Weekend Reading – How to safeguard your retirement plan
Hey Everyone,
Welcome to a new Weekend Reading edition on the subject of how to safeguard your retirement plan.
While I’m still catching up from my vacation, a bit, including answering reader emails, I’m now up to date for all comments on this site. That said, keep them coming! I enjoy the engagement here and I learn from all readers. 🙂
As referenced a few weeks ago, there’s a lot to think about when it comes to achieving your retirement income goals.
I know. 🙂
I think about it a lot and I write about it a lot.
I’m also ready to talk about it a lot with my friends and partners at TD Direct Investing.
I’m taking some time away from work in a few weeks to discuss this subject and more!
SUBJECT/TITLE: Five things you can do to help safeguard your retirement plan
DATE: Thursday, November 21, 2024 @ 1pm ET
DESCRIPTION: With so many variables and assumptions to consider when crafting a retirement income plan – there are lots of distractions and things that could push you off course. Well, to help you focus, I’m sharing my own approach to help deliver meaningful retirement income while minimizing those potential disruptions – sharing my own retirement income plan.
REGISTRATION LINK: You can register here, for free and join me on November 21 to engage in the dialogue from a passionate DIY investor that should benefit all DIY investors!
You need to develop a strategy and retirement income plan that works for you. Nothing else will do.
I’m really looking forward to this one….gonna be a great conversation!
More Weekend Reading – How to safeguard your retirement plan
I hope to share more details from our recent trip to Athens, our 10-night cruise and places in between in the coming weeks but in the meantime here are some more fun pics that I hope you’ll enjoy as a follow-up to my last Weekend Reading edition:
Our retirement income plan is designed to fund more of these international trips over the coming years in our very early 50s now…
Enjoy!
Our hotel view of the Acropolis. Yes, we toured it. Incredible. Highly recommend to say the least.
Our walk from Oia to Fira, Santorini. Amazing hike and worth every hour. Here is the map below with thanks to https://santorinidave.com/fira-oia-hike.
Hard to miss and not love the views of Little Venice, Mykonos below:
And while we toured Turkey, Sicily, mainland Italy, and Majorca, Spain (touring the Moorish Almudaina royal palace and 13th-century Santa María Cathedral as well along with wine touring) – it’s impossible not to be impressed by Sagrada Familia, in Barcelona once we arrived.
(Our walk from the hotel to the church was just a few blocks away.)
Sagrada Família remains under construction as the largest unfinished Catholic church in the world. Work started on this church in 1882 (not a typo) and continues…
More Weekend Reading…
In case you missed it, we crossed $47k per year in projected annual dividend income from a few key accounts (i.e., not all of them). We hope that will continue next month too!
Pretty cool infographic, Canada ranked in the top-5 of the world in terms of natural resources available to us, and the world. Makes me think we should be doing much, much better economically here… With thanks to @VisualCap.
I read one article this week from a Canadian financial advisor who seeks assets under management that Dollar-Cost Averaging is good for the soul. Well, maybe, but lump sum saving and investing works much better.
Vanguard and other wealth management institutions think so too.
From Vanguard a few years ago:
“We conclude that if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible. But if the investor is primarily concerned with minimizing downside risk and potential feelings of regret (resulting from lump-sum investing immediately before a market downturn), then DCA may be of use.”
Vanguard @Vanguard_Group and this recent Life Hacker article are more aligned with my thinking:
“Markets tend to go up over time. The longer you keep money out of the market, the more likely you are to miss out on potential gains.”
I have my own post about this as well.
I wrote about Lump Sum Investing (LSI):
“LSI wins because the sooner you get money working for you, the better.”
Good stuff on taxes in retirement. Advice-only planner Jason Heath at MoneySense explains how to plan for taxes in retirement. The key for me as I plan ahead as a DIY investor is that you (and I) can always request higher withholding tax on your CPP, OAS, pension or RRSP/RRIF withdrawals – it’s really a pay upfront vs. pay later approach. Retirees? What do you do?
Finally, Ben Carlson shared some things he doesn’t believe about investing.
I hope to take this quiz of sorts myself over the coming weeks and share more beliefs including many in his list.
Have a great weekend!
