Weekend Reading – Nine skills you need to learn, your enough number and other pre-retirement math #moneystuff

Weekend Reading – Nine skills you need to learn, your enough number and other pre-retirement math #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.

Earlier this week, we surpassed another milestone on our journey to earn $30,000 per year from Canadian dividend paying stocks inside our tax-free (thanks TFSA!) and non-registered accounts. 

Check out the progress here and let me know your thoughts about my investment strategy.

Enjoy this Weekend Reading edition and see you here next week for more new content!

Mark

Interesting article here, nine skills you should learn – that pay dividends in your life. I would put asking for help, developing high emotional intelligence, and ensuring you get some high-quality, consistent sleep near the top of any list.  Thoughts?

MoneySense answered this question from a reader – can this 40-something couple retire early at age 50?   Based on the data in the article, I would think that’s hard to say since despite what the couple have accumulated, ultimately you need to figure out what you’ll spend in retirement to determine your enough number

I’ve written a few case studies on my site – check these articles to see how your retirement plans might compare:

Did this couple save enough to spend $50,000 per year in retirement?

Did this 60-year gentleman save enough to live on a lower income?

I know for us, we’re striving for a $1 M portfolio (beyond assets in future pensions, excluding future government pensions, excluding any elective part-time work).  That should be enough for us.  Your mileage might vary.

You can check out my Retirement page for multiple essays/posts from readers of this blog who have been kind enough to share their story; what “enough” for them is.  I’ve also put some links to some free calculators and tools on that page so you too can determine your “enough number”. 

Simply put, I believe any person or couple with no debt, with modest spending or expense needs, should be able to retire rather comfortably around ages 60-65 with a $1 M balanced portfolio of stocks and bonds and cash.  This assumes they have no workplace pension(s) of any kind and they’ll have some average CPP or OAS or ideally both government benefits at some point.

It’s certainly insane to think you need something like $5 million to retire on like this U.S. financial guru believes.

Here are some retirement-age targets to aspire to, from MoneySense:

Savings targets by age

The reality is, if you want to spend more you’ll need more.  If you feel you need more, you basically have only a handful of options:  work longer; save more; get higher investment returns or a combination of these things.

Here is a recent post about our financial freedom goals – by age 50 – what might be possible.

Since I like dividend income, and so does Rob from PassiveCanadianIncome, I found out he just bought more 3M stock because of its recent nosedive.  I think this is a good play for this dividend king but I’m personally very bullish on U.S. healthcare stocks more than any other sector.  People always need their health, they don’t need Post-it® notes 😉

Reader question of the week (email adapted for site):

Good morning Mark,

Any thoughts (or writings) on an eventual, major market adjustment, maybe even a crash, as far an ETF dividend strategy is concerned?

Good question and interesting timing, given all the market volatility.

I’ve received similar, recent emails on this subject so I might take some time this weekend to author a response on how I would manage my portfolio in a market meltdown.

Just for now though, I pulled some brief information from a couple of my favourite dividend ETFs:  XIU and ZDV.

These are my top Canadian dividend ETFs for income and growth (at a low cost nonetheless)!

You’ll see coming out of the horrific great recession of 2009-2010, XIU distributions slowly returned as well.  So, my thinking is, this particular fund would either see their distributions run flat OR they could even dip for a period of time in any prolonged equity market storm (like they did).

XIU 2008-2011

Image courtesy of iShares.

Although the data does not go as far back for ZDV as it does for XIU, I could foresee the same thing with this fund or another top-dividend ETF.

ZDV 2011-2013

Image courtesy of BMO.

Bottom line, just like dividends from dividend friendly companies could be trimmed in any major market downturn, so could ETF distributions.  I hope that helps out a bit – or – at least provides my take.

On the subject of BMO, and ZDV, and some other great low-cost ETFs to invest in – use my Bank of Montreal promo code MYOCASH to save hundreds of dollars when you invest with one of Canada’s best discount brokerages.

BMO InvestorLine - January 2019

To see all other deals…Check out my Deals page here!

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe and join the journey. Learn how I'm getting there and how you can get there too!

