Weekend Reading – What does your retirement look like?
Welcome to my new Weekend Reading: what does your retirement look like edition.
Thanks again for your readership!
This site now has almost 6,000 dedicated email subscribers. That is VERY much appreciated. I enjoy engaging and hearing from you and I do my best to answer every single email and every comment on this site.
Before my theme for the week (what does your retirement look like?) some quick links to some recent reads:
I shared my personal better way to budget to allocate money to saving and investing while still enjoying things life has to offer. Let me know how you budget in a comment on the site – curious about other methods!
I also posted a recap of the 5 stocks I bought in 2022, along with a few other portfolio changes to share and why.
Weekend Reading – What does your retirement look like?
What does your retirement look like?
Or, what do you envision your retirement to be like?
As a DIY investor taking control over our personal finances and investing, doing my own taxes, managing my own insurance needs and more as My Own Advisor (for almost 15 years now….) I think often about my/our answers to such questions.
I’ve tried to overcome many retirement planning mistakes but I’ll be the first to acknowledge I’m far from perfect. I wrote about many retirement mistakes some folks make here – check out that older post to see if any might apply to you right now…
As My Own Advisor, complete retirement has never really appealed to me. I don’t get how some folks can work 40, 50 or 60+ hours per week for decades on end and simply cut everything off – just stop working altogether to be retired. That approach definitely works for some – it’s just not me.
Passionate readers will know I’m much more about FIWOOT (Financial Independence, Work On Own Terms) vs. FIRE (Financial Independence, Retire Early). It more accurately describes what I’m pursuing without misleading others that I will “retire” in my early 50s and avoid working for some income.
FIRE is great, and fine for a few but don’t kid yourself when it comes to the marketing madness done by many 30-somethings on this subject. They work hard for income even though they are retired. Go figure.
In previous generations many individuals would work well into their 60s only to have a life expectancy of mid-70s. This means retirement, if any really, was short-lived. Company/factory workplace pension plans were common as was healthcare benefits provided by the employer to cover elder care.
A great deal has changed as we know…and more personal finance headwinds will occur:
- People are living well into their 80s and 90s now – at least some are. Longevity risk is an issue for some seniors and your portfolio will need to ensure you have funding for decades beyond government benefits.
- Many company pension plans are going away. Employers are shifting the investment burden to employees or individuals via defined contribution pension plans, if those exist with your employer at all. More and more, individuals will need to fund and make decisions about their own retirement dreams.
- Healthcare is getting increasingly expensive and our system as a whole is in dire need of systemic repair. As such, you’ll need to factor in elder care or various forms of senior care as you age which are far from trivial.
To hedge against those retirement headwinds, while living my life to the fullest as best I can, semi-reitirement has and does appeal to me.
- I can continue to keep my mind engaged – working in some capacity albeit with fewer hours and with less mental fatigue.
- I can continue to earn some income to fight expense headwinds above.
- I will have more time to enjoy things today or try new ambitions – things I have put off or feel I could not accomplish in previous years or decades due to full-time work constraints.
My sensible (???) retirement plan is designed to ensure we don’t outlive our money, first and foremost, but we also don’t hoard assets until the end. The pandemic has triggered a renewed inspiration for me to get to semi-retirement sooner than later – given that’s always been the plan.
Your mileage may vary!
Here are some of my semi-retirement building blocks as part of our comprehensive financial plan:
- Cashflow – This remains the #1 important part of our financial plan. Our cashflow will come from a variety of sources as part of semi-retirement/FIWOOT in the coming years:
- Dividends and distributions from our taxable accounts.
- Dividends and distributions (and some withdrawals) from our RRSPs.
- Part-time work.
- Retirement planning/projections – This is arguably priority #2. If you don’t know how much you want to spend in retirement, as you age, this will be problematic for you. 😉 After our part-time work is done, we’ll also rely on the following income sources for retirement income:
- Pension and/or LIF (Life Income Fund) incomes.
- Complete withdrawal of remaining RRSP/RRIF assets in our 70s to zero.
- Complete withdrawal of remaining taxable accounts to zero.
- Slow withdrawals from our TFSAs in our 80s and 90s.
- Government benefits (income via x2 Canada Pension Plan and x2 Old Age Security).
- Selling our home for old age needs in our 90s, if we get there, is the nuclear-plan to die somewhat broke.
- Tax Planning – We already know our drawdown strategy and other approaches to help optimize taxation.
- Life Insurance – We won’t have any debt/much debt in semi-retirement so we’re not planning on much if any life insurance needs. We’ll have a cash wedge/large emergency fund to cover major expenses.
- Estate Planning – We have a will and we’ll update ours again in the coming year or so. Any premature death would likely create stress and problems for my wife – so I want to ensure things are up to date as much as possible.
Where I’m going with all of this is that it takes a lot of thought for any retirement or semi-retirement planning. This process is much more about who you are, where you want to be, than financial. Yes, math and portfolio assets are important but they are only part of the equation.
I feel it’s never too soon to start that process.
At the end of the day – life is a series of small moments. My goal in life is to have nice things, in moderation, not to acquire things but to enjoy things and just as importantly, enjoy the process.
As I get older and reach some of my long-standing goals, I anticipate I’ll set new ones – financial, personal or other. I expect to. I want to.
As I get older, I try not to measure any progress against others. Our journey and our process is unique to us. I’m learning to enjoy the process more over time…
I hope the same enjoyment can apply to your personal finance process can as a passionate reader as well…
Weekend Reading – What does your retirement look like and more!
Thanks for the inspiration to write this Weekend Reading theme from Tawcan and Dale recently. Read on about the retirement landscape in Canada here.
Be mindful about what your retirement might look like – since retirement can trigger unhappiness for some:
“What can follow is a lack of structure and sense of belonging — or, in some cases, a reason to get out of bed in the morning. Many people also don’t realize how much of their social connectivity is tied to their workplace.”
Nice to see another juicy dividend increase to my portfolio this week: Suncor increased their dividend by 11%.
Curious about dividend income stocks beyond Suncor, where instead you own ETFs to help fight inflation for any Canadian retiree? Check out this list of ETFs to consider:
This MoneySense article argued TINA (There Is No Alterative i.e., to stocks) still applies but less so these days with interest rates rising. You may want to consider GICs or bonds again as part of your portfolio but with some caution on inflation:
At the time of writing this article, GIC rates were at their highest levels in years. Tangerine was offering a one-year GIC at 4.7%. Inflation was sitting at 7%. The real rate of return is -2.3%. With these numbers, investors are not growing their wealth.
GICs and bonds are options for Canadian investors who are nervous about market performance, are not concerned about growth and can afford to earn less than 5%. If you are looking for financial growth, being invested in the markets over the long term is still a good strategy.
Interesting to see this asset class quilt so far for 2022 for hints to buy this yeat what may be in favour next year:
More interesting analysis on AQN with Dan Kent and the guys at Stocktrades.ca
Check out my Deals page for major discounts with Dan Kent and the Stocktrades.ca team along with other ongoing partnerships and offers to save, invest, and propser!
Have a great weekend,