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Living On A Million Dollars

38K views 223 replies 42 participants last post by  kcowan 
#1 ·
I see more and more of these news stories about people who have got to a million either by extreme saving, maybe a house sale etc., then they quit work in their late 30s and say they are going to live on $40k per yr passive income forever. While am sure it can be done, $40k would be about the amount to rent or pay a mortgage, eat, utilities, bit of entertainment and thats about it afterwards, no account for inflation etc.

While I am all for frugality, that seems not enough to rely on, especially if a family is in your future.
 
#38 ·
I wonder about this too. I am 54. There are at the very least tens of thousands of Toronto homeowners about my age who bought 20 or 30 years ago and are sitting on approximately a tax free one million dollar gain earned purely by the genius of being lucky. Why there is not a stampede out of Toronto to say Ottawa where the same building can be had for $300K or $400K is beyond my understanding.
Mostly because of the family reasons. My mom and MIL (both 70+) live now 20 min driving from us. If we move, they need to move too and this is pretty complicated. Our kids also most likely will live in GTA, Our son soon graduates from University and 90% he secured god job in Canadian bank (downtown Toronto). Our daughter also planning to go to banking industry. Not sure we want to live 3-4 hours flight from our kids and potential grandkids
 
#46 ·
Not sure we want to live 3-4 hours flight from our kids and potential grandkids
Yes this anchor prevents many retirees from moving to a place more sensible for them.

I suppose the family connection is strong. We moved 1500 miles away from their grandparents but had them each out for a month to live with us every year. Then we moved back 8 years later and were local again.

I think the one month stay with us generated a stronger bond and the extended family feeling much more than the Sunday dinners at al. YMMV but don't just dismiss the idea.
 
#65 ·
Perhaps one of the issues here is being alluded to by Pluto a couple of posts ago.

Where is the million? Is it capital gain, distribution, or what? What is the tax rate on that income?

One million dollars in dividends held in a non-registered account will spend a lot easier than having a million dollars in an rrsp.
 
#66 ·
You need to know yourself before you decide to worry about how/when to retire. Everybody is different.
If you value work/career/golf and your life is complete being near friends & family there's no point to consider SWR or even RRSP contributions. I know many of my friends would drop dead if they stopped the 40 hour grind each week and are working happily into their 70's.
 
#71 ·
Agreed. Lifestyles rise and fall and it's well established that after base needs are taken care of additional money gives little benefit. There is a lot of wisdom in the saying:

"Money doesn't buy happiness but happiness can be bought with money". it just matters what you do with it.
 
#70 ·
I'm really enjoying this thread. I'd love to cash out of GTA and move to somewhere lower cost. But, we have our kids here and their kids. Even though we could afford to fly business class with all the extra dough anytime we would like to, it just wouldn't be the same as being here.
 
#74 ·
Interesting thread. Could someone retire on $1m, for sure. It really depends on lifestyle and what you want.

My spouse and I could have retired in our 30's if we didn't have kids d 40s if we spent a lot less on them. Our plan to retire right is at 61 ish. Why that number, that is when I anntipate the youngest will have finished her graduate degree. At that point, we have provided her more than she should need tomake in the world. I hope it's earlier than that, but I want to be sure my kids once out of the nest, stay out.

I remember my dad retired I thought really earlier, about mid 50s. He said later, he waited u til I was done my second year university because he then knew I probably wasn't going to fail out (I had a too much fun in my first yer)

My parents currently live on under forty k a year. That is from their rental income, little savings, small CPP, OAS. In their early days of reitement, they went on more trips, so as kids, we helped pay for their trips so they could splurge. They had the money, but were just too worried that they would run out. Now, they are older, they find the trips are limited. They can pay for them, and have enough.

I think with a fully paid off home, no dependant, and some frugal spending it's definitely doable.
 
#76 ·
m3s raises some good points....

1. "I believe people keep working because ego." Somewhat true I bet! They have people to impress...

2. "Many studies about happiness describe an appreciation for the simple things in life..." Totally agree. Unfortunately many 'working stiffs' as you put it are far too busy to appreciate the great things life offers.

3. "Some people are really missing out on the world." Also lots of truth to that. This is why for us we try and take a balanced view on things. Could we 'retire' now and live in a one-bed apt.? Yes. Do we want to? No. Could we 'retire' now and live frugally, no car, walk; bike, etc. and not travel? Yes. Do we want to? No.

I believe balance in life is good, if not great. Whatever that is for you, you need to define it and be comfortable in your skin in it. Otherwise, the extremes will wear on you and break you down.
 