Mark
Hi Mark: Hey Warren was that Grease or Greece. Just kidding. Mark we did a Mediterranean cruise in “17. It started in Venice, went on to Dubrovnik,Greece and then on to Naples, Pompeii, Rome, Pisa, Monaco, Nice and Barcelona. It was educational. As far as investing and living go it is something like this. Very simple. If you can draw four circles then from right to left the first circle is you. The second circle is your cash flow and the third circle is your portfolio. The fourth circle is your cash account in your portfolio. The cash flow is basically my checking account and I plan to have it around $30,000.00. This gives me enough to pay bills and buy food and other stuff and basically live. Once every 3 months I have a huge bill to pay (installment payments) so I transfer from my cash account to my checking account the required funds so that after the bill is paid I am left with $30,000.00. When the portfolio is were it is today I’m euphoric as I’m worth more than I have ever been worth but there is a bad side. It means I can’t buy any more stock because well buying high and selling low isn’t good investing so the dividends from my companies go into the cash account and just build. But good times don’t last and so some some event will happen were the market will sell off. When the market comes a way down then I feel very poorly but also a bit giddy. Why? Well when the market is down so are all my companies and I look and say I would like more of this, this, this and this. So I go to the cash account which had been building and take some money to buy more of this, this, this and this. This has the effect of slightly fattening my portfolio and by extension the dividends in my portfolio which flows back into my cash account and also slightly increasing my cash flow. So if the cash flow is constant and I have enough to live on then does it really matter if the market is up or down. One you feel happy and one you feel sad but if you always have enough to live on does it really matter. As I said fairly simple.
I would love to back to Europe soon. Maybe in 2026 or 2027 at this point.
Seems smart…keep a decent cash float…$30k. We’ll likely do something similar starting next year, have a modest cash balance and keep it topped up a few times per year.
To your point, good times don’t last. It will be interesting to see what happens on the downside of this bull run. I will keep some cash on the sidelines if/when that happens to invest.
Our plan is to have constant cashflow via dividends and distributions – to live from – so we don’t care too much if the market is up or down, rather, we just want to get paid. We will eventually sell some stocks to feed our lifestyle but that’s a few years down the line.
It is my hope we are making the right decision, in 2025, to scale back from full-time work. I’ll only know in hindsight if I made the right decision!
Mark
Unfortunately or fortunately (depending on how ypu look at it), quarterly payments are in my near future. I have 20% tax taken from my OAS and our DB pension payments and RRIF withdrawals but we have significant dividend income from holdings in our cash account. There’s no getting around quarterly payments starting next year for us.
E-sim cards are a great way to avoid costly roaming fees from domestic cell phone providers when travelling. Unfortunately, my wife and I have cell phones that are 1 model prior those that support e-sims. Dang it! So WhatsApp over wifi is our go to most of the time.
Ya, quarterly instalments is just more budgeting. A small annoyance for being financially successful I think Paul! Ha.
Ya, once you upgrade your cell phone I think eSIMs are the way to go. Until 2 years ago, I didn’t have that feature on my phone either. We have Android phones.
Cheers!
Mark
I prefer to submit my F/P taxes when I withdraw (minimum) from my RIF
Some taxes are deducted automatically from some accounts as follows
QPP – F & P
OAS – F
Company Pension – None
LIF – None
CPP – None
RIF – Amounts adjusted for both F & P taxes to keep me out of quarterly payments.
I end up usually paying some or getting some back for the F & P tax season
I try to hold back on stock purchases so that by the end of the the calendar year I have sufficient funds for both the LIF & RIF up coming year – or close to it. That is my “cash wedge” which gets mentioned every now and then.
Always want that TFSA contribution available in January!
Up till now the LIF withdrawal has gone towards the TFSA and either non-registered account or high (ROFL) interest savings account, cash wedge again.
I don’t use DRIPS within any of my own accounts. I like cash in case an opportunity should crop up. The various accounts are paying sufficient divs to enable this approach. Plus the cash within the no-registered account and the TFSA can also contribute to that cash wedge if need be. Hasn’t happened yet!
Highest expenses for this year so far are
Travelling ( no more vacations as I am retired)
Second is food. Surprising how much it costs. This was the one item I underestimated in my pre-retirement budget
Third is Communications. So telephone, land & cell, and internet. Don’t even have the TV on there. Come to think of it I should throw Netflix in to either the communications or entertainment bin.
Encouraged to see that I am still running within the 2015 pre-retirement budget even with some C.O.L. increases. Once I had figured out my expenditure back then I boosted everything by 20%. Maybe draconian but it has worked.
Ricardo
Your process, albeit a few years ahead of me, is so similar to my process and thinking, I’m just going with “ditto!”.
Great stuff!
What is F & P?
If you are asking about that in context to the comments on this post, I think what the commenter means is Federal (F) & Provincial (P) taxes but you would have to confirm with them for sure – but I believe what is what they mean since they are writing about taxation.
I hope that helps!
Mark
Good stuff, Ricardo.
Do you make your RRIF withdrawals at the end of the calendar year?
Or beginning?
Or both?
My parents do their RRIF min. at the beginning of the year. This way, they have $$$ for income taxes in the spring and/or they can invest inside their TFSA every Jan. if they wish.
