# Living off Investment interest/dividends



## adampeps (Jan 21, 2011)

Hi all,

Happy new year. I've posted a few things in the past about my financial situation. I think I am in a decent spot but keep getting interested in the idea of living off my dividends or gains from my capital. I don't think it is in the cards however and am just curious if others have gone with this approach, if its possible under my situation, etc.

A little details:
- I'm 34 and have about $130K in savings (maxed out RRSP but not TFSA)
- Our biggest expenses are: $1050/month mortgage, and $700/bi-weekly daycare (2 children)
- I make secondary income on the side. This has helped max out the RRSPs, and i've also used it to pay into the mortgage (rate of 2.89%). So for example: % towards RRSP/savings, then I pay my marginal tax rate (42%) and then the rest to mortgage. I realize that the mortgage thing is not the best thing to do with the extra money but because it may not last forever I figure freeing up debts is a good thing to put it towards.

Anyway...So if I am not mistaken if I wanted to go with this approach I would need to figure out what my planned annual spending is and then find the amount in capital I'd need such that 4% would equal the annual amount? I'm also still very confused how inflation plays into this. If I figure I can live off of $40,000 (1 mill capital) this is a much higher amount 20 years down the road. Anyway just curious how realistic this is. I see the hardest thing to do is saving the amount required. However it would be nice to leave something for my kids as well someday and not have to worry about ups & downs while in retirement as much.

Thanks all!


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## james4beach (Nov 15, 2012)

You're the same age as me. That 4% figure ("sustainable withdrawal rate") assumes that you only need the money to last for 30 years. We have to be a bit careful. Our generation has been advised to plan til age 100. If you retire at age 60, you'll need the money to last 40 years and 4% may not be a safe assumption; you should probably use a lower figure like 3%.

As for whether others use this general approach? Yes I think it's safe to say that virtually everyone follows the same methodology: you save up a large amount of money, and then in your retirement you live off of this. The breakdown of interest/dividends/capital is a minor point.

I also don't understand the inflation part of this kind of planning.


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## Rusty O'Toole (Feb 1, 2012)

You can do it but not right away. Start by reducing expenses, pay off your mortgage, and figure out how to live well on the minimum amount of money. Then figure out how much income you need and how to get it. Dividend stocks are a good answer, so is rental real estate. Both can be expected to increase in value with inflation or faster, and both provide cash flow (dividends or rental income).

Derek Foster the "idiot millionaire" has some interesting ideas.http://stopworking.ca/


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## steve41 (Apr 18, 2009)

PM me your and wife's:-

ages, 
gross salaries, 
current savings (reg/nonreg/taxfree)
when you plan to retire, home value, mortgage details


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## Davis (Nov 11, 2014)

The 4% figure isn't a rule - it's a short cut. It was derived by looking at a particular portfolio - I think is was 60% US equity and 40% bonds, and applying that over 30 year periods going back through the 20th century. So in the worst case scenario, withdrawing a steady 4% per year would make your money last for 30 years. The 4% model does allow an increase for inflation. http://www.investopedia.com/terms/f/four-percent-rule.asp

But what if you're not investing 60/40 in US equities in the worst 30 year period of the 20th century? 

I know I'm not. I retired last April at 50. My portfolio generates income of 5.5%, so if I only withdraw 4%, I will be leading a lot of money to someone. I also know that if the market turns really crappy, I can tighten my belt. And I'm invested about 90/10 in equities, and plan to cash in GICs in years when the market is down instead of selling of shares.

Image a spreadsheet that shows income from dividends and interest going out to 85, my annual budget, adjusted for 2% inflation, CPP, OAS, taxes, and drawdowns of capital. That's how I know I could retire safely.

In short, I will be more strategic than a hard-and-fast 4% rule can ever be. 

Having said that, $1 million sounds a little risky to me. I doubt there is much room to cut from a $40k/year budget if you have a bad run in the market.


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## Nelley (Aug 14, 2016)

james4beach said:


> You're the same age as me. That 4% figure ("sustainable withdrawal rate") assumes that you only need the money to last for 30 years. We have to be a bit careful. Our generation has been advised to plan til age 100. If you retire at age 60, you'll need the money to last 40 years and 4% may not be a safe assumption; you should probably use a lower figure like 3%.
> 
> As for whether others use this general approach? Yes I think it's safe to say that virtually everyone follows the same methodology: you save up a large amount of money, and then in your retirement you live off of this. The breakdown of interest/dividends/capital is a minor point.
> 
> I also don't understand the inflation part of this kind of planning.


Your chances of living to 100 are slim and none-you are just as likely to get absurdly fantastic investment returns.


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## gibor365 (Apr 1, 2011)

When you about 50 y.o., I think 4% approach is OK considering that at 60 you can start getting CPP and at 65 OAS.. In our case ,in order to retire completely ,we need at least 1.6 mil and this is only because we don't have debt, own house in GTA (can downsize if needed), our son at last year of university (double degree business/math - so he shouldn't have any problem getting high pay job) and out daughter at grade 10 and has about $50K in RESP


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## james4beach (Nov 15, 2012)

Nelley said:


> Your chances of living to 100 are slim and none-you are just as likely to get absurdly fantastic investment returns.


Having money left over is not a bad thing. Running out of money at age 98 and surviving on discount beans IS a bad thing.


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## james4beach (Nov 15, 2012)

To the original poster: this 4% stuff is just a rough approximation. In reality people end up with a very wide range of savings by the time they retire. Of course the more you save up, the better.


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## Nelley (Aug 14, 2016)

james4beach said:


> Having money left over is not a bad thing. Running out of money at age 98 and surviving on discount beans IS a bad thing.


If you get to 98 you will more pressing problems than lack of money-I can understand not wanting to be poor but the reality is that at 98 your mental and physical health is 10 times more important than money. If you end up in fantastic shape at 98 eating discount beans you are better off than anybody else.


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## GreatLaker (Mar 23, 2014)

This paper by William Bengen is a great explanation of the "4% Rule". I put it in quotation marks because it is not a rule so much as just the amount of the initial withdrawal from a balanced portfolio that can be adjusted for inflation annually and has a low probability of the portfolio being exhausted within 30 years. The study looked at results for hypothetical retiree every year starting in the mid 1920s.

http://www.retailinvestor.org/pdf/Bengen1.pdf



> Assuming a minimum requirement of 30 years of portfolio longevity, a first-year withdrawal of 4 percent, followed by inflation-adjusted withdrawals in subsequent years, should be safe.





> In no past case has it caused a portfolio to be exhausted before 33 years, and in most cases it will lead to portfolio lives of 50 years or longer. By comparison, a 4.25-percent first-year withdrawal could exhaust a portfolio in as little as 28 years, were past conditions to repeat themselves.





> Note that my conclusions above were based on the assumption that the client continually rebalanced a portfolio of 50 percent common stocks and 50-percent intermediate-term Treasuries.





> Despite advice you may have heard to the contrary, the historical record supports an allocation of between 50- percent and 75-percent stocks as the best starting allocation for a client. For most clients, it can be maintained throughout retirement, or until their investing goals change. Stock allocations below 50 percent and above 75 percent are counterproductive.


So if the future is no worse than the study period, a 4% withdrawal rate from a balanced low-cost portfolio should be safe for 30 years.

Note that the only time the portfolio value is used is the first year. After that the withdrawal amount is adjusted for inflation. Growth rate of the portfolio enables the withrawal to keep pace with inflation.


This Bogleheads page describes several withdrawal strategies. The "4% Rule" is called Constant-dollar, since the withdrawal is constant in real (after inflation) dollars. https://www.bogleheads.org/wiki/Withdrawal_methods

Because it uses an unchanging method to calculate the withdrawal amount, in most cases the retiree's portfolio will be significantly larger after 30 years. That is a result of sizing the withdrawal to not exhaust the portfolio during the worst market returns in the study period.