#79 · (Edited)
It really depends on lifestyle and the things that are important in retirement. For some, it means going on a cruise a couple of times a year. Some will enjoy traveling and exploring European cities. Others will enjoy a fast-paced and active city life, the arts, theatre and music scene, or eating out often. For my wife and I, a life of luxury means spending as much time as possible outdoors: tent camping in secluded places, hiking, kayaking, mountain biking, gardening, road trips. And I hate flying, not surprisingly as I was at one point working for a major airline and we had more than our share of international travel. We rarely if ever eat out, as we have more pleasure preparing our dinner on a Coleman camping stove or camp fire in the middle of the Utah desert than we would eating in a Michelin-rated restaurant in Paris. This means that our actual spending is much lower than most, and indeed is currently well below $22,000 per year, by choice, not by obligation.

We own a mortgage-free condo in Calgary that we will be selling soon so we can build a very small home/workshop on a 4-acre wooded lot we own on one of the Gulf Islands. Home will be off-grid (well, septic, solar). Our total annual housing expenses, including electricity, insurance, taxes, maintenance, are currently $6,000 but will go down to $3,000 once we are on the island. Vehicle insurance, registration, licensing, and maintenance for our gas-guzzler camper van used only for travel, top $2,000 a year. Our total food cost for 2 currently amounts to $6,000 per year but will likely decrease once we move to the island and subtract what we will grow and harvest (clams, salmon, crab, deer. Add another $1,000 for clothing and miscellaneous, and I am at around $12,000 for basic needs. Communication-wise, we do not have internet or cable but use two Mexican cell phones with data plans and no roaming fee in Canada, the USA and Mexico for $10 per month each, enough for our limited needs. Starting last year, we drive to Mexico in the early fall and spend 6 months there, mostly camping. For next year, we are renting a one-bedroom fully-equipped beach studio, a block from the ocean in a little beach town on the Pacific for $500 per month ($3,000), including all utilities and internet. Food and enough beer and licor the cana is much cheaper there than in Canada and is already included in my annual budget. Add another $2,000 for our annual roundtrip, including gas and Mexican auto insurance. Total for year: $17,000. Let’s add another $5,000 for replacing a kayak or a mountain bike once a year, medical travel insurance, and/or a bit of entertainment (not sure what but let’s just have a buffer for the sake of it), and we are at about $22,000. I am sure I am forgetting something but it wouldn’t add much on our budget.
 
#81 ·
... I believe people keep working because ego ...
Interesting point :)

When we went to adult only, probably one of the most expensive resorts in the world resort in Mexico (6K + for couple for a week) (peoiple who is coming there, mostly lawyer, doctors, prinicples of private schools and so on) and during different "activities" was telling other guys that I'm semi-retired - others were telling "cool" etc :).
When i was telling the same at Cuban average + resort, others were looking at me like I'm some homeless :), even though I earn in dividends/interest more than they per year :)....
One guy was telling, "even my mother in law who is 70+ works part time"
Obviously, I don't give a **** about impressing other people, but some might ...
 
#83 ·
We have quite a few vacations on our bucket list. They range from expensive Australia/Paris vacations to affordable Mexico / visiting friends and family in US.

It has occurred to me that it would make sense to engage in the more affordable vacations first, and let our holdings grow, rather than knock down our nest egg with two weeks in Paris straight out of the retirement chute.
 
#85 ·
It has occurred to me that it would make sense to engage in the more affordable vacations first, and let our holdings grow, rather than knock down our nest egg with two weeks in Paris straight out of the retirement chute.
You maybe surprised , but in many cases trip to Paris/around the France can br cheaper than ridiculous expensive trip (flight, accommodation, car rent ) to AB
 
#87 ·
It really comes down to the lifestyle that you want to live in retirement. I've done some research and have also talked to my older siblings who are retired to get an idea of how much their lives changed in retirement. The answer shouldn't surprise many people but you really don't change your lifestyle a lot in retirement. The first couple of years you may travel a little more but that subsides. As for working, sometimes I think people continue to work because they just don't know how they will fill up the time if they don't go to work, which is a problem, you really need to try and find things to do outside of work that you enjoy. I never had that problem even when I was young, I can always find things to do with my time.

As for living off a $1m per year, it depends on the above, what do you plan to do with your time, not everything costs money. It should be easy to make $40k a year in dividend income, even the Canadian banks pay almost 4% in dividends. From research I did in the past you can make around $47k in any Canadian province and not pay any taxes on dividend income and this is equal to making about $80k while working after you deduct all the taxes, CPP, EI, workers comp, etc. etc. etc.

I have been tracking my expenses over the last 4 years and I spend around $40k plus or minus a couple thousand and I don't believe I am depriving myself of anything. Golf anywhere from 20 to 35 rounds a year, live in Toronto, go on 2 or 3 trips a year, eat what I want, go out to lunch with friends, drinks once in a while. I take in a ball game or hockey game once in a while but don't have season tickets.