I keep running DRIPs inside the LIRA for the coming years. It’s part of our dividend income updates.
https://www.myownadvisor.ca/october-2024-dividend-income-update/
I see and know our major expenses are 1. housing (fees, taxes, improvements, utility bills, etc.), then 2. food/groceries and then finally, 3. travel/entertainment.
Our transportation costs are low since we have a PHEV now and use about $50 in gas per month.
Mark
Usually make the LIF withdrawal at the beginning for the TFSA contribution as well as any residual income tax.
This coming year may change as I already have the TFSA $$’s available. Will see how tax season works out and then decide whether to hold the funds in the LIF till the end of the year and make equity purchases through the year. After all, the divs are tax free for re-investment while in the LIF/RIF until withdrawal. Taking them out at the beginning means putting them to work in the non-registered fund where the divs will be taxed. Just delaying the taxes for one year if I delay withdrawal till the end of the year as then it becomes a mute point.
I break out my housing costs a bit differently than you Mark. If I were to add all taxes, maintenance, utilities, etc in to housing cost then, yes, housing would be the top expense. I break it down a little differently as I figure no matter where you live you will have utility bills, etc. So I don’t figure them in the “cost” of the house. I even have two lines for the house, one being maintenance and the other being upkeep. A bit of very similar nomenclature but basically painting, roof repair, system maintenance is “maintenance” whereas flowers and similar items fall in to upkeep. If it stays with the house it is maintenance, if can be a non-recurring expense such a flowers then it is upkeep. Gas for the lawn tractor/mower goes in to upkeep. Can’t take the grass with me if I move! At least not the kind I grow. LOL
Gas for the cars is costing approx $220mth. Still a lot less than I had budgeted back in 2015. Had considered an EV but cancelled my order as it is just not worth it at present for me. Technology is changing fast so it won’t hurt to wait a bit. Never know, maybe hydrogen cars will be the big thing is a couple of years. They do exist already.
The LIF/RIF accounts are always shifting as withdrawals are based on the year end value. Plus the incremental minimum tax rate (not 4%). Last year was a nice year for me as the values had dropped making for a lessor minimum withdrawal. This year we’ll wait for another 1 1/2 months to see where they are at. The higher they are the more to withdraw and the more tax to pay. Nobody likes paying taxes.
RICARDO
Thanks, makes sense….
“Usually make the LIF withdrawal at the beginning for the TFSA contribution as well as any residual income tax.”
Well, in terms of costing, we have line items in our budget for each to clarify (so very much like you) but I include/lump housing into a broad category that includes taxes, fees/upgrades and general day-to-day run costs to live here. That just makes sense to me to forecast what we need for income to cover that but everyone is different.
Our “base” expenses without much entertainment and travel, etc. and pretty much doing nothing (boring!!!!) is about $4k per month.
Add in a bit of buffer, and our basic retirement spend is likely around $5k per month if I include some buffer here and there.
If we want to enjoy ourselves in retirement, we’re planning to spend on average about $6k per month = $72k per year rising with inflation of 3% every year. A big spending year would have us spending closer to $7k per month or $84k per year but I don’t think we’ll spend that much until a few years from now. We’ll see…
https://www.myownadvisor.ca/financial-independence-budget/
Ya, our PHEV costs about $10 per month to charge and about $50 per month or every 6 weeks in gas. Pretty good. I won’t go full EV/full new technology until our next car in another 10-12 years.
For sure…”Nobody likes paying taxes.”
Ha.
Mark
Mark,
I am signed up for the webinar.
CJ
Good stuff. Any questions for me to weave in CJ? 🙂
Mark
Wonderful pictures and nice highlights of those sites.
Enjoyed that graphic. Hoping Canada can capitalize much more on the natural resource gifts we have.
Withholding taxes- do your homework/calculations utilizing all income sources factoring in any non taxed at source income too, and set all the ones you can control as close to what your real rate and overall taxes should be at year end and certainly within 3K owing, otherwise after 2 consecutive years exceeding this, instalments will be in your future.
Great points on the instalments. Are you paying via instalments now or taking more $$ off at the source where you can?
I pay via instalments via my corporation income so not too concerned about that. It’s all reconciled at the end of the day, just more budgeting work via instalments IMO.
Thoughts my friend?
Mark
Yes I make instalment payments. That basically covers off unregistered dividends & some interest which aren’t taxed at source. Other income like pension and registered withdrawals are set up with appropriate tax withheld.
Sounds like you’ve got it covered at present.
Makes sense. I will likely be doing the same. Appreciated. 🙂
Mark
Hi Mark
Did you decide to go with an eSIM from MobiMatter?
I used it last year and my Hungarian wife is using it again this month. It’s as cheap as chips – whenever she isn’t on the internet via our own package in our Budapest apartment or from a friend’s home it clicks in automatically – 3 Gigs for CDN$8 a month and works in almost every European country. We don’t need a phone number as we top up and pay a pittance from Vodafone per use. Otherwise we use messenger to speak with each other. I buy more than 3 gigs since I use more data than Ottilia but 3 is enough for her.
