Weekend Reading – I Don’t Know
Welcome to a new Weekend Reading edition about things I know and things I don’t know.
First up, some reminders on other content:
I believe name changes would be (somewhat) beneficial to many existing financial accounts:
Weekend Reading – Name changes are needed to financial accounts
Here is our latest dividend and distribution income update – I will have a new tally to share soon thanks to investments made inside both of our TFSAs earlier this month.
Weekend Reading – I Don’t Know
Inspired by a few articles I read this week and last week, I wanted to share this: I don’t know.
I don’t know what stock market returns might be.
I don’t know what the price of gold or silver will be later this year.
I don’t know if inflation will stay elevated.
I don’t know if house prices will ever flatten out or come down a bit.
I don’t know if Canadian stocks are going to do better (again) than the S&P 500 this year.
This is why you diversify and spread your assets around.
For us, our portfolio diversification means a mix of 1. individual stocks, 2. low-cost ETFs and 3. cash/cash equivalents like GICs, cash-alternative ETFs and money market funds. You can read How We Invest here.
For diversification, you might decide on owning many stocks from many sectors or maybe even better, you own many stocks from many countries around the world. You might even own some gold, silver, bonds, real estate and more assets that should appreciate in value over time…
Beyond our stocks and ETFs for income and growth, we continue to own some cash/keep some cash equivalents on hand for these reasons:
Leveraged from Morningstar:
“And it’s always important to keep some cash on hand to cover unexpected emergencies, such as job loss, car repair, appliance replacement, and so on. Most financial advisors recommend keeping at least six to 12 months’ worth of living expenses in cash as an emergency fund—even if you don’t end up spending it right away.”
And from Morgan Housel:
“We do it because cash is the oxygen of independence, and – more importantly – we never want to be forced to sell the stocks we own.”
Ben Carlson from A Wealth of Common Sense also believes in I Don’t Know.
For fans of U.S. dividend stocks, my friend Dividend Growth Investor shared a list of 2026 Dividend Aristocrats.
For fun, this poll:
And for some fun back, someone asked AI for an answer:
What do you think? (And before you ask, yes, $100k spending = spending money after-tax.) 🙂
Over on MoneySense, Jon Chevreau highlighted many folks remain wary of creating their own pension via annuities.
Finally, back by demand – what if you simply owned a simple, all-in-one ETF and wanted to retire on just that? Could you retire owning just one ETF across your entire portfolio??
Read on:
Have a great weekend!
Mark
I’ve probably transitioned from pondering all that I don’t know (there really is too much) to asking myself if I really care? I’m finding many of the issues that used to drive me around the bend worrying about or considering do not illicit the same response. Now resigned to the fact that what will be, will be and there ain’t much I can do about it now.
Having said that, I’m more than depressed about the plate of crap we are leaving for the youngsters.
It is a scary world these days, Lloyd, including the financial burden placed on the younger generation.
Not easy times…
Mark
The question about $2.5MM being enough sounds a bit ridiculous, doesn’t it? But there are so many questions – is it in registered, TFSA, non-registered, or corporate account? Is it for a couple or individual? Has the person paid into CPP, lived in Canada their whole working life? These all factor in to the retirement income flowing in later in life (CPP/OAS) and the tax implications. If all of this income is in an RRSP, then the amount needed to live off is much higher due to the tax hit. Especially if it’s a single person: if 100k is after tax, then the pre-tax needed is $140k (in Ontario) to have 100k to live off of. This would only last 15 years! At 65, their pensions would kick in, but doubtful it would be enough to spend $100k annually. This is a worst case scenario I can think of, most couples would have more than enough but really “it depends”. How AI comes up with such a flippant answer only proves how useless it can be.
You are probably right. 🙂
I believe $2.5M is PLENTY for a $100k after-tax lifestyle, if you include CPP and OAS – single with at least 50% MAX CPP and full OAS. If this is a couple, then more than enough…
If this is no gov’t benefits, would be tight to be honest but doable assuming one/a couple could be flexible with spending. Could scale up +/- 10% in any given year or not.
Thanks for your comment!
Mark
At the top of my “I don’t know list” or rather I didn’t know – had to replace my vehicle this past week. After almost 9 years and 288,000 km I finally got the repair quote that tipped the scale. Not great timing. My contract has started but no serious hours until May. In the end I bought a 2022 – same car, Mazda CX-5 with 31,000 km. We looked at a new hybrid but more than double the price. Used car finance rates were 9% (ouch) so for now it’s on the HELOC and will get paid down gradually once the contract income starts coming in.
On a positive note, we hit $80.5k in go forward dividends at the end of January. Still on track to retire next July.
Mazda has a decent line-up of cars. We have a Hyundai and like it.
Congrats on the >$80k income. Well done.
I retire this spring so I will let you know how that goes!?
Continued success on the mortgage and job.
Mark
I am not close to 80 but I don’t enjoy long flights very much. We are going on an Iceland / Northern Europe cruise in the summer and to get to Southampton we are going on the Queen Mary II out of NYC. Hopefully less jet lag and a relaxed classy crossing. We have been fortunate to have traveled to all the places on our pre-retirement lists. I missed out on Iceland previously when I was quarantined for 8 days with Covid in 2022 (until I tested negative for virus).