9 Responses to "Weekend Reading – Nine skills you need to learn, your enough number and other pre-retirement math #moneystuff"

  1. Hi Mark, as usual I enjoy your web site and the comments from your readers. I thought I would take the opportunity now to comment, for what it’s worth, on your pending decision about deferring pension payments. I will retire in three weeks from now (yes, can’t wait!!!) from a job that pays a DB pension. It’s an “early retirement” , as I am almost 59, and I am taking a penalty for not going to the “normal retirement age” of 62. I crunched the numbers carefully and decided to take the pension immediately.
    My reasoning included:
    a. We never know when we are gonna croak – it could happen tomorrow, next week or tonight, or 40 years from now; and b. I worked out the amount of time forgoing the pension payments worked out to, and the estimated dollar amount involved. Then I divided the total amount of forfeited payments by month and added those months to when the deferred payments would start coming in. I would be older than 64 before I would break even (yes even with higher monthly payments than now). That’s a long way off before the deferment strategy would start to pay dividends, and call me pessimistic but I have no confidence that I will be around to claim that money or use it effectively at that time. I am sure other readers will have their own opinions on this topic. Just my take.
    Keep up the good work and I hope you’re enjoying condo life in Ottawa. I am retiring to a condo in Sandy Hill that I have owned for six years, close to the Market, restaurants, groceries, pharmacies and LCBO, but also many students and street people. Pros and cons.
    Good luck to all.

    Reply
    1. Three weeks? Geez. CONGRATS!

      I have no problem with folks taking any early DB pension for the reasons you outlined, as long as it is an informed decision.
      https://www.myownadvisor.ca/financial-freedom-target-age-50-may-2019-update/

      In that link above, “I can receive a (DB) benefit as early as age 55 with a reduction, (reduced by 0.4% per month prior to age 60; reduced by 0.3% per month between ages 60-65.”

      I’m not planning on taking it any earlier than age 60 given I’m hit with very steep penalties. Ideally, I’ll take it at age 65 and draw down most of my RRSP (but not TFSA; not non-reg.) before then.

      re: Keep up the good work and I hope you’re enjoying condo life in Ottawa.

      We are! So far, so good. It will be great to walk to the farmer’s market today, get some supplies, enjoy the day by foot.

      Sandy Hill is a nice area as well. We enjoyed the art in the park there last weekend.

      All the best to you and stay in touch!
      Mark

      Reply
      1. Congratulations Biff,

        WRT DB early retirement, I was informed that the option of taking the pension early vs waiting until 60 (or 65), that it is better to take the early retirement. So, for example, retire at say 58, take the 10% hit. If someone retires at 58 and plans to collect the pension at age 60 (or 65), the person has to reapply for medical and dental coverage at 60 (or 65). What I don’t know is why this is a big deal. Anyone know?

        Reply
  2. “Any thoughts (or writings) on an eventual, major market adjustment, maybe even a crash, as far an ETF dividend strategy is concerned”?
    Absolutely, all stocks, ETFs and funds will drop in value. The question is how much and for how long, that’s provided market returns is your investment objective. For income investors the bigger the drop and the longer they stay down the better.

    Reply
  3. Good reading Mark, thanks. Interesting how these nine skills apply equally in retirement. In my case, gotta keep working on all nine! On the eventual downturn of the markets, I’m not changing a thing. Without knowing the timing, how could you possible adjust or prepare? If you’re presently ok with your accounts, have enough cash to overcome any lower dividends/interest (if your already retired), why stress? It’s all gonna rebound in time. Go have a beer!

    Reply
    1. Me too. I have to keep working on these too!

      I have a few ideas on what folks might consider (post coming soon) about any eventual downturn but like you Paul, I’m basically going to hold what I hold and ride things out. I think the key is to have cash on hand if and when you really need it. In some cases, the more, the better since you could likely ride out a year (or so) living off cash savings without having to sell any assets (bonds or stocks). That would be smart IMO.

      All the best and I did have a few beers last night!

      Reply
  4. That’s a great table to visualize quickly how much you need to retire. It probably needs to be tinkered with a bit to account for the different costs of living across the country. For example, the amount of income needed for the basic middle class will probably only cover the bare necessities here in Vancouver…

    Reply
    1. Thanks Brian. I firmly believe folks that have saved a $1 M (which is a very big number by the way…) will be “fine” in retirement if they don’t have a pension whatsoever and have modest spending needs. Having no debt and minimal debt will be key for them.

      Reply

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