# Have You Saved Your First Million Yet?



## Belguy

I hope that your portfolio will be up to the task:

http://www.theglobeandmail.com/glob...ve-on-dividends-in-retirement/article4607635/


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## My Own Advisor

Working on it!


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## doctrine

Of course this is at best a poor example. How hard is it to achieve the goal of $50k a year, even assuming you get zero pension benefits, but use the RRSP and TFSA vehicles, over a working career? Of course the answer is not hard, but few people do this early enough to make a difference. At a minimum, this theoretical discussion should have included CPP and OAS in the calculations with any clawbacks such that $50k is reached.


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## sags

Already retired at age 55.......with DB pensions thank goodness........because,

I worked for 40 years, starting in 1966 with a salary of $7,000 per year.

The salary very gradually went up for 12 years until a big jump to $20,000 in 1978.

Another 28 years during which my income went up from $20,000 to $80,000 the year I retired.

After 40 years of working..........did I even earn $1.3 million total over that time period? 

Maybe the gross income...........but deduct income taxes, CPP contributions, EI contributions, union dues and pension contributions (for many people) and the net wouldn't be anywhere near the necessary 1.3 million.

Then you have to live somewhere, pay utilities, car payments and maintenance, kids, and on and on.

It seems a totally unrealistic proposition.

People need a return of DB pensions they can count on............not some pie in the sky plan to save every dime they earn.


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## GoldStone

Sags, your DB pension doesn't come out of thin air. The PV value of your future pension payments is very likely *well* over 1 million. One way or the other, that amount has to be put aside. There are no miracles.


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## MoneyGal

GoldStone said:


> Sags, your DB pension doesn't come out of thin air. *The PV value of your future pension payments is very likely *well* over 1 million*. One way or the other, that amount has to be put aside. There are no miracles.


No doubt. But his contributions would not have equalled $1M. Nor would his contributions plus those of his employer. DB pensions have an actuarial present value which typically exceeds (often by a significant margin) the amounts paid into the plan; this is the nature of insurance.


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## GoldStone

MoneyGal said:


> No doubt. But his contributions would not have equalled $1M. Nor would his contributions plus those of his employer. DB pensions have *an actuarial present value* which typically exceeds (often by a significant margin) the amounts paid into the plan; this is the nature of insurance.


Good point. Many DB pension funds are also underfunded because past actuarial calculations overestimated investment returns (and underestimated longevity advancements?). In case of public pensions, the taxpayers will be on the hook to fund the shortfall.

BTW, sags:

Your 1966 salary of 7K is worth 48.5K in 2012 dollars.
Your 1978 salary of 20K is worth 65.5K in 2012 dollars.

See Bank of Canada inflation calculator.
http://www.bankofcanada.ca/rates/related/inflation-calculator/

Your career pre-tax earnings totaled 3M+ in today's dollars.


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## MoneyGal

GoldStone said:


> Good point. Many DB pension funds are also underfunded *because past actuarial calculations overestimated investment returns (and underestimated longevity advancements*?). In case of public pensions, the taxpayers will be on the hook to fund the shortfall.


Not exactly. _The fall of interest rates has been a much bigger driver to the rise in present-value estimates of DB pensions than any other single factor_. Investment returns will not be set by actuaries. Actuaries are probably also most attuned to increases in longevity than any other population group.


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## Square Root

i think this kind of saving result is possible but perhaps not easy. If we assume SAGS averaged about $40k over a 40 year working life and was able to set aside $5k/year and earned 10% on these investments(not outrageous over this period) he would have well over $1million according to my calcs. Easy? No. Doable? Yes especially when combined with CPP and OAS.


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## sags

It would have been impossible to save 5,000 during the first 12 years, so the weight of the savings would have had to come from the last 20 years. That would have been possible, but difficult and there would have been less time for the savings to grow.

We actually tried one of those popular "get a loan and buy unused rrsp room"..............deals that were popular at the time.

It didn't work out too well. The balanced fund lost 50% of it's value and my wife cashed it out and put it into GICs where it made almost nothing for a decade. 

We still had the loan payments to make though.

Looking back, I wish we had bought a house with multiple rental units, lived in one and rented out the others.

But there is a lifestyle choice in that, and the wife wouldn't go for it................lol.


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## 1.5M

To sags: If you invested $3k in 1966 at 10%/year (which is the return of SP500 in the same period, including dividends) would be $240k in 2012. So basically you would only have had to invest about 40% of your income in your first 5 working years to basically have $1M now. So it's not unrealistic at all.
That's why your $7k salary in the first year was worth substantially more than your last year's $80k salary (considered as a 10% return investment, $7k in 1966 was the equivalent of $316k in 2006). I think the use of the inflation rate is misleading when comparing incomes in different years.

The lesson for a young person is that it's very important to invest as soon as possible as much as possible and postpone the spending. It's not worth to waste most of your life (by working 40 years), for a few years of overspending in your 20s.


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## jcgd

I'm kicking myself for waiting until I was 22 to start saving. I save about $9k a year right now. I can't save much more right now because I have some debt to pay off (eats $800/month I would be saving), my gf is in university full time and I'm in university part time. It doesn't leave much wiggle room. I'm basically living cheque to cheque. Better than nothing though, and better than about 95% of my peers. Heck, I've only met a few people who take part in my company's rrsp matching program. The last guy I asked said getting 100% matching on $5k a year wasn't worth it because they kill him on the taxes when he pulls it from his rrsp at the end of every year. 

Fool...


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## 1.5M

In general, someone does not just live off dividends. Even dividend producing stocks would also produce capital gains and unless one living on $50k/year plans to leave behind $4.11M (after a 30 years period, starting at $1M and a 5% return net of dividends), it makes no sense to live just on dividends. And there are other pensions and also government handovers to seniors. 
I don't think to live on $50k/year (increased each year by inflation) someone needs a starting capital of $1M. At 8% total average return net of inflation (dividends plus capital gains minus inflation), one would need about $600k (it would last about 40 years).


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## sags

Thanks for the calculations 1.5M.............food for thought, in real numbers, for any younger people on the forum.

Maybe if they had a class or two in some real numbers like this in high school........people would be better prepared.


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## jcgd

Maybe of they had a class that prepared you for anything after high school...


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## Maybe Later

sags said:


> Maybe if they had a class or two in some real numbers like this in high school........people would be better prepared.


They did, it was called Math. I remember doing the problems. But at 16 we had no clue what it really meant. You probably learned budgeting too. I did. Health class maybe? I just didn't care. It seemed about as relevant as denture cream at the time. Part of the reason it is so difficult is that if there isn't a frame of reference it's hard to really understand what those numbers really mean. Until then, they're just exercises to complete.


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## GoldStone

sags said:


> Maybe if they had a class or two in some real numbers like this in high school........people would be better prepared.





Maybe Later said:


> They did, it was called Math.


+1

They've done studies, you know... about this very subject.

Math skills = greater family wealth


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## sags

I took the 4 year business and commerce courses in high school, and we learned about writing cheques and balancing a budget..............but nary a word about stock markets or investing of any kind.

That was back in the 1960s.......so it probably changed since then.............but

We employed second year University students as summer replacements, and quite a few failed the basic Grade 8 level simple addition and subtraction math test, so I am not sure recent education is a whole lot better.


