal, how does this work? When you tell your broker you
wish to journal, do they sell your shares in Canadian dollars then convert it to USD to buy the same shares but listed on the US stock exchange? So, this may mean you will end up with less number of shares of the same stock?
If they are journaled to the U.S. side, do you need to convert the dividends received to Canadian dollars for income taxes at the end of the year (for non-registered accounts)? If you sell your shares, will you receive the proceeds in USD and will need to calculate exchange rate for any capital gains/losses (for non-registered accounts)?
It all sounds very complicated. Thanks very much and keep up the awesome work on both your websites!
Very kind words and thanks for your readership Anna!
- contact your brokerage, understand how they manage currency conversions.
- when in doubt consider holding assets that pay dividends in USD in any U.S. sub-account (RRSP preferably, more tax-efficient), and
- see if you can be a beneficial shareholder for any asset you own via the company’s investor relations department/dividend policy, and see if you can take advantage of Bank of Canada spot rates, at your brokerage should they honour that.
For item #3, you can see that information below, a quick example from Brookfield Infrastructure Partners:
The quarterly distributions payable on the Partnership’s LP Units are declared in U.S. dollars.
Registered unitholders who are U.S. residents receive their dividends in U.S. dollars, unless they request the Cdn. dollar equivalent. Beginning with the Q4 2016 distribution, registered unitholders who are Canadian residents and beneficial unitholders whose units are registered in the name of CDS or a name other than their own name (i.e., generally those holding their LP Units with a Canadian brokerage), will receive their dividends in the Canadian dollar equivalent, unless they request to receive dividends in U.S. dollars. The Canadian dollar equivalent of the quarterly dividend is based on the Bank of Canada closing exchange rate on the record date for the dividend.
Registered unitholders wishing to receive the U.S. dollar distribution equivalent should contact Brookfield Infrastructure’s transfer agent, Computershare, in writing at P.O. Box 30170 College Station TX 77842-3170 or by phone at 1-877-243-3717.
Beneficial unitholders whose units are registered in the name of CDS or a name other than their own name (i.e., generally those holding their LP Units with a Canadian brokerage), should contact their broker if they would like to receive the U.S. dollar election.”
Hope that helps a bit!