Weekend Reading – The Safe Withdrawal Rate (SWR) debate, buying QQQ ETF, new dividend milestones and more!
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.
You can find my last Weekend edition here about the best ETFs to own for a slice of Canada, commentary about the shortest recession (ever), why FIRE is for wimps and much more!
This week, I shared an update on our financial goals for 2020. I figure we wouldn’t be this far in our financial independence journey if we didn’t have any every year to keep us focused. Thoughts on that?
Enjoy these articles about what is truly a safe withdrawal rate (SWR) for modern times, why I own QQQ, some new dividend milestones from bloggers and much more.
Have a great weekend!
As a follow-up to this ridiculous clickbait article about needing $8-million dollars to retire on, I enjoyed Early Retirement Now’s rebuttal:
Heck no is the answer. In fact, as ERN claims with lots of detailed facts and charts, should you be conservative by nature AND have more than 30-years of potential retirement then maybe you want to consider a withdrawal rate of just lower than 4% say something around 3.5% – but that’s potentially as low as you want to go.
The reason being, and this is cited on my site from other established research, your SWR relates to much more than just any bond returns. It remains a great rule of thumb to start your retirement math with.
In fact, from any purist perspective, assuming you have at least 50% equities in your portfolio throughout retirement, a 3.5% withdrawal rate is likely is “safe” for some 30-years even if you never make a withdrawal adjustment outside of that.
Studies have shown, you could have retired on the eve of The Great Depression, coming out of that date withdrawing 3.5% and gone for 50 years, and you still had money left over at the end.
In many cases, taking out 4% from your portfolio value, you could end up with almost x3 your starting principal even after 30 years!!
How much is enough???
Geez, I can’t tell you for your lifestyle but I can say my wife and I figure $1-million in personal assets should be plenty to cover our basic expenses throughout semi-retirement or during full-on retirement. This is because thanks to pure math/taxtips.ca calculator you can find on my Helpful Site page here, this amount should last plenty even with 3% inflation and modest 6% rate of return.
You’ll see from the table above that you actually don’t stop drawing down more money than your portfolio generates until you’re forced to in your 70s thanks to RRIF rules.
What do you make of using 4% or even 3.5% as a starting rule of thumb? Comment away.
I will be posting my dividend income update in the coming week or so. In the meantime, this was our increase last month.
Dividend Growth Investor highlighted the solid returns for stocks that the Dow Index dumped.
Before my reader question of the week, as per the blog headline, I wanted to highlight I bought more QQQ ETF for my LIRA recently. You can read up on what a LIRA is and how I’ve previously managed it over the years here.
Yes, I know, the NASDAQ went down recently but I really don’t care. I’ve actually had some QQQ for a while now since 2015 but was waiting for some U.S. cash to build up inside my LIRA for any future purchase. I bought more QQQ to take advantage of any long-term tech stock gains without worry about any individual tech stock selection. I figure QQQ = a good long-term “growth kicker” for my portfolio.
Would you agree or am I making a mistake with tech in my portfolio? Comment away!
Dale Roberts was back with a mix of interesting points in this week’s edition of making sense of the markets.
Reader question of the week (adapted slightly for the site)
I have been reading your blog off and on since February. I enjoy your insights very much. At that time I rearranged some of my TFSA investments to allow me to invest in a couple biotech and tech stocks. I did experience a decent return on them. While my TFSA also has some Canadian dividend stocks that are lagging, I’m wondering if it would be wise to sell these and invest in more tech worthy stocks to generate a “higher” return? I’m 62. I also have RRSPs and pension related RRSPs. My TFSA represents about 20% of my total investments.