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## Square Root

Good point about living solely on divs, highly unlikely. However, studies have pointed to the max safe withdrawal rate being around 4%. If your portfolio yields 4% this may be the max you can take and be sure of not running out of money over a 30 year period. However, my opinion is that divs are much safer than capital and unlikely to result in capital depletion if the company is blue chip wih a history of not cutting divs. At some point I will need to spend or donate some principal or my daughter's inheritance will be ridiculous.


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## kcowan

Math skills are indeed valuable. One of my buddies in megacorp quit because he was frustrated. His DB pension was paid out in a lump sum of $80k. Five years later, and two pension enhancements later, I retired with a DB pension worth .75 million NPV. So far I have collected over $1 million.


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## Square Root

If you were to take a darwinian view of intelligence and math skills, the lack of such in many people makes it much better for the rest of us. Kcowan: pensions can be higher for us because others screw up.


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## Daniel A.

The ability to research decisions in advance out weighs basic math skills.

Pension formulas are complex and vary from one plan to the next some of us get that. There are plenty of on line calculators to assist people.
Only with research can one truly make an informed decision about their pension, like Kcowan I see the power of my DB pension and that's why I will be in Cabo this winter.


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## GoldStone

Daniel A. said:


> The ability to research decisions in advance out ways basic math skills.


I suspect that research skills and basic math skills are very strongly correlated.


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## steve41

Hey. Whatever happened to basic grammatical skills? 'out ways' should be 'out weighs'


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## Young&Ambitious

steve41 said:


> Hey. Whatever happened to basic grammatical skills? 'out ways' should be 'out weighs'


Steve, they don't matter in comparison to math so it's okay :tongue-new: (kidding!)


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## thebomb

We are on our way to building our 'portfolio'. Husband and I mapped out our revised retirement plan couple days ago. He recently started with the gov with a fantastic DB pension. I am so friggen excited! Changes the landscape of our planning.


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## kcowan

steve41 said:


> Hey. Whatever happened to basic grammatical skills? 'out ways' should be 'out weighs'


How about outweighs? Or am I the only one who gets irritated by out side?


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## Dmoney

Every one just needs to comm down about grammer and speling around hear.


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## Dmoney

On my way to having my first million, but I can't help thinking that it would be so much easier to get a cushy government job, spend every penny along the way, and retire at 55 with a pension valued well over a million... 
Let's keep that government debt rising...


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## Square Root

Dmoney said:


> On my way to having my first million, but I can't help thinking that it would be so much easier to get a cushy government job, spend every penny along the way, and retire at 55 with a pension valued well over a million...
> Let's keep that government debt rising...


So what is stopping you?


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## thebomb

Easy Dmoney. That's putting everyone into the same pot. My husband is the most frugal guy around, hardly spends every penny along the way, and I will take his government DB plan all day long. Further to Square Roots comment 'what stopping you'? I can do the same (get a gov job), but our choice is to have one of us in the public sector and one in the private. We have his DB and we have my bonus'. Harmony.


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## Dmoney

Square Root said:


> So what is stopping you?


Drive and ambition. 

We can't all work for the public sector, anyone with an ounce of sense can see that. 

I want to see how successful I can be and push my own limits. I don't want to settle. A cushy government job felt too much like settling to me.


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## GoldStone

thebomb said:


> Husband and I mapped out our revised retirement plan couple days ago. He recently started with the gov with a fantastic DB pension. I am so friggen excited! Changes the landscape of our planning.


Congrats on joining the ranks of Canadian Aristocracy!


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## Dmoney

thebomb said:


> Easy Dmoney. That's putting everyone into the same pot. My husband is the most frugal guy around, hardly spends every penny along the way, and I will take his government DB plan all day long. Further to Square Roots comment 'what stopping you'? I can do the same (get a gov job), but our choice is to have one of us in the public sector and one in the private. We have his DB and we have my bonus'. Harmony.


I wasn't saying all gov. workers go out and spend every penny, just that they can. Is this a bad thing? Not at all. In fact the stability of government employees is in my opinion paramount to keeping our economy going. As a government worker, from day one, you know how the remainder of your life is going to play out. Start at $XX,XXX/year salary, follow the pay grade up to $XXX,XXX in year 35. Retire and receive 70% of last 5 years' pay. A financial planner's wet dream.

I was simply pointing out that a government worker never has to save their first million, because on retirement, their pension is valued well over this amount. 

I really don't want to come across as critical of government workers here. They are just playing the game, the same way the rest of us are. The problem is with the game here, not the players.


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## Square Root

@dmoney. if you didn't want a gov't job because it felt like settling, why would you criticize the compensation of those that felt differently? Seems like you want it both ways?


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## Dmoney

I haven't criticized the compensation of government workers, in fact I expressly avoided it in order to derail this thread somewhat less. 

The way I see it is that all public sector workers are millionaires, but very few are multi-millionaires. I see the public sector as a very low-risk, surefire way to be a millionaire. So, in a discussion in the "retirement" section, I value a million-plus dollar pension in the same way as a million-plus dollar investment account. Two different ways of getting there.

I personally chose (keep in mind I'm only 23 and things can and do change) to take a great private sector opportunity that pays me substantially more than I would receive were I to work in the public sector. This opportunity came at the expense of job security, free time, pension and staying in my home town. If my career progresses the way I hope, I will be a millionaire many times over, something that can not be attained in the public sector. I went the risky route, hoping for more, and I'm happy with my choice.

Do I wish that public sector compensation was lower? Not really, since it wouldn't result in a commensurate decrease in taxes. The savings would just be blown by government elsewhere. 
Do I think that public sector workers are well paid? Absolutely. 
Am I jealous of public sector pay? Not at all.
Do I think that the guy sweeping a factory for $12 an hour and paying $125/month for a transit pass should be livid that a TTC worker sweeping a bus is making $28? Absolutely. Does it bother me? Not at all.

I definitely think the broader public sector needs to appreciate where the average worker is coming from when they complain about gov. compensation. The average worker is not nearly as well off as the public sector worker, has no benefits, no pension, no savings and pays an ever-increasing proportion of their paycheque to fund the compensation of gov workers. I can definitely sympathize with their argument.

In the end life goes on, we're all going to get where we're going, we'll just go about it in different ways.

Square Root: What do you mean by want it both ways?


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## Daniel A.

I never had a government job and my DB pension is worth over a million I'm living on it now.

We all make choices along the road I watched many fellow employee's quit in my 30 years with the company.
Did it make sense to me NO but it is up to them. Follow your dreams and take responsibility for the result there are many things that can change a persons game.

There are no cushy jobs all require commitment government or private sector, I've yet to see a job that does not have strings attached.


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## Square Root

Dmoney: You think it was settling so you didn't want a gov't job then you want those who take such a job to be paid less for it. Sounds like tails I win, heads you lose?


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## heyjude

I am in a career that will never lead to a pension. I wish I had understood that when I was making career decisions in high school.


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## Dmoney

I don't want them to be paid less for it (unless of course by them being paid less, I am taxed less, which is never the case)...

I want public sector compensation to be reduced in the same way I want the price of bread, cars, beer and cell phones to drop. Not because I hate bakers, auto companies, brewers or Apple, but because I'm better off if the cost of these items are reduced. 