I wasn’t sure what growth rate to assume for 40 years but 6% seemed a tad conservative.
I don’t think the Sens and Leafs will be meeting in the playoffs this spring. I am looking forward to the Olympics.
Hope you and your wife are well too.
Very nice. We hope to get to Iceland ourselves. We looked into the Queen Mary for our next cruise but decided on Celebrity again, this fall.
(Our last Celebrity cruise was a Med. trip for about 10-nights throughout Greece, Italy and Spain.)
I would be curious to learn about your review of the QM boat/cruise when you get back!
Yes, 6% total return could be a bit low for even a 70/30 asset mix.
I use actually 5% for my own projections and that’s with 90% stocks + 10% cash/cash equivalents. I like being a bit conservative and that way not disappointed if returns are much larger than that. I can always spend more money.
Olympics should be fun indeed. Incredible athletes.
I am not a big cruiser – we tried our first one last year, a short Caribbean cruise on Virgin. I like the style of no extra tipping fees, the food is quite good, and the “buffet” isn’t a regular open one where everyone can cough on the food. 😉
We did an MSC cruise in Europe last fall, specifically chosen because it is a non-US owned cruise line. It was ok, but we’d rather have slow travel in one location. The only way I would use a cruise is as an alternative to flying from one destination to another, at least at this point in our travels. Part of my issue is many of the common cruiselines are American owned and/or depart from a US location and I’m currently avoiding them. Celebrity is now US owned, as is the Virgin line (which I thought would be UK but it’s not).
We were very happy with Celebrity when we went in fall 2024.
I hear you on the U.S. departures. We are totally avoiding that for our next trip. We have no interest in visiting the U.S. anytime soon but we found a trip we liked from Europe so we are going from there.
Any travel coming up soon?
Mark
We are going to Portugal in April for a month. Nothing else really planned for the year. It looks like we will be going to the US very reluctantly for a family memorial service – we honestly don’t have a choice as we need to help with going through possessions, etc. Trying to figure out how to do it while spending the least amount as possible there. 🙂
Sorry to hear about your family loss, Sandra.
Portugal is very nice. Been a couple of times.
We hope to vacation/spend about 3-4 weeks there every few years in retirement, amongst other locations. 🙂
Might decide to rent soon to figure out where we want to put roots down 5-10 years from now.
Thanks Mark. It’s been a difficult time to be sure, but it helps that we are retired.
We went last year for about a month and loved it. Going to spend time in the Algarve this time, which we missed last year. Wow, so you’d retire outside of Canada! I know some people who have done that, but we are keeping Canada as a home base due to parents/kids. They chose the Azores to live out their retirement.
Oh, very nice. Algarve area is likely where we want to visit/stay for a month.
We will keep Canada as home base for sure, but potentially renting is easier in the coming years. We will see!?
Queen Mary 2 is an ocean liner vs a cruise ship. It usually sails between NYC and Southampton,England. Imho a much better way to UK than business class on an overnight flight. Will let you know what we think. I was on the original Queen Mary as a kid and stayed on it again (Long Beach) before a South Pacific cruise in 2012.
I assume you started in Piraeus and ended up in Barcelona on your Med cruise?
5% is very conservative. Haha
Yes, indeed it is! Seems like a great ship/liner/big boat! Impressive. Watched a few videos about it.
That is correct on our route, very nice and saw about 8 ports over 10-nights. We had a few days in Athens prior to see the main sites. About a 15-16 day trip overall.
Yes, 5% is especially with 90% stocks and 10% cash/cash equivalents that we have now. Just raising more cash as I/we age, I wouldn’t be surprised if we are closer to 85/15 in another 5-10 years which feels about right long-term. Assuming we get 5% returns from our portfolio, should be able to easily spend $100k per year after-tax. Might rent as well in the coming years to have a bit more flexibility on our travel.
Lots of decisions to make as my full-time/part-time career ends in a few months.
Mark
Would be nice to know the composition of taxable income (pension/RRIF, interest, dividends, capital gains) but generally, your investments will provide the $100k plus inflation after tax without consuming capital assuming 6% growth. If you do consume some capital, then it could be a question of returns and duration but again portfolio should be sufficient. A 2008 sized crisis would significantly reduce your portfolio (40% drop my first retirement 1/2 year) but dividend yields would likely soar with a few dividend cuts and possible deflation. You likely could also reduce consumption slightly in bad years. A reverse mortgage could also be a later life option too. 40 years is a long retirement and I doubt you will spend as much later in retirement unless you / spouse need long term care. Your retirement question scenario is similar’s to BMO’s conclusions 5? years ago.
Thanks, Colin. Nice to hear from you!
I agree with all your points. Our plan is certainly to spend some capital as we age.
Our thinking is spend less in “bad years” and then spend more freely as desired in good years.
Can’t have 2024 and 2025 investing years all the time – although that would be very, very nice. 🙂
I suspect we won’t be spending as much (definitely not on travel) post-age 80. Too expensive to travel internationally after that age.
I hope you’re doing well.
Mark