I was working up until a little over a year ago and when the company restructured I found myself out of work so I got to try a couple of things I had been thinking about with regards to investing and the amount of money required to make a decent living. It took me a while to get everything set up last year with regards to my accounts so I do not have good data from last year, but so far this year I am tracking to make over $70k per year on dividends and options (covered calls and puts) and this is with only $500k so with a million I think I could double up, or at least $100k per year. Since I actually enjoy trading and studying the market, I treat it a little like my new job.

I've actually been thinking of selling my house in Toronto and taking the money and moving east. Unlike some, most of my family is back east, I moved here for work many years ago, but still go back east every year because that is still home. I have looked at properties out east and the house you can get out there is incredible for the price. Many are in the $200k to $300k range but if you go up into the $400k to $500k range you are buying properties that would be in the $2m to $3m range in Toronto. If you don't want the hassle of owning a house, you can get some very nice condos for under $200k for around 1500 sq ft, not the 400 sq ft closets you get in Toronto.

Like everyone, I've been looking at the pluses of continuing to live in Toronto versus moving east. Not everyone has the same priorities or desires so retirement and the amount required is really an individual call.
 
#111 ·
It took me a while to get everything set up last year with regards to my accounts so I do not have good data from last year, but so far this year I am tracking to make over $70k per year on dividends and options (covered calls and puts) and this is with only $500k so with a million I think I could double up, or at least $100k per year.


i believe the option income projections above are somewhat misleading ...

at the 4% return you propose as doable for dividends, a $500k portf would bring home $20k in dividends per annum. Since you mention you are "tracking" $70k from a combination of dividends & options trading, this must mean you expect your option portfolio to earn $50,000.00.

to obtain premium this high (50k on 500k underlying stock) one would have to be selling calls & puts that are very close to the money. This in turn implies high levels of risk, plus constant assignments, especially in the puts with their concomitant margin impairment risks, not to speak of constant re-buying of stocks that have soared past their assigned option strike price, therefore the trader can only purchase a lesser number of shares.

a strategy like this can actually abrade or erode capital, as many option-selling ETFs have learned to their sorrow. It's not a sensible strategy for a retired senior seeking to augment income, imho.

according to yourself, you have been trading options since june 2016. This is 10 months, so i'm not sure how you arrive at your annualized option trading return.

http://canadianmoneyforum.com/showt...a-high-level?p=1278914&viewfull=1#post1278914


if you continue this close-to-the-money strategy for 10 years, i believe it is unlikely you will see a 10% annual return from options alone. A sustainable figure across a decade might be in the 3-5.5% range. Something roughly equivalent to dividend income.

options plus dividends at $20,000 each, from a $500k portf, might yield $40,000 on a current basis. Coupled with OAS & CPP, a retired person living in a zone with moderate housing costs could manage well.

on a $1M portfolio, a party using options to augment regular investment income could manage famously. That extra 30-40k from option selling will put him over the top.


.
 
#93 ·
My brother in law retired in his 40s. Without education, he worked very hard and achieved quite a bit. He retired as a VP at a small but very well known investment bank. His wife was also high up in the corporate world. They now have houses all over the world and split time between several countries and generally focus on golf and clubs. No kids, a small hypoallergenic dog and no time wasted on silly things like cooking. They seem satisfied but also obsessed about a whole bunch of insignificant tiny little things.

My great uncle worked hard as an engineer for as long as he could (until 75). He loved his job. He was 90 this year, surrounded by the loving family. Never really seemed happy after he retired.

Where am I going with this? Everyone is wired differently but there is something wrong with retiring at 30 and spending most of ones life without a real objective. Even those leaving atrocious office jobs in their 50s must surely have some projects and aims other than migrating between Florida and Canada and keeping the health benefits?
 
#96 ·
Family composition and dynamic make a big difference to how much you can live on. While I can live very frugally, I wanted to provide my 3 kids the opportunity to go to university (something that I never had). Two of my 3 have already been through post-secondary and are now on their own but the youngest is in the 1st year of bio-med. I also would like to be there if some day they need help with a wedding. So for just my wife and I, yes we could probably live on $40,000 dividend income and a paid-off house and even fit in some extras like travel. But with 3 kids - no.
 
#98 ·
If you want real French food, Paris is the last place to try it
I wouldn't agrue :). For example, I liked food much more in Normandy, Britanny, Dordogne than in Paris or Alcase....
I also wouldn't like to retire in Paris (as I said before, malaga area is more appealing to me), even though I;m fine with GTA.... However, I'd like to go to a long term vacation in France, esp. Chamonix area
 
#100 ·
Off topic but I also was disappointed with French restaurants, even outside of Paris. Perhaps my expectations were too high but I often thought I could get something better in Canada and I would definitely get better service at home. Some of the pricier places specialize in a lot of weird stuff, like kidneys, brains and such which just isn't my cup of tea. The small local restaurants offer good value for a 3 course meal with wine so we usually found those to be our best bet.
 