If the job could be done with less workers, or lower wages, and the full savings was delivered to taxpayers, then yes, I would love to see wage cuts.


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## Cal

Back to the original article. At the end of every year I calculate what my annual dividend salary is based upon my current share totals. It gives me an idea as to where I am at on an annualized basis.


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## hboy43

Hi:

I don't have a million personally, but within spitting distance. In order to use up all my dividend tax credits, every year I take some income from somewhere, either capital gains, or RRSP withdrawl, such that I pay $1 to $2K tax. As I am only 50 years old and have not worked in 10 or 11 years, it is clearly possible for Joe average to get this large a pile. The problem lies in doing what is necessary: No cars, restaurants, books, magazine subscriptions etc. Have room mates for a good long time to reduce house expenditures. I ran a REAL tight ship until age 35 when I married. Now, not so much.

So if one wants it badly enough, pretty much everyone can get it. The problem is that the "badly enough" threshold is too high for most. One has to choose what one wants most and then structure one's life to get it.

What I did was too extreme in hindsight, but factors of my youth inexorably drove me in that direction. There could easily have been much worse outcomes.

I'd say almost any disciplined couple of family income > $80,000 could aim for retirement at 50. Pick a smaller house in a less expensive market. Have 1 or better 0 cars. Eat out twice a month instead of twice a week. Make your own beer and wine. What is the sense in movies at $20/head? Do your reading at the library. Vacation in a tent instead of a hotel. Do your kids really need 3 organized activities a week, or could you just toss them outside to, you know, play once in a while. Many other ideas. Pick the ones that work for you. Just don't complain that you can't do it, because that is just BS.

hboy43


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## Daniel A.

hboy43 you have summed it up well, how extreme are most of us, what is our goal in life.
I retired at 56 and live well due to pension income but in the course of living burned through thousands of dollars.


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## loggedout

Dmoney said:


> I don't want them to be paid less for it (unless of course by them being paid less, I am taxed less, which is never the case)...
> 
> I want public sector compensation to be reduced in the same way I want the price of bread, cars, beer and cell phones to drop. Not because I hate bakers, auto companies, brewers or Apple, but because I'm better off if the cost of these items are reduced.
> 
> If the job could be done with less workers, or lower wages, and the full savings was delivered to taxpayers, then yes, I would love to see wage cuts.


I'm not sure if it's so simple to assume that reduction in the compensation of goods and services providers (whether private or public) is automatically beneficial for a "consumer", and that's that.

A potential reduction in price is beneficial to a consumer, quite obviously, but there are other potential consequences to reducing people's compensation besides price reduction that can impact the market/society in ways that can have a detrimental impact on you.

Going back to the question that started this thread: nope, not close. I'm 32 and have around 250k "saved" (not including pension). I can't imagine how long it would take to save 750k more in today's dollars going forward. It will be really hard given that I don't have a rosy outlook for our future economy and the maintenance of retirement plans of any kind when the world goes Mad Max and the Thunderdome. I think I may have to go back to my grandfather's pension plan: having lots of children.


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## loggedout

sorry for double post.


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## Guigz

I don't need one whole million, but I am about 20% there.


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## Jon_Snow

Hboy43, that was an awesome post above... Just turned 40 - and more and more I am realizing I don't really have to work much longer. Posts such as yours merely reinforce my conviction that I am close.


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## nathan79

At 33 years old with only 40K saved, a million is probably out of reach for me. I'm aiming for about 500K, which should be enough to satisfy most of my wants. Assuming the mortgage is paid off -- which it will be -- I can live quite comfortably on 20K a year. Any CPP or OAS (if it still exists by that time) would be a bonus.


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## Sherlock

I'm saving my 2nd million, didn't have any luck with saving my first.

But seriously 1 million by 65 doesn't seem out of reach. Starting at 30 with $0, and assuming a 7% annual return, you need to save about $584/month. If you can get 8% then it's only $466, and if you can only manage 6% then you gotta save $728/month. I think this is easily doable for anyone who earns an average income. For a couple, it's even easier. The problem is the possibility of some kind of life-changing event beyond your control (divorce, lawsuit, etc) that wipes out a significant portion of your savings.


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## Cal

I agree w Sherlock, if you really want to get there, you can still do it. It is definitely possible.


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## Square Root

Sherlock. Your figures sound very doable. The problem is after 30 years $1million will not be worth $1million as inflation will be significant. Will need to save quite a bit more to have $1million in current dollars.


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## MoneyGal

:encouragement:


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## steve41

Sherlock said:


> ....get 8% then it's only $466...,


 You mean 8% per decade, right?


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## Sherlock

No.


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## doctrine

Sherlock's estimate is correct, if you use the historical 7% annual real return that the S&P 500 has provided over the last 50 years. Nominal returns have been upwards of 10% a year.


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## spirit

I am a teacher and I guess I am one of the lucky ones that have a defined benefit plan. My best friend's husband is a retired policeman with a defined pension plan. My husband is a retired electrician who has a defined benefit plan.......
Not one of my children became a teacher. They saw me mark papers most nights and also saw badly behaved kids in their own classes and what teachers had to put up with. Not for them. Even with summers off (used for professional development most years by the way)
The policeman's children did not become police officers. They did not want shift work for 40 years and the havoc it plays with the body, rarely weekends or summers off. Few friends outside of the force. High rate of alcoholism and divorce due to the stress of dealing with difficult people all shift long.
My own children did not want a trade. They saw the high cancer rate due to always working with chemicals on the site. The stress on the body where you cannot do a physical job much after 50 and have to look for other work......climbing towers at 40 below in the windchill, jobs in camps 5 hours from home......
Guys give your heads a shake and look at the reality of some of those cushy jobs. If they were so fantastic would not everyone be doing them? Truth is, they can be extremely difficult and they take a lot of moral courage to perform. I am sure you work very hard at what you do. Please give others some consideration.


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## Daniel A.

Well said spirit people really need to ask themselves why they chose their career path.
I spent 38 years working shift, weekends, holidays, missing events.
Today I do have my DB pension and am in charge of my life for the first time.

It sure would be nice to hear why people made their choice in life after all it is common knowledge has been for my full working career what the benefits of most jobs are.
I read some of the comments and wonder what has gone wrong.
A friend and I talked a couple of days ago he had a great job in the seventies at RBC he quit to seek his fortune it never did work out, today he looks back and tells me that if only he had stayed life would be great.

There are a few on the board posting that I wonder about, it would be nice to read a synopsis to better understand why they feel the way they do.


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## Square Root

yes, well put spirit and Daniel a. if it was so obviously better somewhere else.......? You make choices and they have consequences. On the other hand some of us just get lucky while others not so much. I think that is life.


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## Dmoney

spirit said:


> If they were so fantastic would not everyone be doing them?


They would if they could:

Massive oversupply of new teachers... because the job/benefits/pay/work *is* fantastic. And the qualifications are easily attainable.

http://professionallyspeaking.oct.ca/march_2012/features/now_what.aspx
http://oncampus.macleans.ca/education/2012/03/05/labour-unrest-must-be-infuriating-for-new-teachers/
http://oncampus.macleans.ca/educati...rds-of-new-teachers-cant-find-full-time-work/
http://www.universityaffairs.ca/way-too-many-teachers.aspx

The fact is that there is a massive number of people who are attracted to teaching. To say otherwise is blatantly false.


