Weekend Reading – BlackRock soaring, how Canadians invest, paying off your mortgage and more!
Welcome to the weekend!
Welcome to my latest Weekend Reading edition, a Masters edition if you will, highlighting some of my favourite articles from the week that was across the personal finance and investing blogosphere.
A reminder, in case you missed last week’s edition you can find it here including my contributions to the Best ETFs in Canada for 2021 with ETF experts and the team from MoneySense.
This week, I have some articles and thoughts about BlackRock (BLK) stock soaring to new heights, how Canadians invest (or not), why paying off your mortgage might be mistake and much more.
Where to begin?
Earlier this week, I told my wife Jon Rahm would win. I have no idea if that will happen of course but I like his chances still as he hovers around the leaderboard at the time of this post. I love The Masters. I know what I’ll be watching ALL weekend…!
Have an awesome weekend whatever your plans are and enjoy them.
Be safe, thanks for reading!
I enjoyed a recent take about paying off your mortgage from Physician on FIRE, despite that approach not always being the smart financial thing to do. It’s a financial mistake for the blogger profiled but one they do not regret.
From the article:
“I think most of us would agree that money gives us security. With enough money, you don’t have to fret about the little things, and you can freely make spending decisions. However, more specifically, I believe that being debt-free gives me a heightened sense of security.”
I would agree. We’re now into the 5-figures with our mortgage debt and once that debt is gone, it will be extremely liberating. Beyond ongoing expenses such as condo fees and property taxes, food and then minor transportation costs (we barely drive our one car anymore now that we live in the city), the money we’ll make is the money we’ll keep and/or spend as we wish. We’re getting to our Crossover Point soon.
Actually, we’re getting to the point whereby we don’t really need to save too much more for retirement. We will however, continue to maximize contributions to our TFSAs and RRSPs for the coming 4-5 years. After that, we’ll have some decisions to make!
It’s all part of our Financial Independence Plan revealed here. Read it and let me know what thoughts you have in a comment please. I’m curious to hear from others! I’ll try and update that plan later this year for readers.
When it comes to paying down your mortgage, or investing, of course there is the emotional answer above and the math answer. Here is the math answer:
My recent posts:
While I continue to believe benchmarking has some merit, I definitely don’t think you should obsess over it. Read on for those key reasons.
A big thanks to Robb Engen for sharing his path to Retire to Entrepreneurship here. Certainly a worthy goal for anyone to work on their own terms. Long live #FIWOOT!
Financial Independence – Retirement
Speaking of FI, FIRE, FIWOOT and more, as part of my ongoing commitment to share some financial independence, early retirement or retirement articles from the blogosphere, here are some links!
On Cashflows & Portfolios we highlighted how you can retire by age 50 – taking advantage of a hot housing market. For this 30-something couple, that’s part of their plan.
This couple has less than $800,000 (although still amazing) in the bank. With a decent company pension they wonder if they can retire at age 52. Read that article to see if they can make it work and see how you might compare with your needs and wants…
As always, ensure you check out my dedicated Retirement page where I have case studies about “how much is enough”, how other successful retirees are managing their portfolios and much more. They’ve been inspirational to me and shape where I want to be…
I’ll have more case studies on my site soon!
According to this new BMO study, highlighted by Henry Mah, this is how Canadians are investing their money.
“Too bad, as I believe that most investors are missing out on an opportunity to obtain much higher and more reliable investment income, as well as capital growth, by following the Income Growth Investment strategy.”
Dividend Earner made some changes to his portfolio, including getting out of Enbridge (ENB), TC Energy (TRP) and Telus (T). It was interesting to read his mistake:
“One mistake in portfolio management I have realized over the past few years is that selling your winners is a mistake. Taking profits from your winners is a mistake. My winners have been Apple, Microsoft, Costco, Visa, and Canadian National Railway for example and I took profit from time to time and I should not have. I would have more money now.”
Interestingly, I continue to own all three of those Canadian companies and have no intentions to sell them. They churn out a few thousand dollars per year in my portfolio.
Back to Dividend Earner, I too have done that and it’s all part of managing the emotional game when it comes to investing. Then again, I’ve been very good to hold onto a few winners and add to them over time. BlackRock (BLK) is one such stock. The next major stop, $1,000 per share in the coming year or so I bet.