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## My Own Advisor (Sep 24, 2012)

Adampeps,

It sounds like you've done well....RRSPs maxed to date.

Our plan is to save and invest $1 M to live from, however, that won't be enough for us based on our needs and wants - as another comment above referenced - it may not leave much buffer if the markets are horrible for a few years (i.e., some dividends and distributions get cut, other). Even still we feel this is a great financial goal for us, so in addition to any small pensions, we figure $1 M invested in our portfolio is "enough money". 

Our goal is to draw about 4-5% yield from the portfolio within the next 10 years, largely keeping the capital intact and drawing it down on our own terms - largely to meet discretionary budget needs such as travel or newer vehicles. 

The chances of anyone living to 100, are very, very slim.


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## Koogie (Dec 15, 2014)

My Own Advisor said:


> The chances of anyone living to 100, are very, very slim.


Slim, but ever increasing...



Squaring-The-Survival-Curve And What It Means For Retirement Planning - Michael Kitces
https://www.kitces.com/blog/squaring-th ... -planning/

""Because the interesting phenomenon of recent advances in life expectancy in particular is that while overall life expectancies have been rising,* most of the gains are attributable to people living closer to the maximum human lifespan (rising up towards about 115 years), and not as much from increases in the maximum age itself. ..*""

""One potentially concerning behavioral consideration is the role that the availability bias may play in influencing longevity forecasts. Many clients forecast their own life expectancy based on the longevity of family members. *While it appears that genetics play a significant role in longevity and it’s reasonable to take family health history into consideration, ironically, squaring-the-curve may mean that individuals with the lowest longevity expectations are actually the most prone to significantly outlive their expectations!*""

""The reason is that people with longevity in their family already tend to die of old age, whereas families with without longevity often die of other health conditions. Yet, if squaring-the-curve results in increasing survival rates without a corresponding increase in maximum age, then the bulk of the gains in survival rates will go to those who aren’t dying of the same ailments that claimed the lives of previous generations.* In other words, someone who has a family history of living into their 90s of 100s may have a good reason to believe they will also live that long, but there isn’t a huge risk they will live significantly longer. However, someone without longevity in their family who believes they will die in their 70s likely has the biggest “risk” of living 20-30 years beyond their expectations.*""


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## lonewolf :) (Sep 13, 2016)

As technology comes more advance the rearranging of atoms some say we could live for ever.

Being creative makes it easier to live off investments i.e., can move to cheaper places to live or find cheaper ways of doing things or doing totally other things.


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## kcowan (Jul 1, 2010)

My Own Advisor said:


> The chances of anyone living to 100, are very, very slim.


My current lifespan estimate is 96 (that is 50 percentile) and I use 97 which is probably 60 percentile.
http://members.shaw.ca/keith.cowan/LifeExpectancyChange.jpg


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## AltaRed (Jun 8, 2009)

GreatLaker said:


> So if the future is no worse than the study period, a 4% withdrawal rate from a balanced low-cost portfolio should be safe for 30 years.
> 
> Note that the only time the portfolio value is used is the first year. After that the withdrawal amount is adjusted for inflation. Growth rate of the portfolio enables the withrawal to keep pace with inflation.
> 
> ...


With a caveat. As I understand it, this particular 'rule' assumes efficient investing, e.g. the S&P500 and US Treasuries, with near zero operating costs. Americans have had 'inexpensive' access to the markets relative to Canadians who continue to pay horrible MERs relative to Americans. When I did all my pre-retirement work using FIRECalc, I tempered market return inputs with higher associated investing costs and a number like 3-3.5% withdrawal is 'safer' to compensate for MERs. 

One does not necessarily have to compensate for a full 2% MER burden in Canada since active management does succeed in obtaining some alpha to mitigate the effect of MERs, but not all. For those in the middle of their investing career today using ETFs and TD e-series type index funds, it is probably safe to use 3.5% SWR. Better yet, use the Variable withdrawal method (as explained in finiki) and that helps alleviate 'sequence of returns' risk, i.e. an unfortunate series of poor market returns early in retirement. 

I am in the school of thought that a 30 year planning horizon to 90 or 95 is plenty enough regardless of improvements in longevity into the 90s. Most people I know today can live pretty much on CPP and OAS when they are in their 90s. They don't spend anything or go anywhere except on health care and even then, some provinces like AB cover almost the entire cost of drugs for seniors. It may not be the same when Generation X and Millenials get there (e.g. OAS) but there will be a substitute 'income support' program to replace it. Either way, an excessive effort to be overly conservative just means one's beneficiaries or favourite endowment fund wins big eventually.


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## My Own Advisor (Sep 24, 2012)

kcowan said:


> My current lifespan estimate is 96 (that is 50 percentile) and I use 97 which is probably 60 percentile.
> http://members.shaw.ca/keith.cowan/LifeExpectancyChange.jpg


As long as you have your health, age 96 would be amazing.


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## AltaRed (Jun 8, 2009)

My Own Advisor said:


> As long as you have your health, age 96 would be amazing.


My mother passed away at 96. The last few years were not the best, and the very last 6 months was an accelerating decline physically (not mentally). My FIL passed away at 99 and the last 2-3 years was an increasing decline (physically and mentally). He became wheelchair bound and ultimately incontinent. I don't want to go there and would rather 'assisted death'.

OTOH, a casual friend of ours is now 93-94 range and is sharp as a whip. He lives in a strata bungalow, still has his DL, gets his own groceries and cares for his own place (cook, etc.). A former British air force pilot, professional engineer for Canadair and Boeing, and flight instructor and loves to discuss all things 'air' with me, including the Mayday air accident series on Discovery channel. I hope when he goes, it is with a heart attack (he lost his wife to dementia a few years back).


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## james4beach (Nov 15, 2012)

Off topic I realize but I _love_ that Mayday show on Discovery!


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## GreatLaker (Mar 23, 2014)

AltaRed said:


> With a caveat. As I understand it, this particular 'rule' assumes efficient investing, e.g. the S&P500 and US Treasuries, with near zero operating costs. Americans have had 'inexpensive' access to the markets relative to Canadians who continue to pay horrible MERs relative to Americans. When I did all my pre-retirement work using FIRECalc, I tempered market return inputs with higher associated investing costs and a number like 3-3.5% withdrawal is 'safer' to compensate for MERs.
> 
> One does not necessarily have to compensate for a full 2% MER burden in Canada since active management does succeed in obtaining some alpha to mitigate the effect of MERs, but not all. For those in the middle of their investing career today using ETFs and TD e-series type index funds, it is probably safe to use 3.5% SWR. Better yet, use the Variable withdrawal method (as explained in finiki) and that helps alleviate 'sequence of returns' risk, i.e. an unfortunate series of poor market returns early in retirement.
> 
> I am in the school of thought that a 30 year planning horizon to 90 or 95 is plenty enough regardless of improvements in longevity into the 90s. Most people I know today can live pretty much on CPP and OAS when they are in their 90s. They don't spend anything or go anywhere except on health care and even then, some provinces like AB cover almost the entire cost of drugs for seniors. It may not be the same when Generation X and Millenials get there (e.g. OAS) but there will be a substitute 'income support' program to replace it. Either way, an excessive effort to be overly conservative just means one's beneficiaries or favourite endowment fund wins big eventually.


Good points AR. Thanks. I did mention low-cost balanced portfolio, but it definitely bears repeating, especially with so many high-cost investments still common in Canada. The latest Cdn Couch Potato portfolios have MERs in the 0.15% range, but a quick look at the big banks investment and retirement products reveals many of them have MERs in the 2 - 2.5% range. IMO these products slowly convert the investor's retirement funds into the adviser's retirement funds, and they do it so slowly, 1% trailer at a time, the investor is completely unaware. In fact many of the in-branch advisers are likely also unaware of the debilitating effect of cost on portfolio growth, they just sell the products they are told to sell.