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## My Own Advisor

thebomb said:


> We are on our way to building our 'portfolio'. Husband and I mapped out our revised retirement plan couple days ago. He recently started with the gov with a fantastic DB pension. I am so friggen excited! Changes the landscape of our planning.


Having a DB pension plan changes everything (in terms of retirement planning). It's a very big bond in my opinion. I need to write about that soon on my site.


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## Mall Guy

Wow, what a diverse conversation. . . from 'did you' to 'can you' to 'do you want to' to 'how to get there'. . . but back to OPs original post . . . let's do the add'em up - how many have saved a million, did it change anything for you, did you finally just freaking relax or did you go "better get another mil to go with the first". I think I only saw one yes, and a bunch of working on its, and a few getting close. What is considered "saved" . . . investments (whether in RRSP, TFSA, or taxable), contributions to RESPs (that you will re-repatriate at some point), home equity, investment property equity, DC pension . . . future value of inheritance ?

Depending on the definition . . . yes by net worth, no in my own mind . . . I want a million in a balanced investment portfolio, plus all the other stuff listed above! But still I won't relax . . . 1% my *** !!!


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## My Own Advisor

I am trying to work towards a $1 mil. stock portfolio and a paid off home in another 15 years. Hopefully the house is done in 9 years, the portfolio will take a few more years than the house...maybe more than 15 but hopefully not. That portfolio does not include my pension at work. This will be my financial freedom.


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## marina628

I got there in 2012 but I am still relatively young(45) so still have to plug away at it .


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## Jon_Snow

In terms of net worth, I will soon be closer to the 2 million mark... but sadly, my portfolio is still considerably shy of a million. Would have to sell a few of my properties to get there. But considering our naturally frugal ways, I don't think we need a million dollar portfolio anyway...


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## mrPPincer

Semi-retired at age 50, have been for a number of years, gradually working less and less over the last decade.
Excluding the value of my home, my portfolio needs about 2 more doublings to get me within spitting distance.

Considering that I plan to only add the TFSA limit of new money for 10 more years, I'll need something in the neighbourhood of 14% returns over the next decade to have saved a mil by age 60. (rule of 72)

At present I'm an index investor, and I don't forsee mind-blowing returns over the next decade for a balanced index portfolio, nor do I see myself consistently being lucky or outsmarting the market in active investing, so reaching a million before I plan to fully retire (from physical labour type work) seems highly improbable, but not impossible.

There is however, my alternative retirement strategy, the OLG, otherwise known as voluntary taxes.
When the pot for the lotto 649 goes over 28 mil, a ticket is worth the 2 bucks, because the odds of hitting the jackpot are 1 in 14M.
(Sometimes there's 2 winners, but I figure that is somewhat counterbalanced by all the smaller prizes)

Plan C, becoming pool boy and subsequently marrying into money seems even more improbable than plan B, so it brings me full circle, back to A :smilet-digitalpoint


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## Square Root

yes. Many times over. Annual earnings from our investments and pensions exceed that figure. We are very lucky and know it.


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## Homerhomer

No, not yet and it's not a goal to be honest, however looking around I can't think enough how blessed we are.
We are healthy, son is turning out to be a nice young fellow.

Some of our friends have serious health issues, children with disabilities, some are alcoholics, have other addictions or are not happy in their relationships. Wouldn't trade it for a million, or even two.

We are trully blessed.


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## atrp2biz

Yup--and zero real estate. Moved to Calgary from Toronto last summer and we're still renting--haven't found the house we're looking for yet. We're in our early 30's with one kid and another in the oven--I'm thinking the new baked goods may force our hand in making the real estate plunge.


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## olivaw

Yes, my wife and I have surpassed our first million in liquid assets. It wasn't easy and most of the savings came later in life after the kids were done, the mortgage was paid off and we reached our peak earnings years.


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## My Own Advisor

Congrats Square Root, marina and oliviaw and others.....you're an inspiration.


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## RedRose

Yes, and holding on to it and yes I can now live and relax.


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## NicW11

Almost . My husband and I together, though. We're in our mid forties, and paid our house off a year ago, so now we can focus on increasing our portfolio. Being debt free is a great feeling!


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## pwm

Yes, I hit that mark just before I retired in 2005. Here's a big reason I was able to do so: 

I worked for Great-West Life for 35 years. They started a stock purchase plan in 1990. I enrolled in the plan for the maximum payroll deduction of 5% of gross pay. The company contributed $1 for every $2, and dividends were re-invested. I never even noticed the deduction other than the first year. The stock split 3 times and is now trading above $24. My average cost per share is $8.14. I ended up with just under 20,000 shares. Also living within our means for our whole life helped a bit!


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## marina628

When I was 25 i use to think a million was so much money but at that time I lived in much smaller house ,drove cheaper cars and didn't have the material things I have today. Today with our life style I am not sure 5 million could keep me in retirement like we live today so I have decided I will not retire since I love my job.Maybe one day we will go back to one car sell the cottage(or move there year round) and a smaller house but for next 20 or so years I rather keep what we have and continue working.


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## pwm

$1,000,000 is not what it used to be. It was an enormous sum when I started working for $280/month in 1970. Not so much now. I'm reminded of that scene in one of the Austin Powers films where Doctor Evil threatens to blow up the world unless he gets "a million dollars!". (He's been away for a while, you see.)


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## My Own Advisor

That stock purchase plan was your key PWM. Good on you to take advantage of it and congrats on being where you are financially. Sounds like you've earned it.

I figure a paid off home and $1 M unregistered portfolio, coupled with a pension, should be good enough to retire on. I hope to be there in my late-50s. Time will tell and lots can happen between now and then. 

If I can keep maxing out my TFSA for the next 20 years, that will definitely help.


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## Jungle

I love the storys in this thread. Having 7 figure net worth is one thing, but having 7 figures in investiable assests is another. (ie non real-estate)

Just remember that one million 20 years ago with 3% yearly inflation today = 1.8 million today. 

So if I want 1M of todays money in 10 years, (which is actually goal for me), I would really need 1.34M


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## My Own Advisor

Fair point Jungle. When I speak of my desire to have a $1 M portfolio, to be ready to retire, it definitely does not include my house as an asset. $1 M in today's dollars is what I am striving for in 20 years or less.

I need cash flow to live off of, the house to live in. 

Reading about others who have been there, done that, is a huge inspiration to me. It makes CMF a stellar community to visit.


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## NicW11

Yes, its true - a million isn't what it used to be. I''m 43, and combined with my husband, we're getting close, but I know it's not enough (for me) to retire on. Like you marina, I like what I have now and I like that I get to travel as much as we do. We could afford to live in a much larger house with a nicer sofa and larger tv, but funding my travel addiction is much more important to me . I like my job and intend to work for a long time to come. 

And even though its easier to achieve these days, it's still cool to look forward to the day I can say I'm a millionaire! It's a huge accomplishment and congrats to all who have achieved it, and those that are on their way!


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## Plugging Along

A million dollars is definately not what it used to be. To be honest, if I won a million dollars, I would still continue working. It would take $5 or $10m for me to completely stop working.