I’ll remind myself to update that post later this year but for those very curious about my portfolio I already bought more of CNR a few months ago when it was trading at $130 per share. It’s now trading closer to $150. I hope to buy even more later this year.
I recall blogger Dale Roberts loves BLK stock as well. He shared some first quarter results for some low-cost Canadian ETFs recently.
Last but not least, blogger Chris Istace pointed me to this impressive (older) essay entitled How Not to Build a Country citing a housing crisis amidst a lack of innovation issues in Canada. I personally blame prolonged low interest rates. They are terrible for our economy including our housing market overall. Just my take.
Reader question of the week (adapted slightly for the site)!
On the subject of stocks, last week, I answered a question about Fortis stock.
A reminder that I also post some of the burning (and great) reader questions on this dedicated FAQs page here.
Hi Mark, I enjoy and thank you for sharing your knowledge and journey. My question is in regards to dividend investing within a RRIF. As you know, using a RRIF we are forced to withdraw a set amount. That amount doesn’t matter where the money comes from (e.g., dividends, interest, selling stocks or ETF units), it has to be withdrawn.
Assuming pre-RRIF, my portfolio earns/pays about 5% and say at age 70 I start my RRIF. (I used your RRIF table for reference and ignored the changes to RRIF withdrawals for COVID-19 during 2020 tax year for my scenario.)
(Mark: The minimum required withdrawal for all types of registered retirement income funds (RRIFs) has been reduced by 25% for the year 2020. Individuals who have already withdrawn more than the reduced 2020 minimum amount will not be permitted to re-contribute the excess amount back into their RRIFs. Tax will only be withheld if you withdraw more than your unreduced minimum amount.)
OK, so age 70 requires a 5% withdrawal rate. In another 10 years, my RRIF minimum is 6.82%.
My real question is: wanting to keep the principal and take only cash from dividends, how likely is that?
It seems increases in RRIF withdrawals from ages 80-90 are even more onerous, but starting at age 70, I figure a 10-year plan is reasonable for me to get that income out.
I would appreciate any thoughts you have on this including your future!
Thanks for your question!
First of all, good forward thinking on your part, planning what may or may not be needed well ahead of when you need to make a decision. I think that’s great to consider the pros and cons in any major decision.
Secondly, I need to highlight that I’m not honestly sure how I will manage my own RRIF in the coming decades. I have some ideas I’ll share below but I’m still in my 40s. Simply, so much could change between now and then – including government RRIF rules! On that note, for a quick rant, it is truly my hope the government abolishes any RRIF minimums or maximums and simply leaves the RRIF as a tax-deferred account that you can no longer contribute money to.
In fact, I hope our tax system can become a major election issue eventually. It’s terrible.
OK, so my thinking is, once converted from an RRSP to a RRIF, contributions to any RRIF in my financial dreamland cannot occur but you can keep assets there as long as you want until death/as per your will. That would simplify our tax system and estate planning decisions but I doubt I’ll get my wish….the government loves to make the simple complex…
Finally, here are my thoughts and personal plans for any context!
When it comes to RRIF minimum withdrawals, I believe you are largely correct. While the combination of dividends, interest and growth from assets inside a RRIF could be around 5% for some investors in their early 70s, it may be far more difficult to have their RRIF returns exceed RRIF minimum withdrawals, especially as people age into the 80s and beyond.
Source: MD Management.
Recall this is done by design: the RRIF is a tax-deferred account and the government wants their money back as you get older!
When it comes to our plan:
- We intend to make strategic/periodic withdrawals from our RRSPs in our 50s and 60s, and only leave some RRSP/RRIF assets until our 70s. This way, we can defer CPP and OAS and get the maximum available income from those government benefits.
- We will withdraw from our RRSPs earlier in life to avoid RRIF headaches later in life. While most of our RRSP/RRIF money gone by our 80s for almost certain, along with our taxable dividend income stream, that will leave only TFSA assets and government benefits “until the end”. By moving any RRSP/RRIF money to our taxable account over time, or just spending that money, that money will not be subject to minimum withdrawals and we can incur capital gains (an efficient form of taxation) as needed. With any TFSA money, it’s just that: tax-free money.
In essence, our plan is to move tax-deferred money (RRSP/RRIF) into tax-efficient money (taxable account for dividend income and capital gains) and also into tax-free money (TFSA) before age 70 where we can.
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Happy saving and investing folks and enjoy The Masters!