I am planning to use variable % withdrawal method in retirement, since I want to spend down a lot of my principal.


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## Nelley (Aug 14, 2016)

My Own Advisor said:


> As long as you have your health, age 96 would be amazing.


IMO if you get to the point where there isn't a single human on the planet who both has a higher standard of living than you and is 10 years older than you, then why is having more money such a big deal? If you are healthy at age 96 you are in that position.


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## Nelley (Aug 14, 2016)

GreatLaker said:


> Good points AR. Thanks. I did mention low-cost balanced portfolio, but it definitely bears repeating, especially with so many high-cost investments still common in Canada. The latest Cdn Couch Potato portfolios have MERs in the 0.15% range, but a quick look at the big banks investment and retirement products reveals many of them have MERs in the 2 - 2.5% range. IMO these products slowly convert the investor's retirement funds into the adviser's retirement funds, and they do it so slowly, 1% trailer at a time, the investor is completely unaware. In fact many of the in-branch advisers are likely also unaware of the debilitating effect of cost on portfolio growth, they just sell the products they are told to sell.
> 
> I am planning to use variable % withdrawal method in retirement, since I want to spend down a lot of my principal.


These MERs are purposely presented in a dishonest manner-2.5% per annum is actually probably about 36% of your expected return for the year from your funds-so the fee is actually 36%, not 2.5%.


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## AltaRed (Jun 8, 2009)

Nelley said:


> These MERs are purposely presented in a dishonest manner-2.5% per annum is actually probably about 36% of your expected return for the year from your funds-so the fee is actually 36%, not 2.5%.


It is not dishonest when they say 2% of AUM i.e. total capital, but I agree most investors don't discern the difference. Just wait until people get their 2016 results from their investment insitution and see how much MER 'costs'.


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## Nelley (Aug 14, 2016)

AltaRed said:


> It is not dishonest when they say 2% of AUM i.e. total capital, but I agree most investors don't discern the difference. Just wait until people get their 2016 results from their investment insitution and see how much MER 'costs'.


Yeah-if you put a million with these grifters after a lifetime of "investing" (say 28 years at 2.5%) you quite possibly could have transferred a million dollars from your pocket to their pockets simply for bookkeeping. Insanity.


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## My Own Advisor (Sep 24, 2012)

AltaRed said:


> It is not dishonest when they say 2% of AUM i.e. total capital, but I agree most investors don't discern the difference. Just wait until people get their 2016 results from their investment insitution and see how much MER 'costs'.


Absolutely. As long as they read it 🙄


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## GreatLaker (Mar 23, 2014)

Will the new CRM2 statements say how much the MER cost? I thought it will list transactional and administration charges, and trailing commissions, but not the entire MER. It could still be a shock for someone with a large portfolio. Here's a sample report from IFIC: https://www.ific.ca/wp-content/uploads/2015/04/Model-Report-on-Charges-and-Compensation.pdf/10338/

It would be interesting though, to report the MER in terms of total investment return for the year. Imagine if it said something like:


> Your gross investment return over the past 12 months was 7.5 percentage points. The fund's Management Expense over the past 12 months was 2.5 percentage points leaving you with net investment return of 5 percentage points after Fund Management Expenses. Therefore the Management Expense cost you 33.3% of your total investment return for the year. The amount we received from others to provide ongoing services for your account was 1 percentage point. Therefore Adviser Compensation cost you 13.3% of your total investment return for the year.
> 
> If you hold these investments for 50 years the amount we receive from others to provide ongoing services for your account will add up to 50% of your original investment. If you hold these investments for 50 years the amount paid to the fund manager for Management Expenses will add up to 125% of your original investment.


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## AltaRed (Jun 8, 2009)

That is the million dollar question. I've seen 'cost' disclosure as possibly being many things, or at least written/interpreted a number of ways. We will have to wait and see what the statements say and what members report. I am guessing they will try to 'omit' the fund management fee (the brokers might do this) but any reports from the mutual fund companies themselves could not rightfully omit it, i.e. they are costs incurred by the shareholders/unitholders of the fund units. I am guessing I will see the numberrs from BMO IL and Scotia iTrade this coming week (there was some indication of mid-January).


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## Nelley (Aug 14, 2016)

GreatLaker said:


> Will the new CRM2 statements say how much the MER cost? I thought it will list transactional and administration charges, and trailing commissions, but not the entire MER. It could still be a shock for someone with a large portfolio. Here's a sample report from IFIC: https://www.ific.ca/wp-content/uploads/2015/04/Model-Report-on-Charges-and-Compensation.pdf/10338/
> 
> It would be interesting though, to report the MER in terms of total investment return for the year. Imagine if it said something like:


Very eloquent summary of the situation.


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## CdnStache (Feb 22, 2016)

My wife and I are 34 and we retired a year and a half ago with 2 kids and we're currently living off of dividend income. You should google FIRECalc if you haven't used it before. It's a great site for projecting the success of your retirement. And I'm assuming everyone has heard of Mr. Money Mustache but if you haven't he has written a great article on the 4% safe withdrawal rate.

Keep in mind that your expenses will go down greatly in retirement...daycare costs, commuting costs...

Just keep at it and pare down your expenses as efficiently as possible. Its definitely possible to live off of dividends.


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## gibor365 (Apr 1, 2011)

> My wife and I are 34 and we retired a year and a half ago with 2 kids and we're currently living off of dividend income.


 Curious what is your dividend income? Do youown house? Has debt?


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## TomB19 (Sep 24, 2015)

CdnStache said:


> Keep in mind that your expenses will go down greatly in retirement...daycare costs, commuting costs...


What about the cost of travel and entertainment to fill the time that is no longer spent working? I'm expecting a pretty severe increase in spending when we finally retire.

In your case, I suppose you are spending time with your children. That's fantastic. For my wife and I, we don't have children. She wants to travel the world. ... so we both keep working. lol!


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## gibor365 (Apr 1, 2011)

> In your case, I suppose you are spending time with your children. That's fantastic. For my wife and I, we don't have children. She wants to travel the world. ... so we both keep working. lol!


We have 2 kids,but at certain time the kids are grown up and don't want to spend much time or even travel with you......
Maybe CdnStache got inheritance and geting on dividends 80K per year  No problem to retire then


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## CdnStache (Feb 22, 2016)

gibor365 said:


> Curious what is your dividend income? Do youown house? Has debt?


We own our own home, no debt...dividend income of about $40k. The kids are still young...1 and 4...so once they are both in school full time I may pursue some type of part-time job at something I'm interested in. But only if it fits my schedule and it's something that I want to do. If nothing comes along, no biggie.


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## CdnStache (Feb 22, 2016)

gibor365 said:


> We have 2 kids,but at certain time the kids are grown up and don't want to spend much time or even travel with you......
> Maybe CdnStache got inheritance and geting on dividends 80K per year  No problem to retire then


No inheritance here, that's for sure! We spent some time travelling before we had kids and we definitely plan on doing more once they get a little older to appreciate it. We'll be able to spend a longer period of time travelling than we did while working full time where we only had 3 to 4 weeks of vacation to squeeze a trip in.


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## CdnStache (Feb 22, 2016)

TomB19 said:


> What about the cost of travel and entertainment to fill the time that is no longer spent working? I'm expecting a pretty severe increase in spending when we finally retire.
> 
> In your case, I suppose you are spending time with your children. That's fantastic. For my wife and I, we don't have children. She wants to travel the world. ... so we both keep working. lol!