I do admit it was nice being able to say that I was a 'millionaire' in my early thirties (housing boom), then be able to say that we are millionaires without our principle residence (but still had to include other RE) in there. Our next goal is the $1 mil portfolio, without any RE. Aiming for within the next 10 years.


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## Calgary_Girl

Interesting thread! I looked back at our net worth and it looks like hubby and I hit the magic million in liquid assets in March 2011 between our retirement and taxable accounts. Like others have said though, $1 million is definitely not what it used to be especially considering that our oldest daughter has special needs and we're doing everything in our power to make sure that she's taken care of when we are no longer around. 

Our liquid assets are now approaching $1.2 million but luckily hubby likes his job and it pays well so he'll continue to work.


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## Jon_Snow

Well, look at this - Calgary Girl, Plugging Along, and myself - racing neck and neck on Networthiq.com! Congrats to you both on your progress.

Its going to an uphill battle to catch these two though - their incomes seem to be considerably higher. As I have mentioned before, my goal is to "retire" before I'm 45, so we will go from DINK's to SINK's, and our saving ability will be impacted. But by the time I "hang up my toolbelt", our dividend portfolio should be such that we won't be saving all that much less than we do now - instead of saving 6k every month, we may "struggle" to hit 3 or 4k... I think we will be okay. :tongue-new:

We really like our current lifestyle - we lack for nothing except perhaps a "McMansion" that many of our friends are strapped with - we can pretty much do everything we want to do for 30k per year. Thats what it means to hold no debt and enjoy inexpensive hobbies and interests.

No way do we need a million dollar portfolio (a large future inheritance is very likely in the future) , though we will likely get there eventually on our own.


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## uptoolate

Yes a million dollars certainly isn't what it used to be and that is especially true if that million dollars is in an RRSP and the government can potentially lay claim to almost half of it. That said, without the tax deferral inside the RRSP it would never get to be a million dollars in the first place!


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## Plugging Along

Jon_Snow said:


> Well, look at this - Calgary Girl, Plugging Along, and myself - racing neck and neck on Networthiq.com! Congrats to you both on your progress.
> 
> Its going to an uphill battle to catch these two though - their incomes seem to be considerably higher. As I have mentioned before, my goal is to "retire" before I'm 45, so we will go from DINK's to SINK's, and our saving ability will be impacted. But by the time I "hang up my toolbelt", our dividend portfolio should be such that we won't be saving all that much less than we do now - instead of saving 6k every month, we may "struggle" to hit 3 or 4k... I think we will be okay. :tongue-new:
> 
> We really like our current lifestyle - we lack for nothing except perhaps a "McMansion" that many of our friends are strapped with - we can pretty much do everything we want to do for 30k per year. Thats what it means to hold no debt and enjoy inexpensive hobbies and interests.
> 
> No way do we need a million dollar portfolio (a large future inheritance is very likely in the future) , though we will likely get there eventually on our own.


Don't read to much into my networth statement. It's pretty rough in terms of numbers, our real estate is a big chunk, so who knows exactly how accurate that is.

To me it's not really a race at all. Apples and oranges. All of us have different lives and goals. For us its not he big house that we spend on (though I want that) as we are mortgage free. It's the kids. We may have a high income, but with two young kids, we spend a lot more. I spend on childcare alone to what your total expenses are. That doesn't include their school fees, food, clothing, activities or anything else, resp contributions, etc. Heck I spend more on my kids monthly than I did with all of our accelerated mortgages payments.


We are saving about the same amount as you, possible a little less, yet, we think we will want more than double what you need for retirement. So perhaps, we are only half as far as you are along the goals.


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## My Own Advisor

For those that have hit and passed the $1 M mark, did you focus on debt payment (mortgage), building liquid assets (unreg. portfolio + TFSA + RRSP) or both? 

Curious....

I've seen this debate before, I intend to blog about this at some point, but would like to understand your thought process: Calgary_Girl? Plugging Along? Jon Snow? Marina628? PWM? Others? 

I feel, you can't retire early without doing both and more importantly, you're giving up your most precious tool if you pay off all debt early and don't focus on any savings or investments - time. Time is the ultimate tool when it comes to investing IMO and the sooner and more often you contribute early, the wealthier you will be. 

A person's savings rate has to be huge if they focused on their mortgage only and didn't save anything until 45 or 50 to retire.


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## steve41

My Own Advisor said:


> A person's savings rate has to be huge if they focused on their mortgage only and didn't save anything until 45 or 50 to retire.


This is very common... (waiting until 40s until beginning to save) 
Building up your career capital, paying down your student loan, house mortgage and raising kids is finally over in your 40s, and saving then begins in earnest. I see a lot of plans that follow this pattern.


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## My Own Advisor

So Steve41, they still are able to retire in "freedom" at age 60 even if they have saved very little until their mid-40s?


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## pwm

I paid off my mortgage first, then started saving for retirement.

Bought my first new house in 1972 when I was 23. Total price was $18,551. I still remember that number because I was terrified having a mortgage of $16,551, but went ahead anyway. Bought a bigger house, and paid it off in 1984 when I was 35 years old. It took me 12 years to be mortgage free. At that point in time, I had zero investments, but from then on every dime that I would have paid for a mortgage payment went to retirement savings. (And every other dime that I had left over too!). I quit work when I was 55. Also note that my wife did not work after the first child came along in 1974, so it's clear that I never spent money on things I didn't need. For example, I bought the cheapest cars I could and they lasted 14 years and 18 years.

My answer to financial security: LIve within your means, and be an investor.


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## Cal

uptoolate said:


> Yes a million dollars certainly isn't what it used to be and that is especially true if that million dollars is in an RRSP and the government can potentially lay claim to almost half of it. That said, without the tax deferral inside the RRSP it would never get to be a million dollars in the first place!


So true, most don't realize that what they hae accumulated inside their RRSP isn't going to be available to them in retirement. I use 50% as a basic projection for what I have inside my RRSP as cash/income, that I will have at my disposal for retirement.


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## My Own Advisor

Thanks PWM. Great story. Live within your means and be an investor indeed. 

I struggle with our mortgage debt. It remains well into the 6-figures but I'm also saving and investing every month, so in this case, trying to do both to be financially free.


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## uptoolate

We were similar to PWM I think. Mainly, focused on paying down student loans and then mortgage before starting on non-RRSP savings. We managed to upsize our house during the real estate down turn in the early 90s and have been in the same place ever since. Never acquired any bad debt (except that loan for the first car at age 25). We did always try to maximize RRSP saving and didn't raid it for RHOSP or anything else. Four children definitely have had an impact on the financial bottom line but certainly worth the cost in the end I would think. Tried to teach them frugality and to delay gratification - we will see how that ultimately works out but I think we have succeeded reasonably in at least 3 of 4.  We never went crazy on vacations but have managed to see the world on other peoples' dime. 

Others have said, 'Live below your means, save, invest wisely'. Has worked well for us.


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## Jon_Snow

My wife bought our current condo a few years before we met... she paid about 140k in 2001 for a very nice 2 bedroom in one of greater Vancouver's nicer neighbourhoods. So, even when we had a mortgage, it wasn't even above $1000 a month - we simply have never been burdened with a mortgage that prevented from saving a ton of money every month. The fact that we could sell the condo now for more than 300k is a nice bonus - though I think the real estate hammer is about drop on Canadians, especially Vancouver and Toronto. 

