Weekend Reading – Reader Q&A

Weekend Reading – Reader Q&A

Welcome to some new Weekend Reading, a Reader Q&A edition. 

In case you missed my post this week, I wrote about The Debt Burden of many Canadians here:

The Debt Burden

Weekend Reading – Reader Q&A

For a change, as part of this Weekend Reading edition versus more blog and reading roundups, I thought I would share a list of questions delivered to my email inbox over the last few months, from readers, and reply to those.

Let me know if you have more saving, investing or other personal finance questions I should answer.

Happy to turn that into a new blogpost or update an old one including this one I have on my to-do list later this year:

How We Invest

OK, here goes!

Mark, congrats on your financial indepedence journey. So, what’s next?

Well, thanks very much.

Yes, it is great / feels great to have realized financial independence, work on own terms (FIWOOT) as I call it – it’s been quite the journey. 

I prefer Financial Independence Work On Own Terms (FIWOOT) versus FIRE

But the journey is hardly done. I’m just entering a new phase of my career with my current employer and considering new opportunities in the coming years. I’m still very much open for business – working on my own terms earlier than most.   

I hope to share more about “what’s next?” to your question – next week! I have just recently formalized some paperwork with my employer so things are official and will be official with you very soon too.

Mark, I keep reading you’re saving more cash/cash equivalents this year. Why not invest more when the market is down? Why are you not buying the dip?

Great question!

I hope to tackle that in more detail when I publish some information about my retirement income map and revised bucket strategy where I will drawdown certain portfolio money for our semi-retirement, retirement spending.

In short, the reason I am saving cash now is for near-term expenses.

I have spending plans: in 2025, 2026 and 2027.

Any money near-term should not be invested in stocks or my equity ETFs. I know some folks that have cash, cash equivalents, GICs, bonds, fixed income products that protect them from even 5-years of stock market calamity but that seems a bit too much to me; however, these are not normal times either…

Weekend Reading – Five years in cash?

Would you ever consider an all-in-one ETF like VBAL or XBAL or ZBAL or MAW104 from Mawer, why or why not?

Don’t get me wrong, I think these all-in-one ETFs are great for lazy, long-term investing, especially in registered accounts like RRSPs/RRIFs, LIRAs/LIFs and even TFSAs. 

I’ve just decided to take a different approach to investing via my hybrid approach:

1. A mix of mostly Canadian but also some U.S. stocks (although less than 30 stocks in total now) that collectively deliver income and growth, and
2. Beyond the stocks, some low-cost equity ETFs – that deliver (hopefully) long-term growth for extra diversifcation beyond Canada. 

You can always read a bit more about what we own on this dedicated My Dividends page here.

Via my approach, my portfolio returns are consistently higher than VBAL or XBAL or ZBAL or MAW104 but that just makes some sense since I don’t have too much fixed income.

Mark, if you have no debt and given you have already reached financial indepedence, do you still have any life insurance?

Ugh, is this question from my wife? Kidding. 

Yes, I still have some life insurance.

I have some term life insurance as part of my total compensation benefits package at work. Thankful for that, just in case, but I won’t be working there full-time years from now. 

I have a very small whole life policy that my parents purchased 50 years ago now when I was a child that is all paid up. **I had no choice on the matter! **You might recall whole life insurance is a type of permanent life insurance that gives you lifelong coverage – well, your beneficiary coverage that is. Now that I’m older that paid-up whole life policy should help my wife out a bit for any small end-of-life expenses.

I/we also have a modest term life policy each that we purchased about 5-years back when we still had a mortgage. We wanted that coverage to help cover all remaining mortgage debt (and then some) in case a catastrophic event (death) happened. Enough of a benefit to cover all debt + a year of salary loss as well. 

You might recall this post for my decision-making on that?

Should I renew my term life insurance policy?

This current term life policy is set to expire in 2030. Our thinking is we will self-insure after that and just have a larger break-in-glass emergency fund of $50k vs. $10k in a high interest savings account in about five years.

Thoughts?

Mark, like other readers have mentioned, I see your dividend income keeps rising. Why?

Great question. 

A few key reasons:

1. While I have stopped all DRIPs (Dividend Reinvestment Plans) across most accounts now, I/we do receive some dividend raises now and then. Higher dividends paid = more dividend income. I get paid for doing nothing by staying invested. 
2. Sometimes, I buy more stocks or ETFs. I might do that periodically in 2025 while I keep a close eye on growing our savings a bit more for near-term spending. More stocks + more ETF units that pay dividends and distributions = more dividend income. That said, I’ve really slowed down on the buying since the end of 2023. Other than some strategic purchases every few months I need to rely on dividend and distibution raises to increase my income stream moving forward. 

You can read a few more FAQs related to my monthly dividend income updates here. 

Don’t you think you’d have a lot more dividend income paid by now if you didn’t invest in XAW or QQQ?

Yes, very much so. 🙂

But a reminder that dividends and distributions are different sides of the same investing coin – you can’t expect lots of each.

If my returns are 7%, then does it really matter (in a registered account) if that is 2% dividends and 5% is growth or vice-versa? It’s the same money earned. The thing is: dividends, distributions, capital gains, interest, share buybacks, etc. all matter to me. Taxable investing is a bit different however. Dividends can be favourably taxed. 🙂 

Tax treatment of Canadian dividend paying stocks

I’ve owned XAW for lazy growth since 2016. That ETF is up well over 100% over that ownership time. I’ve purchased more XAW since 2016 and I will continue to do so. 

I’ve owned some QQQ since 2018. That ETF is up about over 150% in just the last 5-years!

I own my mix of Canadian and U.S. stocks in some cases as some bond-proxies. I don’t have to decide when to sell those stocks for income. I get paid to hold those stocks via dividend payments; the Board of Directors at those companies make their dividend payment decisions for me so I don’t need to create my own dividends. I just got one new dividend raise this past week in fact: a 9% raise. Not too shabby for doing nothing. 

Mark, how much income do you think you’ll need in retirement?

I pretty much know our semi-retirement/retirement spending number out of the gate: around $72,000 or so per year (after-tax) which is in the same range as what I put in this post below almost a year ago.

Once I share more details about my workplace situation, I will be easier to share other annual forecasts too so you can follow along. 

What do you spend in retirement now? Is that close to my number? What are you planning to spend?

Financial Independence Budget

A reminder: I wrote years ago I believe it depends on what you spend to determine your “enough number”.

I still feel that way today.

Consider what you spend for your enough number

I also like this sketch 🙂

Reference: The Behavior Gap.

Thanks for your emails, comments and questions. I love them all. 

Have a great weekend!

Mark