I think travel expenses go up for everyone, you're right on that one. We have seen our travel expenses go up as well. But it's offset by savings in other areas, and we budget a certain amount per year for travelling. One thing to remember about retiring on dividend income is that you can earn a lot in dividends before you pay tax compared to employment income. So make sure you're comparing your after tax employment income to your retirement income goals.


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## gibor365 (Apr 1, 2011)

> I think travel expenses go up for everyone, you're right on that one.


 Usually, but not always.... there are many countries when you can rent apartment much cheaper than rent your house here in Canada 
I don;t even talk about Ecuador or Thailand, nice apartment in Southern Spain or Portugal can be rented for 250-300 EUR per month (if you rent for 3 months or more)..

For example http://www.thinkspain.com/spanish-property/3168913
2 bedrooms apartment , 2 minutes walk to Mediterranean sea 
I just cannot imagine retiring when you have so small kids.... I'm pushing my wife to retire in 5 years when our daughter will beat 3rd year University , but she is not really wants to 

btw, did you convert your RRSPs to RRIFs?


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## My Own Advisor (Sep 24, 2012)

Congrats CdnStache. Great dividend income AND early retirement.

@gibor, we're looking at travelling to Portugal this year. We've found a number of very nice places to stay, as candidates at least, for $50 per night in the heart of the major cities. 

Back to thread...we expect our travel costs to go up quite a bit in early-semi-retirement. That's a big reason why we are working and saving for tomorrow....


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## Dilbert (Nov 20, 2016)

You also have to allow for greater utility costs, when retired.


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## Eder (Feb 16, 2011)

TomB19 said:


> She wants to travel the world. ... so we both keep working. lol!


You can sell the house, buy a decent sailboat....travel till you drop...easy.


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## kcowan (Jul 1, 2010)

One of the things that few retirees realize is that you can relocate to Mexico and put your kids in The American School and still have change. There are many people in the same boat so you are not isolated.

What amazes me is how the press can force people to stay home by reporting things in Mexico that happen every day in Surrey and Scarborough. Those with good judgement will be rewarded handsomely.

CRM2 will just give the dealers new ways to present stuff that misleads. Do it your self. What did you have last year and have much do you have this year? Ignore the pie charts and powerpoints.


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## My Own Advisor (Sep 24, 2012)

Good advice kcowan about the pie charts and powerpoints. I do wonder, to your point, if CRM2 while beneficial overall might be a way to "spin" data for firms.


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## PrairieGal (Apr 2, 2011)

kcowan said:


> One of the things that few retirees realize is that you can relocate to Mexico and put your kids in The American School and still have change. There are many people in the same boat so you are not isolated.
> 
> *What amazes me is how the press can force people to stay home by reporting things in Mexico that happen every day in Surrey and Scarborough. Those with good judgement will be rewarded handsomely.
> 
> *CRM2 will just give the dealers new ways to present stuff that misleads. Do it your self. What did you have last year and have much do you have this year? Ignore the pie charts and powerpoints.


Things like 43 students disappearing? My son is a photojournalist living in Mexico, and there are lots of things happening there that don't happen is Surrey or Scarborough.


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## gibor365 (Apr 1, 2011)

> Back to thread...we expect our travel costs to go up quite a bit in early-semi-retirement. That's a big reason why we are working and saving for tomorrow


 I'm not sure about it.... While working we usually travel 3-4 times per year, 1 trip is usually for 1 week, very rare 2 weeks... The cost of air tickets is a huge part of the travel expenses.... when retired or semi-retired, we will be able to travel for longer periods of times , but less frequently.
Also take in consideration the timing, when retired , you can book some last minute very cheap tickets/packages... Also when you travel without kids , you are not limited to their school breaks (Winter break, March break and July/August), when everything is the most expensive... and this is the major reason why we still didn't visit Southern Spain, Portugal, Rome etc, as 1 week is not enough and in summer it's extremely hot in those places.... (we've travelled to Barcelona and Southern France in July/August..... it's so freaking hot ).



> as candidates at least, for $50 per night in the heart of the major cities.


 MOA, on what website you were looking for accommodation?
$50 is cheap, but 250EUR is extremely cheap - it's about $10 per night! I was just thinking about possibility to split 3 months minimum stay with somebody


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## gibor365 (Apr 1, 2011)

Dilbert said:


> You also have to allow for greater utility costs, when retired.


Not sure  , I;m semi-retired for almost 4 months, I signed into Goodlife gym on the first day on my lay off.... going to gym practically every day (they also have swimming pool, hot tub, steam room , sauna etc)...so I don'teven remember when I took shower/bath or even shaved in my house


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## Mike-RetireEarly (Feb 28, 2016)

Personally I think the 4% rule is a little to simplistic and conservative. I imagine that a lot of people who follow it will end with fairly large estates, which is okay if you that's what you want to do.

Take a look at the boggleheads website, they list most of the retirement calculators: https://www.bogleheads.org/wiki/Retirement_calculators_and_spending

I like the http://www.cfiresim.com/input.php website, you can include additional pensions, one time source of income (inheritance, sale of house, etc), and part time jobs. It's great for running the Monte Carlo simulations multiple times with different assumptions. You can even set it up to have a higher income in the first part of your retirement, for all of those trips you want to take.

I think that is you get 85% to 90% when you run these simulations that you should be okay, just remember that you might have to make adjustments in your spending during retirement. Personally a third of my budget has been allocated to discretionary items that can be scaled back.

Here's an article I found that discusses the 4% rule and Monte Carlo simulations: https://www.kitces.com/blog/renaming-the-outcomes-of-a-monte-carlo-retirement-projection/


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## CdnStache (Feb 22, 2016)

gibor365 said:


> Usually, but not always.... there are many countries when you can rent apartment much cheaper than rent your house here in Canada
> I don;t even talk about Ecuador or Thailand, nice apartment in Southern Spain or Portugal can be rented for 250-300 EUR per month (if you rent for 3 months or more)..
> 
> For example http://www.thinkspain.com/spanish-property/3168913
> ...


Before we quit our jobs we discussed where we want to live and Panama, Belize, Costa Rica, Thailand, and France all came up. But in the end we decided to move to the west coast for the lifestyle, weather, geography, and favourable tax treatment of dividends. 

We did not convert our RRSPs to RRIFs.


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## gibor365 (Apr 1, 2011)

> we decided to move to the west coast for the lifestyle, weather, geography, and favourable tax treatment of dividends.


 where in West Coast?
We are not planning to retire abroad, but thinking about taking long-term vacations....



> We did not convert our RRSPs to RRIFs.


 Curious why? I'm planning when my wife retires (maybe even earlier) convert RRSPs to RRIFs and withdraw minimum + add dividends/interest from non-reg accounts



> One thing to remember about retiring on dividend income is that you can earn a lot in dividends before you pay tax compared to employment income.


 True! My wife paid from YE bonus 57% in taxes! Our tupid government encourages people to retire at age 36 instead of working


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## kcowan (Jul 1, 2010)

PrairieGal said:


> My son is a photojournalist living in Mexico, and there are lots of things happening there that don't happen is Surrey or Scarborough.


Mexico is a different country with dramatically different rules. Some of that is bad but other aspects are good. I am glad your son is staying in Mexico. Chicago southside is the scariest place in NA. But that does not cause us to avoid the US! Do you know how many deaths there are in Surrey every year?


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## welsh-investor (Jan 5, 2017)

IMO it would definitely be wise to revise your financial plan to account for a longer retirement. Like james4beach said: "the more you save up, the better."