I did, Barry. I used Mobi for our vacation and loved it. I need to do a review of that and post what I did. 🙂
I recall I got something like 10 Gigs for <$15 for a few weeks. Incredible deal and worked great. Will do it again. I assume your experience was good as well? Do share and happy to put a post together in the coming weeks. Mark
Yes … it’s excellent.
We’re in Budapest often so we don’t have a monthly plan with Vodafone or any other data/phone provider. I have a local number which is good for a year on a physical SIM and just top it up as needed. My wife is suppose to have a bit of data from Vodafone to complement whenever she loads $15 on to her phone calls since she has a local account. But it’s spotty and pretty much useless. MobiMatter worked great everywhere … and in Berlin too when we were there for a week in late May.
I’m nearly 72 by the way but have no trouble with using tech as needed! Age is not a barrier to figuring this out – pretty much intuitive.
Awesome, Barry. Very tech savvy at 72. 🙂
We’ll use Mobi again when we travel to the U.S. as well vs. roaming on my provider. I was very impressed with the Mobi eSIM.
How often do you travel to Europe/Budapest? We would love to visit there someday…all in good time I guess!
Mark
Every year for the past 21 years. As indicated above we have an apartment – a 10 minute walk from the northern Budapest metro terminal (line 3) in UjPest. I’ve walked all over the city and know it about as much as any foreigner can. Even entertained Benj Gallander – the Globe and Mail columnist from Contra the Heard. That’s a story … he’s hilarious! In a previous life I lived 10 years in various countries on mainland Europe so fire away if you have any questions. PS – if you’re a walker/hiker like myself the hills above Budapest are loaded with footpaths devoid of foreign tourists which I always find amazing.
I enjoy walking/hiking very much. Got my 10,000 steps in, today!
Yes, heard of Benj G.
I think our next European trip might be to the Nordic countries, potentially visiting a few places via a cruise. We’ll see. That’s tentatively planned for 2026 or 2027.
Next year, 2025 is a transition year for us with some work and potentially not so much work. 🙂
2026 could be more travel as we adjust and if the stock market does well, well, lots of travel in the years ahead since I’m using 5% returns and 3% inflation as part of my (more conservative) planning calculations.
Keep you and others posted!
Mark
We did that same trip (cruise) then finished with a week driving tour of mainland Grease. Lots to see, loved it all.
Having more withholding tax is pay first approach. (not for me) I like the withholding rules as they are for my RRSP withdrawals. I have yet to set up RIFFs on all RRSP accounts as we are in our early 60s and for now we just take out what we need when we need it. Fees are very low, ($0 in my wife’s accounts) I don’t mind making a tax payment at the end of the year. Once we are into retirement for a few years, the RRSPs will then be moved to RIFFs with monthly payments. We are leaving CPP for after 67-68 as it is a tax burden today as we try to melt down our RRSPs. OAS will probably be started around the same age of 67.
Thanks for the weekend reading.
Great stuff, sounds like the reverse trip. What cruise line?
I’m “not there” yet with any RRSP withdrawals, likely 2025 is my first year for that and I don’t mind the RRSP withdrawal rules although that said I wish we didn’t have ANY withholding taxes and/or any RRIF withdrawal rules to simplify our tax system….but I won’t hold my breath!
I can’t recall – are you in retirement or semi-retirement now?
I do like the call, if you don’t need the money right away, to defer both CPP and OAS. Helps smooth out taxes, at least in my plan but we’ll see. Some of these things are 15-20 years away for me!
Mark
I’m returning home from a trip that day. I’m assuming TD will have the recorded webinar on the site. If not let me know if and how your webinar can be viewed after Nov21.
Best Regards,
Steve
Absolutely, it will be recorded and I’ll share a link on my site when the recording is ready.
Where are you travelling to?
Mark
St Lucia, first time. Looks to be hot…
St. Lucia is very nice and we hope to travel there someday. Been to many Caribbean islands. We also like Belize a lot.
I have had 10% withholding tax withheld from CPP payments last year and will adjust it as needed after I file my tax return in the new year. It was the first year I took CPP so it is a starting point for the estimate of taxes owing. I would like to avoid a large lump sum payment after the holidays and having to pay quarterly instalments. I don’t want to think about taxes during the year. I would rather plan trips and go travelling instead.
I like your idea of planning trips and enjoying travel vs. worrying too much about taxes. 🙂
How are you finding the CPP income to date? What is that paying for? Fun or necessities of life?
Cheers,
Mark
Signed up for the webinar – thanks for sharing!
Great stuff, MikeyP! I look forward to your contributions during the event.
Mark