I am very good saver and am still in learning mode regarding investing - this forum has been a godsend.


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## MoneyGal

_Go to the ant, thou sluggard; Consider her ways, and be wise_. Proverbs 6.6 :02.47-tranquillity:


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## avrex

pwm said:


> It took me 12 years to be mortgage free. At that point in time, I had zero investments, but from then on every dime that I would have paid for a mortgage payment went to retirement savings. (And every other dime that I had left over too!).


What I like about pwm's story is that he was extremely *disciplined.*

He put every extra dime into paying off his mortgage. Once that goal was accomplished, he put every extra dime into his next goal, retirement savings.
Most people aren't that disciplined and I applaud him for that.


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## avrex

My Own Advisor said:


> For those that have hit and passed the $1 M mark, did you focus on debt payment (mortgage), building liquid assets (unreg. portfolio + TFSA + RRSP) or both?


I don't have a million yet, but *my answer would be to focus 'mostly' on debt repayment (mortgage), with 'some' building of liquid assets.*

Here is what I have done:

*1. Live Below Your Means.*

*2. Pay off your mortgage.*
While I was paying off my mortgage, I would put some money into my RRSP (but not necessarily the maximum), in order to take advantage of the tax refund. This allowed for some early tax-free compounding of investments.

*3. Maximize RRSP / TFSA contributions.*
Once the mortgage was paid off, I maximized my RRSP (and TFSA) contributions.

*4. non-registered savings*
Now that my registered contributions are maximized, I'm putting money towards my non-registered investment account. 
I'm starting to accumulate Canadian dividend paying companies in this account.

*Footnote: *
I don't have my 'first' million yet. 
However, based on my calculations, a million is all that I'll need to be financially independent.


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## marina628

I found networthiq a bit creepy so deleted my profile and started using quicken .We took on more debt to get the networth we have today.We have been in real estate for 22 years now but about 11 years ago we bought a second property for investment and we were happy just to have the one plus our own for many year.In 2007-2009 we bought 3 additional homes and another in 2 in 2010 but we sold one.We have done very well on both the appreciation and the equity our tenants have paid down for us.
But my first big gamble I made that paid off was with myself about 8-9 years ago when I took a part time job over the internet ,I met the right people and learned how to make some good money online with affiliate marketing.In fact I was named in a recent top Internet Marketing Success stories voted by my peers and clients and will be going to UK Next month to receive my award.One of my best friends published a book this year on how he went from homeless to making 10 million a year from the internet ,neither of us have fancy educations but we seized every opportunity that we were given.Sometimes you just need that one lucky break to get where you want to be and of course working 16-20 hour days til you get there is part of our success story.
Marina


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## Dave

Great thread and kudos to all of you ! One more question for those of you with substantial liquid assets. Is your portfolio mostly in stocks and EFTs or in fixed-interest products ? One million is not what it used to be but it will be even less with future inflation. How do you protect yourself from capital depreciation ? 

D.


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## steve41

My Own Advisor said:


> So Steve41, they still are able to retire in "freedom" at age 60 even if they have saved very little until their mid-40s?


 Sure. They may have to downsize that 5 bedroom monster, sell the cottage, go on a bit of a pre-retirement diet, but retiring at 60 wouldn't be out of reach. Depends if they drink the domestic beer or the imported stuff, and what pension expectations they have. (and don't forget good old 'transfer of wealth')


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## Jon_Snow

Yes, Steve, the "transfer of wealth" factor - the subject that feels kinda creepy to talk about - yet, it is a big factor in my planning.

Remembering former contributor to the forum, Square Root and his 400k yearly dividend stream - my parents are in this wealth bracket, and likely even higher - so I would be foolish to think that I need a 2 million dollar portfolio or some such nonsense.


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## Calgary_Girl

My Own Advisor said:


> For those that have hit and passed the $1 M mark, did you focus on debt payment (mortgage), building liquid assets (unreg. portfolio + TFSA + RRSP) or both?


Hi Mark!

I guess our situation was a bit unique in that we were actually mortgage-free with our first house before we had kids and at the relatively young ages of 29 (me) and 31 (hubby) so we never had the dilemma of mortgage vs. investments. Now that we have a mortgage after building our new house, I guess we do struggle with this debate now but we still manage to max hubby's RRSP+Spousal RRSP, contribute to his ESPP at work and max out my TFSA every year. Our medium-term goal is to have the mortgage paid off within 7 years and then divert all of the mortgage payments to our trading account. Right now we aren't contributing anything to our trading account and have the DRIPs on auto-pilot.

Like Plugging Along said, kids are definitely expensive. Since I chose not to return back to work after our second daughter was born, we don't have any sky-high daycare costs but our oldest daughter has special needs and she's definitely expensive but I wouldn't trade her for anything. She's taught us all about patience and perseverence and is the sweetest little girl that anyone could ever have! Our biggest expense right now, after the mortgage, is definitely the kids and monthly contributions to their RESP's and to our oldest daughter's RDSP.

To Jon Snow and Plugging Along - congrats to both of you as well on your impressive net worths! I won't lie, the competitive side of my personality does make me look at NetWorthIQ every month to see how the "race" is going! ha ha ha


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## Calgary_Girl

Dave said:


> Great thread and kudos to all of you ! One more question for those of you with substantial liquid assets. Is your portfolio mostly in stocks and EFTs or in fixed-interest products ? One million is not what it used to be but it will be even less with future inflation. How do you protect yourself from capital depreciation ?
> 
> D.


Our taxable trading account, which is approximately $600K, is 100% in stocks. The RRSP's, about $550K, is probably 70% stock mutual funds, 30% bond funds.


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## My Own Advisor

@Jon Snow, so you're thinking a $1 M or bit more in 2013 dollars of a portfolio should "do it"? vs. a $2 M+ portfolio? I'm not including any RE here in the liquid assets.

Indeed great thread...

@Calgary_Girl - hey!  BTW, I'll have my next dividend income update on the blog posted this Sunday night. I passed $6 K this year, very happy!

Back to you, your story with your husband is inspiring. Maxing out your TFSA is awesome. 

I struggle with the mortgage paydown vs. investing debate in part because rates are so low right now and with a 3% mortgage, I'm earning more in dividend income than that. That said, rates are cheap so it's a great time to take advantage of low rates by paying down debt as much and as often as possible. I guess that's my primary reason for doing both.

Regarding the TFSA, we've got about $10 K of room for my wife this year, so that will be one of our 2013 financial goals when I post that. Mine is already maxed out for 2013. 

Having your DRIPs on auto-pilot is a nice feeling. I've got a few holdings I can't DRIP yet, but when they do, I just need to give them time to incubate and hopefully I'm set up financially in another 15 years. A man has to dream...


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## james4beach

I'm a younger guy, and this is directed at the near-retirement age people: *you guys have been very lucky and many of you don't realize it*. Your working years have coincided with the greatest bull market in human history driven by demographics and the rise of the American empire. The 1980-2000 period, or 1980-present when you include bonds, is historically unprecedented. The rise in stocks/bonds was incredible, and you were lucky to have your income earning years feed cashflow in the middle of the bull market.