#134 ·
The small local restaurants offer good value for a 3 course meal with wine so we usually found those to be our best bet.
Yes that is what I was experiencing in Paris. Not the tourist traps. Found many that were superb and inexpensive. We even found take out at local marchees for our hotel room. Granted there are inexpensive dining options in Toronto but very different.
 
#104 · (Edited)
The nice thing about Malaga , it's also location. Close to Sierra Nevada where you can do skiing, excellent public transportation (easy travel to Sevilla, Granada, Cordova, Cadiz etc). Can drive to Portugal. Cheap flights to any European city, good weather and food, cheap (can rent condo for 300 EUR/month).

Even Berlin offers much better French food than Paris.
Actually in Germany/Austria (even though I like it a lot) wasn't too impressed with food (yes, excellent beer and sausages :)), liked Czech Republic much more
 
#107 ·
There are superb restaurants in Toronto and all the larger towns around Toronto.

In general N America does offer a lot of crap food but also plenty of restaurants that beat anything one can find anywhere in Europe. And it doesn't have to be New York, Montreal or New Orleans. There are some truly awesome BBQ joints in places like Tennessee, Alabama or South Carolina.
 
#109 ·
Your grand kids wont care about your working stories, so do whats right for you. Rotting away in a job as a badge of honor is a waste of time.

Travel is a funny thing. Some people like getting on a plane to a new destination every few months. For the little bit of international travel I have done, I didnt like it. I found the huge crowds and congestion in other cities and countries really took away from the experience. You cant understand how few people we have and freedom until you have been to Asia. I would like to see some of the historical sites in Europe then I am probably ok with Canada and a few US trips a year for the rest of my life.
 
#110 ·
How is it that you feel you need $5M for that lifestyle?


Fresh out of high school, my first day in Engineering Design Graphics at university, a professor said to the class, "Any number of people can build a structure that will hold a given amount of weight but it takes an engineer to build a structure that will just barely carry it."

It seems to me that we should be financial engineers. Folks in these forums should have the skills and confidence to build a financial program that will take care of our needs with little waste. My goal is for my wife and I to die with the least amount of money in the bank possible. We have no children so we have no need of a legacy. As for charity, that's where it will go but I'm hoping to take care of that while I'm alive, instead of waiting until I'm gone.
 
#124 ·
If I was trying to live off $1 million, I'd probably invest it in a permanent portfolio allocation. On the stock side I'd go heavy on TSX eligible dividends (probably XIU) due to the tax efficiency. Then I would live off this portfolio with variable withdrawals, and I wouldn't hesitate to sell shares as needed, including selling from the bond and gold allocations of course.

The appeal of the PP for this purpose is the low volatility and high resilience to sequence of return risk. Additionally, by construction, it has resilience to the potential horror scenario of dual bear markets in stocks & bonds.

Low volatility --> low sequence of return risk --> well suited for withdrawals --> capital lasts longer

http://canadianmoneyforum.com/showt...t-allocation?p=1521962&viewfull=1#post1521962
View attachment 14450
 
#125 ·
There is just something wrong about putting a million dollars into a volatile place and getting a walmart greeters wage back from it.

On our farm, we are earning double digit returns. The land goes up by inflation or more, its paid down by 3.5% interest each yr and throws off anywhere from 5-15% return in between. I am better off to invest in my business than look anywhere else for return.
 
#133 ·
1. You are comparing passive (investment) income to active employment or business income IE, working the farm. To transform the farm to passive status what would you get if you rented the farm and essentially did no work?
2. "volitile place": I'm assuming you mean risk of a bear market and paper loss of assets. The risk really isn't in volatility. The risk is in the quality, or lack of quality of companies invested in. If you buy quality, they come back. They survive. Apparently you do not worry about your farm not surviving an economic downturn, eventhough your land value might dip. So look for stocks that have a similiar profile as the farm, and don't worry about volitilty.
 
#128 ·
Don't really like Italian food, gonna check ME/Greek ones... Actually the best Greek restaurant we've ever been was in ...Barcelona :)

Paris and London cater to what the tourists expect to see and the tourists don't tend to be fussy + they are never coming back so there is no reason to offer quality.
English food is usually sicks :), but I don't agree with your statement, as a lot of tourists (include myself) frequently check tripadvisor reviews before going to the restaurant...., but, yes, the French restaurants we liked the most weren't in Paris, one amazing was in small town in Loire Valley, other (in Sarlat) was recommended by Russian guy who was serving food (and it wasb't restaurant were he was working :)). Also, we found very good restaurant in Vienna.... In Paris, I rememeber only 1 restaurant we enjoyed in Luxemburg gardens area....
In Europe we also like going to local supermarkets and try some "unknown" food and drinks...
 
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