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## Lost in Space 2 (Jun 28, 2016)

Unless you do something really stupid there should be no reason for your portfolio to ever run dry. The real issue your facing is that Canada is simply bloody expensive. I just die every time i come home and go shopping, prices in Canada are just nuts. When I left a loaf of bread was 69 cents (worked at Westons so I’ve never forgotten that). So having briefly viewed the thread I’d say that you need to know you costs down to the penny and have a buffer large to cover that. Say you spend 40 grand a year on average than you’d want a portfolio that would generate around 60 grand a year, Since you have a long time to cover I’d personally go with dividend stocks, 60% Canadian 40%. Generally speaking you'll always get dividends regardless of market movements


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## gibor365 (Apr 1, 2011)

It's should be pretty tough to live for family of off 40K/year. We have pretty small house and still on utilities, property tax,insurance and other essential services spend almost 15K per year


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## My Own Advisor (Sep 24, 2012)

I would think, even if you are very frugal.

I know for us, 2 of us, when I do this math - it adds up:
1. Property taxes = $400 per month (and rising)
2. Heat, hydro, water, telcos/cell phones = $600 per month (and rising)
3. Home maintenance and improvements = $500 per month (variable, and rising)
5. Home and auto insurance x2 cars = $370 per month (and rising).

So, that's close to $2k per month or $24k per year just for shelter and other fixed costs, _and I haven't eaten anything yet nor gone anywhere yet._

This is why I continue to believe when I semi-retire, I will need at least $30k to cover the "basic necessities". Other retirement income will be needed beyond that.


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## canew90 (Jul 13, 2016)

adampeps said:


> Hi all,
> 
> Happy new year. I've posted a few things in the past about my financial situation. I think I am in a decent spot but keep getting interested in the idea of living off my dividends or gains from my capital. I don't think it is in the cards however and am just curious if others have gone with this approach, if its possible under my situation, etc.
> 
> ...


As others have said you have a good start, in that you've max'd out your RRSP at such a young age. I'd suggest you Max out your TFSA (for both you and your wife) before contributing to RRSP. Pay a bit more tax now and much less later, IMO.

I'll start by saying that we have no pension, other than cpp & oas and we have been retired for over 10 yrs and our dividends exceed our expenses by quite a bit, so most get reinvested.

Can you achieve the same goal, certainly. It's a question of which route you want to take to achieve it. We only got on track when we discovered The Connolly Report. Before then we attempted the Growth, Buying & Selling and other methods, with limited success. Once we switched our investment objective from Growth to Income, we began to see positive results and eventually achieved our goal. Retired with more income from our investments and they continue to grow now that we are retired.
Certainly Total Return is important, but we've found that as our income grew, so did the value of our portfolio. However, during the financial crisis when our portfolio value dropped almost 30%, our income during the crisis continue to grow, though at a slower rate. That was a great buying time as our income jumped considerably by buying more of the company shares we owned at a huge discount.

We found that the Income route was simple, less stressful and that it works (at least for us). The other advantage of the Income route is you'll see your income grow and know how close you are getting to your objective. We are 100% Cdn equities. No Bonds, Mutuals, ETF's or preferreds.

Don't waste your time thinking about 4% withdrawal or any other calculations. Retirement is a long way off and your requirements when you want to retire may be quite different. By investing for income, when you get close, you'll know if it will provide the growing income to continue to meet your needs. 

As others said, getting there is not just in savings, but how you live and spend your earnings before you retire.


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## CdnStache (Feb 22, 2016)

gibor365 said:


> where in West Coast?
> We are not planning to retire abroad, but thinking about taking long-term vacations....
> 
> Curious why? I'm planning when my wife retires (maybe even earlier) convert RRSPs to RRIFs and withdraw minimum + add dividends/interest from non-reg accounts
> ...


We moved to the Lower Mainland of BC. 

We haven't touched any of the money in our RRSPs yet. We're letting the dividends reinvest themselves. We'll look at converting them to RRIFs when it makes financial sense.


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## CdnStache (Feb 22, 2016)

My Own Advisor said:


> I would think, even if you are very frugal.
> 
> I know for us, 2 of us, when I do this math - it adds up:
> 1. Property taxes = $400 per month (and rising)
> ...


Our break down is:
1. Property Taxes = $150 per month
2. Heat/hydro ($60/month) water is included in property taxes, internet ($50/month), cell phones ($100)
3. Home Maintenance is quite variable as we like to do home renos and we have reno'd 4 previous houses 
4. Home and auto Insurance = $260/month

You mention that most costs are rising and that is true. Fortunately, most of our dividend income has been increasing at a greater rate than that of our expenses.


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## gibor365 (Apr 1, 2011)

> So, that's close to $2k per month or $24k per year just for shelter and other fixed costs, and I haven't eaten anything yet nor gone anywhere yet.


 You are correct! In my numbers (15K), I didn't include home renovation ... we don't spend too much on it, but upcomimg summer we need to replace roof and it will cost 5-6K.
From my calculation, we spent last year 81K (it's included 2 family trips to Aruba and Cuba, and 2 trips to Adults only resorts- Jamaica and Mexico)... So, yes,we can live on 40K, but it will be more not living, but existence .
When our kids will be independent (5-6 more years), probably we can live good life with around 60K (in current $$$), this year our dividend/interest income (include both registered and cash accounts) was just above 34K. Hopefully in 5-6 years, we'll get close to 60K and I will be able to convince my wife to retire , she also will be getting DCPP pension when she's 55 (in 14 years )


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## bobsyouruncle (Dec 25, 2016)

canew90 said:


> The other advantage of the Income route is you'll see your income grow and know how close you are getting to your objective. We are 100% Cdn equities.


This aspect of seeing very tangibly how close you are to attaining your objective in hard numbers is a tremendous advantage of the income approach.

Out of curiosity, if you're 100% Canadian, may I ask how many stocks are making up all your income?


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## My Own Advisor (Sep 24, 2012)

@gibor, that's what my math tells me - about $30k per year to live with/for basic necessities as long as we live where we do today. Could we live somewhere less expense? Probably. I'm surprised by CdnStache's numbers. There is certainly nowhere in Ottawa where you can own a home for <$2,000 per year in property taxes. I'm also very surprised by their heat/hydro bill. $60 total? Really?

Anyhow, beyond the $30k per year:

1. Another $10k per year for food and household supplies.
2. Another $10K+ for travel and extras and entertainment.

That puts a modest-good Canadian retirement around $50k per couple after tax. There's where you need your $1M in the bank in invested assets. That's "enough money" with CPP and OAS. You can retire on less though but that means working until age 60 or 65 at least and not living in an expensive Canadian city. Rule out TO or VAN for sure. 

The "good life" with more travel and extras approaches $60k per year (after tax) and any luxuries you're into $70k+ per year (after tax). At $70k+ this would include luxury vehicles, travelling for many months during year (i.e., snowbirding) and more.

Certainly the latter is something to aspire to but many Canadians, certainly my Gen Xers, will not have that lifestyle unless they have done many things right when it comes to saving and investing. Many Boomers have been extremely fortunate...


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## Jaberwock (Aug 22, 2012)

Put together a portfolio of dividend paying equities, with an emphasis on stocks that regularly raise their dividends.

You need your annual dividend increases to exceed the rate of inflation, so that your income is not eroded by inflation. 

Max out your TFSA's first, then contribute to your RRSP, so that when you reach 65 you have tax-free assets and income that will keep you below the OAS claw-back threshold.

Don't think of retiring until you have paid off the mortgage, and the kids have left home.

I have been drawing out of my RRIF at more than 5% per year for the last 3 years. In spite of that, the value keeps rising.


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## TomB19 (Sep 24, 2015)

What do you use as the value of inflation? Surely you don't use the 2.x% number the government fabricates every year?

The reality is closer to 7%.

A rule of thumb is the value of money halves each decade. That is 7% inflation.


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## OnlyMyOpinion (Sep 1, 2013)

Yes, depends on your individual living situation/costs. I know of senior's apts (full dining provided) that just bumped their monthly rent by 5% on January 1.
Assuming only CPI or only 2% could be hazardous to your health.
One needs to look a several scenarios and be comfortable with them.