I find that many older people fail to acknowledge the role of this well timed, historically unique bull market. And they draw some wrong conclusions, such as "I am a great investor" and "I will see similar returns if I stick to my methods". Well if the bull market ends, no you won't. And if that historically unique bull market didn't happen during your working years, you would be in a very different position today.

Another consequence is the expectation that Baby Boomers have for investments as a whole, and for their children. Boomers think to themselves, everything will keep rising at 7% to 10% a year in perpetuity. So they make promises to others based on this. They think their children can live the grand retirement life they did, if they invest similarly (I personally doubt it). And then there's pension fund managers and investment advisors. Younger people are lead to believe that government & corporate pensions will still exist because these amazing returns will continue forever. In reality, I think those returns are gone. Many corporate pensions will be exposed as bankrupt the moment someone is willing to revise the expectation of returns going forward... most forecasts are still done with these 7% to 10% figures! It's now a decade of poor returns, yet people stick to those outlandish projections!

I'm rambling a bit, but to sum up my thoughts on this:

1. In my generation, I think very few people will be able to save anything close to a $1 million (in today's dollars). The Boomers could do it only because they got the greatest bull market in history, and should be thankful for that timing.

2. If you have a pension, that's great. But realize that some pensions will vaporize because they are based on now-obsolete returns and wildly outlandish projections. Do not expect that your children will have any pension at all.

3. If you're near retirement, I caution you about expecting anything like 10% returns going forward. I think that's extremely optimistic, even Buffett writes this in his 2007 Berkshire letter. GDP is growing at around 2% and there's a mountain of debt in both USA and Canada. Personally my projection for stock/bond returns going forward is more like 2% to 5%

4. Real estate has been a huge part of Canadians "wealth accumulation". Building equity in your home etc doesn't work unless the price is rising quickly... as it has been. So just like in America, there has been a false expectation of wealth-growing based on a housing bubble. Many of us think Canadian RE is a bubble, and if this ends, it's going to take a lot of this supposed "wealth" away. So beware of that risk too.


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## Nemo2

@james4beach: Personally, I view all of your points as being valid.......I'm 70, my lady is 60......including a modest townhouse condo, (that for rounding purposes we factor in at $165K, ($2K less than we paid for it 3 1/2 years ago)), we're 'worth' (with zero debt), just over $1.5 million......our total expenditures/living expenses for 2012 were ~ $35K.......we spend less than we bring in, because we're always anticipating that 'other shoe' dropping.

We have friends, with less money, who spend more, and 'appear' not to worry.....but that's not for us.

Our 'positive' is that we're happy.....we want for nothing......and, as a neighbor, (German born, a couple years older than me), said "We were born in the best possible time".


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## Dave

Good point james4beach. This is why my main focus is on wealth preservation and not double digit growth in the current environment.

D.


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## pwm

Cal makes a good point. 

When you count your registered investments, not all of that money belongs to you. A good chunk of it is really CRA's money. Their portion is your marginal tax rate in retirement. In my case that's 42%. One way of looking at it is that it was never your money in the first place, and they are really just taking their portion back when you de-register it, if that's any consolation.

One thing I would have done differently in hindsight, is to put all my RRSP contributions into my spousal RRSP. My wife didn't work after the first child, and her marginal rate is much lower than mine now.

RRSPs didn't do much for me since my marginal rate when working was about the same as it is now.


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## HaroldCrump

pwm said:


> One thing I would have done differently in hindsight, is to put all my RRSP contributions into my spousal RRSP. My wife didn't work after the first child, and her marginal rate is much lower than mine now.


RRIF income is eligible for income splitting after 65.


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## kcowan

@james4beach:
I think you are right for anyone retiring in the next 15 years. But don't forget how bad the 70s were. Yes the 80s and 90s were good. Even the 30s were preceeded by the roaring 20s and folowed by the 40s and 50s.

So yes it is prudent to be cautious about investment return assumptions. But never returning to good times is not a valid assumption IMHO.
Keith

(Will all DIY investors eventually become traders to improve overall returns? Or dividend investors?)


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## pwm

HaroldCrump said:


> RRIF income is eligible for income splitting after 65.


Good point. I'm splitting company pension and CPP now and the RRIF income will also be split so that will help.


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## pwm

james4beach: You make a good point about timing. When you were born is just as important as where.. For example, my father's 2 older brothers came of age during the depression on a farm in Saskatchewan. They rode box cars looking for work until the war, and joined the army in 1940. When they came home 5 years later, they were over 40 years old by then and had nothing. No education; no useful training. They never married and never achieved much. 

I was born in 1949. When I looked for work after school, I just grabbed the paper and picked a job from the list. I did nothing special, but soon I was a supervisor. Investing in the longest bull market in history was pretty easy. In fact everything in my life has been pretty easy. So when you say: "you guys have been very lucky and many of you don't realize it."  I agree with you. I have been very lucky, but I for one do not take it for granted. I can't speak for others of my age group but I often stop to think how fortunate I have been.


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## james4beach

@ pwm: thanks for the reply (and thanks to the others too).  That's an amazing example too, thanks for sharing! And by the way, Headingley is a nice little place, I used to go there all the time


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## Plugging Along

If you guys are interested Malcolm Gladwell's 'Outliers' writes about interesting factors in success, and why some people were born at the 'right time' to be more sucessful (hockey players in the earlier part of the year), etc. 

It's an interesting read that essentially what I took out of it, is that yes there are things you can't control that can be attributed to luck or bad luck (like when you are born), but it doesn't stop anyone from being successful.


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## Plugging Along

My Own Advisor said:


> For those that have hit and passed the $1 M mark, did you focus on debt payment (mortgage), building liquid assets (unreg. portfolio + TFSA + RRSP) or both?
> 
> Curious....
> 
> I've seen this debate before, I intend to blog about this at some point, but would like to understand your thought process: Calgary_Girl? Plugging Along? Jon Snow? Marina628? PWM? Others?
> 
> I feel, you can't retire early without doing both and more importantly, you're giving up your most precious tool if you pay off all debt early and don't focus on any savings or investments - time. Time is the ultimate tool when it comes to investing IMO and the sooner and more often you contribute early, the wealthier you will be.
> .


Sorry for the late response, I did couple of posts, only to have them deleted by mistake or something.

Anyways, for me, I have disclosed that I am not a millionaire by liquid assets, but am only by investment assets (which I include rental property, since I could sell it like any other investment and it generates a 'dividend' for me). I am a little of an anomaly from the fine folks at CMF, as I was not a very financially responsible as a 20 something, I am rather too impulsive with my investments, and quite honestly not that interested in managing all of my investments. I use a financial advisor for a large part of my portfolio as my own means of diversification against my aggressive/impulsive nature. 

I started actually saving in my RRSP’s when I first started working (no TFSA then). Here’s the kicker, I borrowed the money for it for the my first year, and was in debt for student loans and consumer debt. Would I recommend this now, nope, from strictly a numbers point, it was not the right thing. However, why did I do it then. At that time, my financial guidance counsellors (very very successful family) saw that what I really needed was discipline, and to get in the habit of automatically saving. I went with a FA, because it gave me no excuse to not save and invest. I have always contributed my RRSP’s, with the exception of the year that we were both unemployed since then, increasing our contribution amounts by our raise everytime we had a raise. We did this even though we had a mortgaged because of our tax brackets. 