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## gibor365 (Apr 1, 2011)

> Don't think of retiring until you have paid off the mortgage, and the kids have left home.


 Exactlywhat I was telling , imho ,those are first 2 conditions of early retirement


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## gibor365 (Apr 1, 2011)

> The "good life" with more travel and extras approaches $60k per year (after tax) and any luxuries you're into $70k+ per year (after tax). At $70k+ this would include luxury vehicles, travelling for many months during year (i.e., snowbirding) and more.


 Yeap. More or less I have similar numbers.... And all this after kids live independent or couple who doesn't have kids.
I'd say for "luxury" retirement, income should be much more than $70+ 
Remember that when you retired you pay for dental all by yourself, you know how much cost simple implant?!
The same about drugs , and older you become , more pills you consume (when I was 40 I didn't take any pills, now at 50 , whole my table is full of different pills that I take on daily basis... cannot
think what will be in 10 years ).
Also, you need gym membership, another 1K+ for couple.



> and not living in an expensive Canadian city. Rule out TO or VAN for sure.


 as an option, sellyour house in ON/BC and move to NB/NS where you can buy nice house for 70-100K


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## like_to_retire (Oct 9, 2016)

gibor365 said:


> Also, you need gym membership, another 1K+ for couple.


Do you realize how much free exercise the world has to offer?

Why would anyone need a gym membership?

ltr


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## Eclectic12 (Oct 20, 2010)

gibor365 said:


> ... as an option, sellyour house in ON/BC and move to NB/NS where you can buy nice house for 70-100K


Maybe NB/NS makes sense ... but then again, at 70K retirement income - it looks like one needs to be prepared for about +7% NS tax increase for income (+12% for eligible dividends) and +5% NB (+2% eligible dividends).

There's no guarantee what happens in the future but for the moment ... that's something to factor in.


Cheers


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## Franky Jr (Oct 5, 2009)

I've been considering using CPI x2 to get a proxy for real inflation. I doubt it's less than this.


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## gibor365 (Apr 1, 2011)

Eclectic12 said:


> Maybe NB/NS makes sense ... but then again, at 70K retirement income - it looks like one needs to be prepared for about +7% NS tax increase for income (+12% for eligible dividends) and +5% NB (+2% eligible dividends).
> 
> There's no guarantee what happens in the future but for the moment ... that's something to factor in.
> 
> ...


70K income for couple, 35K per single .... 5 or 7% in taxes is not big difference.... we personally don't have eligibe dividends (all in registered), so we don't care


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## Nelley (Aug 14, 2016)

like_to_retire said:


> Do you realize how much free exercise the world has to offer?
> 
> Why would anyone need a gym membership?
> 
> ltr


The equipment is rather expensive along with the space requirements (if you are going to set up a home gym).


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## OnlyMyOpinion (Sep 1, 2013)

gibor365 said:


> ... Remember that when you retired you pay for dental all by yourself, you know how much cost simple implant?!...
> Also, you need gym membership, another 1K+ for couple...


Teeth? Gym membership?
I thought we were supposed to just let them fall out, switch to soft food and sit in front of the TV? :disillusionment:


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## gibor365 (Apr 1, 2011)

Nelley said:


> The equipment is rather expensive along with the space requirements (if you are going to set up a home gym).


Maybe gym is not needed for people who is only jogging 

Not only equipment, our goodlife ha: swimming pool, sauna, steam room and cold plunge .... at home I can only have "cold plange" in the bath


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## Eder (Feb 16, 2011)

ex·pa·tri·ate....simple. I'll let others elaborate.


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## agent99 (Sep 11, 2013)

james4beach said:


> I also don't understand the inflation part of this kind of planning.


We live off dividends and government pensions. We use the 4% SWR as a rough guide. Our target minimum portfolio annual return is 4% plus inflation. In practice. after withdrawals, our portfolio has grown on average by about 3.4% pa (13-14yr period) In other words, a safe margin above inflation. 

As I understand it, SWR stands for Safe Withdrawal Rate. A rate that statistically would allow you to die just when your money ran out. You are spending income and capital. Sustainable withdrawal rate would be more like what we are doing. To do that you have to obtain a higher return, or accept a lower withdrawal rate.


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## TomB19 (Sep 24, 2015)

Eder said:


> ex·pa·tri·ate....simple. I'll let others elaborate.


Where?

Canada is expensive and our tax levels are horrendous but we have a beautiful country that is generally safe and well developed.


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## james4beach (Nov 15, 2012)

Canadian tax levels are comparable to at least a few US states, especially states that are worth living/working in, like CA, OR, NY, MA. Cost of living in Canada is also lower than all of those states. And in some Canadian provinces (BC, AB, ON) you'll actually have less tax than those American states.


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## My Own Advisor (Sep 24, 2012)

Agreed James.


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## Eder (Feb 16, 2011)

TomB19 said:


> Where?
> 
> Canada is expensive and our tax levels are horrendous but we have a beautiful country that is generally safe and well developed.


Lol the safety card (or illusion of safety perhaps)


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## redsgomarching (Mar 6, 2016)

Eder said:


> Lol the safety card (or illusion of safety perhaps)


I would say as safe as most places (knocks on wood).


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## adampeps (Jan 21, 2011)

Thanks all - sorry I haven't chimed in much. It was really interesting reading all of the thoughts. It's funny that I was reading about the 4% rule from the MrMoneyMustache website so was nice to see the CDNStash account using what seems like the same methodology.

Right now I follow the Canadian Couch Potato with my RRSPs. However although I received dividends, I think it is more intended for growth. Some mentioned to use a portfolio of divided paying stocks and watch the income go up. That sounds exactly what I was looking for but am worried that I am leaving money on the table.

Am I correct in the following assumptions:
1 - Following a portfolio like the Canadian Couch Potato - is it reasonable to guesstimate that it will return 7% on average over the course of 20-25 years? I know that I could have some major downswings during that period and depending on timing could be less / work more but wanted to see for estimation of value if that was reasonable.
2 - A dividend based portfolio would return around 4% per year assuming stagnant share prices. Id the dividend investor hoping that the share prices increase on average 3% as well? 

To me right now what I am missing is why someone would choose to return 4% dividends over the next 20 years when they could have 7% (if my assumptions are correct) from a Canadian Couch Potato method. I really like the idea of dividend income staying the same even in down years, but is that worth the 3% annum?

Hope this makes sense.

Thanks!


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## My Own Advisor (Sep 24, 2012)

Something to remember Adam is total return = dividends + capital appreciation.

So, with dividend investing, or dividend growth investing - you're focused on income (dividends from your portfolio) and less on capital appreciation, although you can and should _expect _some. No guarantees. 

With indexing, i.e., CPP method - you're focused on total return. No guarantees either. 

No guarantees = market goes up, then down, then high, then low, then flat, etc. I have no idea short-term. Long-term I do have expectations.

To answer your questions, for me:
1. Yes, I am assuming/expecting long-term my dividend focused portfolio would return around 4% per year (yield) + 3% capital appreciation.
2. Yes, for part of my portfolio that is indexed, I am assuming/expecting long-term the indexed portion of my portfolio will return 7% with 100% equities.


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## GreatLaker (Mar 23, 2014)

adampeps said:


> Am I correct in the following assumptions:
> 1 - Following a portfolio like the Canadian Couch Potato - is it reasonable to guesstimate that it will return 7% on average over the course of 20-25 years? I know that I could have some major downswings during that period and depending on timing could be less / work more but wanted to see for estimation of value if that was reasonable.
> 2 - A dividend based portfolio would return around 4% per year assuming stagnant share prices. Id the dividend investor hoping that the share prices increase on average 3% as well?
> 
> ...


Most investors will get a mix of capital gains (from stock price increases) and income (from dividends). The amount from each depends on the stocks and investment strategy chosen.

Dividend investing concentrates on companies that pay consistent dividends and usually ones that have a good track record of increasing dividends over the years. These tend to be mature slow growing companies that don't have to invest a lot to support growth. Think banks, insurance companies, utilities, pipelines, telcos (although lately they have had to invest due to technology shifts). Investors that need income love dividends because they provide consistent increasing income even through most bear markets. Good dividend stocks will also have stock price increases too.

Growth investing concentrates on fast growing companies that invest a lot to support growth so dividend payments are low or non-existent. But because they are growing the share price goes up quickly. Companies like Amazon, Tesla, Facebook, Netflix. Growth investing is hard because you need research to predict the winners and weed out the losers. And if a growth company has a bad quarter or some bad news the stock can plummet. For every Amazon or Tesla there are several Blackberries, Enrons, Valeants.

Value investing looks for companies that are undervalued because of bad news, market shifts or have had a streak of bad luck but the fundamentals still look good. Think AIG, BankAmerica, Dell. Value investing is also hard due to the research needed to evaluate companies and the risk they may never recover. 

Index Investing (aka Couch Potato) says all those other methods are very difficult and the average investor is never going to beat the market because they lack the skill, research and time to do it right. So index investors concentrate on investing in the broadest range of companies at the lowest reasonable cost. You get the good companies, the losers and everything in between, but will beat unskilled investors or investors that have high costs due to commissions, MERs, trading costs, tax inefficiencies and just plain mistakes.

Is 7% reasonable for the future? Maybe, for an investor with a high % of equities and high risk tolerance. I hope for 7%, but plan based on 4%. If I get more I am happy and can spend the excess, but won't go hungry and cold in retirement.


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## TomB19 (Sep 24, 2015)

Eder said:


> Lol the safety card (or illusion of safety perhaps)


I don't understand your response. Surely you are not suggesting a safety equivalent in all countries?

We've studied various countries and take vacations to check them out (shop the housing market, check out the facilities, etc). Our current target is Panama.

There is some value to living in a neighborhood that is generally well maintained. If you need a 4 wheel drive to go to a store for milk and the neighbors have rusty cars on blocks in their bushes and roofs that are caving in, that feels bad. That's third world. It's not a deal ender for everyone but it's part of the value factor.

If you look at Panama, prices are extremely high in Panama City. Prices are high along the Pacific coast. Prices are extremely low in some of the rural interior areas.

Sure, you can rent a house for $350 per month in the Panama Interior where locals make $30 per month but who wants to live at that level? In some areas, they need to store water because the water system stops working every afternoon when demand outstrips supply. They have no money for infrastructure improvements so they just stay up until midnight and do laundry then, as well as fill the water reserves, and take showers.

All locations are not the same. My wife wouldn't consider living in most of these places and I don't blame her.

Can you share some of your research on areas that provide higher value than Canada? I'm sure they're out there but it takes time to research and I won't live long enough to visit every area of every potential country. I can visit perhaps one place per year.


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## Canuck (Mar 13, 2012)

Retired about 3 years ago (at age 47), live off eligible dividends of close to $78K, pay about $5K in taxes on this amount of dividends. 

Renting at the moment, but will buy again if the price-to-rent ratio ever makes sense again in Vancouver. I figure I can take enough money out of the market to buy a place (condo or townhouse) and still have roughly 40-50K in dividend income, which won't be taxed at all. 

Dividend hikes are great, already making an extra $1K this year with 10% hike from AQN, ENB and ENF.


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## Koogie (Dec 15, 2014)

FWIW, we also plan on 4% and will be pleasantly surprised by anything above and beyond. Mind you, we are also more conservative (60FI,40EQ) than most but that is to accommodate my wifes comfort level. Because, above all else, you have to be able to sleep at night.


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## james4beach (Nov 15, 2012)

My plans are based on a 3% withdrawal rate. If you look at SWR studies you'll see that American stocks were the best performing in the world, for a long period, but other markets (like the UK) required lower withdrawal rates.

I'd rather make my plans around conservative figures, which is why 3% withdrawal rate seems like the better idea to me.

Remember that this is not the same as the investment performance. The safe withdrawal rates come from mathematical models that consider average/worst case market behaviour, along with volatility -- which is a critical factor for sequence of return risk. Your investments could certainly perform better than 4% on average but that doesn't mean that 4% is a safe withdrawal rate. It also has nothing to do with dividends. There is a mathematical modeling approach to all of this... see the papers by Pfau & friends.


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## james4beach (Nov 15, 2012)

Koogie said:


> FWIW, we also plan on 4% and will be pleasantly surprised by anything above and beyond.


And yet you're starting with an over-optimistic assumption. 4% is probably not a safe withdrawal rate any more, going forward.


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## Koogie (Dec 15, 2014)

james4beach said:


> And yet you're starting with an over-optimistic assumption. 4% is probably not a safe withdrawal rate any more, going forward.


It wasn't the withdrawal rate, it was the assumption of returns. Maybe if you didn't assume before you typed ?


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## kcowan (Jul 1, 2010)

Eder said:


> ex·pa·tri·ate....simple. I'll let others elaborate.


Lovely condo for $300k and expenses at 65% of Canada. Come on down. Includes budget for a month in Europe and 2 months in Canada as well as 2 months inland Mexico. Still pay taxes in Canada.


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## kcowan (Jul 1, 2010)

Granted 2016 was a great year. Total returns 11.2% (adjusted down for exchange gains) and total draw was 1.8%. Plus CPP/OAS for 2, partially clawed back. 20% in cash and 12% in bonds. Ready to be "trumped"!


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## james4beach (Nov 15, 2012)

Koogie said:


> It wasn't the withdrawal rate, it was the assumption of returns. Maybe if you didn't assume before you typed ?


Maybe you didn't mean it that way, but if you go back upthread you'll see there is some confusion and intertwining of "rate of return" and "sustainable withdrawal rate".

Some people have been writing as if the rate of return is also the rate you can withdraw at. They're related, but not the same. You could have a 7% long term performance and yet it may only be safe/sustainable to withdraw 3% a year.


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## Koogie (Dec 15, 2014)

james4beach said:


> Maybe you didn't mean it that way, but if you go back upthread you'll see there is some confusion and intertwining of "rate of return" and "sustainable withdrawal rate".
> 
> Some people have been writing as if the rate of return is also the rate you can withdraw at. They're related, but not the same. You could have a 7% long term performance and yet it may only be safe/sustainable to withdraw 3% a year.



Some people indeed.


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## OnlyMyOpinion (Sep 1, 2013)

Canuck said:


> ... Dividend hikes are great, already making an extra $1K this year with 10% hike from AQN, ENB and ENF.


:encouragement: Yup, we got a 'raise' of $2500/yr already.


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## Eder (Feb 16, 2011)

TomB19 said:


> Can you share some of your research on areas that provide higher value than Canada?


La Cruz,Bucerious,Nuevo Vallarta,Puerto Vallarta,Sayalita,Barrad Navidad,Mazanillo, Ixtapa,or a palapa in Yalapa . Cheap,modern,safe,direct flights in/out. Public transit everywhere.Cheap health/dental care. No washed up actors flying around criticizing everything . No language barrier. Cheap cell/internet. Did I mention weather yet? Went to 5 star restaurant yesterday....inc bottle of wine bill came to $380 peso's for 2 people...I doubt I can go to Timmy's for that.


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## My Own Advisor (Sep 24, 2012)

Nice Eder.

My uncle and his girlfriend are in PV for 6 weeks. Mid-60s couple. Retired. Living the good life. I hate them


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## Nelley (Aug 14, 2016)

Eder said:


> La Cruz,Bucerious,Nuevo Vallarta,Puerto Vallarta,Sayalita,Barrad Navidad,Mazanillo, Ixtapa,or a palapa in Yalapa . Cheap,modern,safe,direct flights in/out. Public transit everywhere.Cheap health/dental care. No washed up actors flying around criticizing everything . No language barrier. Cheap cell/internet. Did I mention weather yet? Went to 5 star restaurant yesterday....inc bottle of wine bill came to $380 peso's for 2 people...I doubt I can go to Timmy's for that.


I haven't been to Mexico in years but used to go on 2 week vacations all the time (PV, Neuvo Vallarta, Cancun)-I like Mexico a lot except for the water which hits me hard even taking every precaution.


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## kcowan (Jul 1, 2010)

Nelley said:


> I like Mexico a lot except for the water which hits me hard even taking every precaution.


Usually you are reacting to excessive exposure to sun and tequila. It is a common problem that natural coconut water (available inexpensively from street vendors) can prevent.

We always drink river water at restaurants. It is just fine. And it is free. Our budget had dropped by 40%.


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## TomB19 (Sep 24, 2015)

I stroked mexice off the list some years ago. My wife was born in Mexico and won't go back but perhaps we should reconsider. It's great to hear about your good experiences.

Thanks!


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## adampeps (Jan 21, 2011)

Thanks all - one other question. Have there been any analysis papers or anything comparing let's say an indexed portfolio vs a dividend portfolio over a certain number of years? I realize that might be hard to do since the dividend shares could be different but just something reasonable. Like I mentioned earlier, I am confused whether to:

1 - Go more with indexed funds and sell them off for retirement (I would think quicker to accumulate goal retirement figure but nothing when I have passed)
2 - Go with dividend paying shares and use the dividend income to fund what I want to do retired (To me this would take longer to get a needed amount but would still exist in part when I am gone).

Thanks!


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## james4beach (Nov 15, 2012)

Dividends do not change any of these equations since dividends are just a mechanism to extract value from equities. They do not create wealth; they are just a cash transfer mechanism. What you really should focus on is achieving the best possible total return.

Are you talking about pre-retirement, building up and accumulating money?

Let's pretend you went the dividend investment route. In your accumulation and savings years, you have to reinvest all those dividends anyway -- you can't take the dividends out. Getting paid a dividend and then reinvesting it is a null operation -- you didn't get richer as a result of that. So it makes no difference whether you use standard index investment or choose some dividend heavy investments.

Just make sure you get the best possible total return.


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## gibor365 (Apr 1, 2011)

> In your accumulation and savings years, you have to reinvest all those dividends anyway -- you can't take the dividends out. Getting paid a dividend and then reinvesting it is a null operation -- you didn't get richer as a result of that.


 Not true! When you DRIP your dividends ,you don't need to buy shares, thus to pay commissions. Also, some stocks give you up to 5% discount when you DRIP


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## Eder (Feb 16, 2011)

james4beach said:


> Getting paid a dividend and then reinvesting it is a null operation --


Nope...it is +EV in most cases...ducy?


bleh...as usual Gibor is smarter & faster than me.


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## Nelley (Aug 14, 2016)

james4beach said:


> Dividends do not change any of these equations since dividends are just a mechanism to extract value from equities. They do not create wealth; they are just a cash transfer mechanism. What you really should focus on is achieving the best possible total return.
> 
> Are you talking about pre-retirement, building up and accumulating money?
> 
> ...


NO-a cash dividend isn't the same as a possible rise in value of an equity-you are saying a certainty (cash received) is identical to a future rise in value of an equity-it isn't.


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## adampeps (Jan 21, 2011)

Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this?

Thanks!


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## Nelley (Aug 14, 2016)

adampeps said:


> Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this?
> 
> Thanks!


Yes-both-I don't know what was the problem at Scotia-should be effortless.


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## AltaRed (Jun 8, 2009)

adampeps said:


> Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this?
> 
> Thanks!


Scotia iTrade has not yet gotten into the 21st Century when it comes to true USD RRSP accounts. No problem at all with CAD accounts, but they have yet to implement what folks like BMOIL and RBCDI have, i.e. full USD RRSP sub-accounts. I've ragged on Scotia for some time to get their act together if they want to be competitive.

Disclosure: I have my (smallish) RRSP at iTrade but it is exclusively CAD so I don't actually care. But if I did care, I would have moved it to BMO IL where I have a non-reg account too.


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## mordko (Jan 23, 2016)

Why keep several non-reg accounts? Is it to keep within the 1M insurance limit?


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## humble_pie (Jun 7, 2009)

Nelley said:


> NO-a cash dividend isn't the same as a possible rise in value of an equity-you are saying a certainty (cash received) is identical to a future rise in value of an equity-it isn't.



hello! the above is not correct imho. Jas4 was never talking about taking out a cash dividend. He was talking strictly about immediately re-investing every cash dividend, so it would continue to grow along with the original stock holding.

.


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## Koogie (Dec 15, 2014)

adampeps said:


> Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this? Thanks!


I for one am not holding US dividend payors directly (beyond a few small legacy holdings). I hold CDN dividend payors for the obvious benefits and I index the whole US market through an ETF (VTI). The US market is vast and I don't have the time/skills/inclination to dividend shop there. But, of course, many people do. Happily and successfully. If you are so inclined, I say fill your boots.

Can't speak to iTrade but at TDDI it is a piece of piss.


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## AltaRed (Jun 8, 2009)

mordko said:


> Why keep several non-reg accounts? Is it to keep within the 1M insurance limit?


I keep 2 non-reg accounts primarily because some of my assets are legally separate from the rest of my assets and thus I keep those separate to avoid commingling bookkeeping. A secondary benefit is that it doesn't hurt to also have access to more/different analysis and research.


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## gibor365 (Apr 1, 2011)

adampeps said:


> Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this?
> 
> Thanks!


Sure, both . I don't understand what can be a problem? Shouldn't be any difference ...If there is no USD-RRSPs, you just buy US stock with CAD$ and getting dividends converted back to CAD$.



> The US market is vast and I don't have the time/skills/inclination to dividend shop there


Just go to David Fish dividend champions spreadsheet (dripinvesting.org) , check out several dozens stocks who increases their dividends for 25+ yearsand do research from there...
There are about 100 such stocks on NYSE and just 2 (CU, FTS) on TSX


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## james4beach (Nov 15, 2012)

humble_pie said:


> hello! the above is not correct imho. Jas4 was never talking about taking out a cash dividend. He was talking strictly about immediately re-investing every cash dividend, so it would continue to grow along with the original stock holding.


And if you're in your wealth-growing accumulation years, you _must_ reinvest the dividends.


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## AltaRed (Jun 8, 2009)

james4beach said:


> And if you're in your wealth-growing accumulation years, you _must_ reinvest the dividends.


In some way, not necessarily via a DRIP. The key is taking ALL the cash income generated by one's investments and re-investing it into something of one's choosing.


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## Nelley (Aug 14, 2016)

james4beach said:


> And if you're in your wealth-growing accumulation years, you _must_ reinvest the dividends.


NO-you can invest the cash dividend anywhere you want-you are not forced to reinvest in shares of the same company that paid you the dividend. Jeez.


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## My Own Advisor (Sep 24, 2012)

adampeps said:


> Hi all - sorry another question. Are most dividend investors holding both CDN and US companies? I have my RRSP holdings at Scotia iTrade and believe it is quite hard to get configured to purchase US companies...so wasn't sure if it is possible to just have CDN companies in a portfolio like this?
> 
> Thanks!


Absolutely, for me at least.

Holding about 30 CDN stocks and about 10 US stocks - all pay dividends and have done for many decades. Otherwise, I would index invest and I do 

Most of those 40 stocks are DRIPping every month and quarter. Money that makes money can make more money. 

As AR mentioned, whatever you are investing in OR reinvesting - *stay invested.*


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