When we purchased are house, we had a good down payment but still had a 6 digit mortgage. We based our affordability not on the minimum payment but rather on double payments when we first bought the house. We bought a lot less house than we could afford, as we also based the mortgage on the lowest income earner. It took us just under 8 years to pay off the mortgage. It would have been 6 years, but I invested all the extra mortgage payments into the stock market in 2008 to hold until the following year, to have it drop by 50%. That was a huge lesson. Once the markets turned around, and we were both employed, then we realized what an anchor it was to have a mortgage when you have no cashflow, and paid it off. That was a good lesson too. At this time, we still made smaller contributions to the RRSPs, but took the refunds to pay off the mortgage, instead all focused on the RRSP.

Now, we are focused back in RRSP, and our non registered accounts. In our non registered accounts, we have had opportunities to invest in start ups and venture capital. This is all money that though we would not like to lose, if we did lose it, we would just continue out the same path. However, if it does well, then we could retire earlier, it’s our ‘gambling’ money. This is also where I play around in the stock market.

Finally, and the most important for us, was before focusing on investing or growing our money, our biggest focus that has remained constant was the investment in our human capital. We spent more time working on our selves in terms of experience, and developing skills that would have a longer benefit in our overall financial picture. We still spend more time focusing on our career and income growth than anything else. I am happy to spend the time on working on my career, and paying a FA to manage part of my portfolio. The few thousand dollars a year I pay the FA, I more than make for in my career advancement. 

So to answer your question, I did a combo approach of paying off mortgage and investing at the same time. The focuses changed at the time depending on our life situation, and the environment. We have been able to do all of these things to different extents because first and foremost we build the investment in our human capital, so we have larger incomes to work with.


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## Echo

Plugging Along said:


> If you guys are interested Malcolm Gladwell's 'Outliers' writes about interesting factors in success, and why some people were born at the 'right time' to be more sucessful (hockey players in the earlier part of the year), etc.
> 
> It's an interesting read that essentially what I took out of it, is that yes there are things you can't control that can be attributed to luck or bad luck (like when you are born), but it doesn't stop anyone from being successful.


Outliers was a good read, particularly the part where he says it takes 10,000 hours of practice to become exceptional at a specific skill (using examples like the Beatles playing two shows a night on the club scene in Europe before they perfected their sound and made it big).


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## Chigu

james4beach said:


> I'm a younger guy, and this is directed at the near-retirement age people: *you guys have been very lucky and many of you don't realize it*. Your working years have coincided with the greatest bull market in human history driven by demographics and the rise of the American empire. The 1980-2000 period, or 1980-present when you include bonds, is historically unprecedented. The rise in stocks/bonds was incredible, and you were lucky to have your income earning years feed cashflow in the middle of the bull market.
> 
> I find that many older people fail to acknowledge the role of this well timed, historically unique bull market. And they draw some wrong conclusions, such as "I am a great investor" and "I will see similar returns if I stick to my methods". Well if the bull market ends, no you won't. And if that historically unique bull market didn't happen during your working years, you would be in a very different position today.
> 
> Another consequence is the expectation that Baby Boomers have for investments as a whole, and for their children. Boomers think to themselves, everything will keep rising at 7% to 10% a year in perpetuity. So they make promises to others based on this. They think their children can live the grand retirement life they did, if they invest similarly (I personally doubt it). And then there's pension fund managers and investment advisors. Younger people are lead to believe that government & corporate pensions will still exist because these amazing returns will continue forever. In reality, I think those returns are gone. Many corporate pensions will be exposed as bankrupt the moment someone is willing to revise the expectation of returns going forward... most forecasts are still done with these 7% to 10% figures! It's now a decade of poor returns, yet people stick to those outlandish projections!
> 
> I'm rambling a bit, but to sum up my thoughts on this:
> 
> 1. In my generation, I think very few people will be able to save anything close to a $1 million (in today's dollars). The Boomers could do it only because they got the greatest bull market in history, and should be thankful for that timing.
> 
> 2. If you have a pension, that's great. But realize that some pensions will vaporize because they are based on now-obsolete returns and wildly outlandish projections. Do not expect that your children will have any pension at all.
> 
> 3. If you're near retirement, I caution you about expecting anything like 10% returns going forward. I think that's extremely optimistic, even Buffett writes this in his 2007 Berkshire letter. GDP is growing at around 2% and there's a mountain of debt in both USA and Canada. Personally my projection for stock/bond returns going forward is more like 2% to 5%
> 
> 4. Real estate has been a huge part of Canadians "wealth accumulation". Building equity in your home etc doesn't work unless the price is rising quickly... as it has been. So just like in America, there has been a false expectation of wealth-growing based on a housing bubble. Many of us think Canadian RE is a bubble, and if this ends, it's going to take a lot of this supposed "wealth" away. So beware of that risk too.


I think you have to modify your comments a bit. I agree with most of what you say, however most retirement calculators and those that tell you if you are on track through my Group RRSP at Standard Life and now Manulife, use a rate of 5% as their projection. I don't think I know any retirement calculator that uses 10%+. Also you are right that "defined benefit" pensions are going the way of the dodo bird but Defined contribution plans will still be available. My company contributes 6% of my base into my PENSION (not RRSP matching) which is held by a third party (manulife in this case). If you are talking about CPP, then you may have a point. 

I am 31 years old, and am "projected" by the retirement calculator on my group rrsp website (manulife) to be at about 1.6 million using a 5% rate by 65, and I am just now entering my core earning years. I started investing late, and i have over 50k+ room in my RRSP because of this, so I think if you start early and are diversified you can easily make it to $1,000,000 + by 65 even in these times. I think the TSX gained over 5-6% this year (2012), and the S&P gained over 10%. So it's possible. Yes the BOOMER years may be behind us, but the younger generation isn't special, we may have a boom of our own, but it may not be for the same reasons.


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## Chigu

My Own Advisor said:


> Fair point Jungle. When I speak of my desire to have a $1 M portfolio, to be ready to retire, it definitely does not include my house as an asset. $1 M in today's dollars is what I am striving for in 20 years or less.
> 
> I need cash flow to live off of, the house to live in.
> 
> Reading about others who have been there, done that, is a huge inspiration to me. It makes CMF a stellar community to visit.


Don't underestimate the value of the house. RIght now, you are probably living in a house bigger than what you need because the kids are still younger, and/or you may be living in a more expensive area to be closer to work. When you retire, you will probably downsize and/or move to less expensive area (or both in some cases). That is when you will realize the tax free gains in your current home. I think the value of the home should be utilized in everyone's retirement planning (not 100% of it, because you do need to live somewhere). I estimate I would downsize at least 30% of my home value after I retire. I.e. if my home is worth 1,000,000 at time of retirement, I would probably sell it and move into something MAX price 700k.


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## kcowan

Chigu said:


> I estimate I would downsize at least 30% of my home value after I retire. I.e. if my home is worth 1,000,000 at time of retirement, I would probably sell it and move into something MAX price 700k.


Or you could move into a nicely-maintained double-wide and put $900k in the portfolio.


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## Echo

I think if you talk to most Boomers who are reaching retirement age you'll find:

1. They don't want to downsize because they like having the extra space for when the kids and grand kids visit.
2. Their idea of downsizing is moving to a smaller house that's brand new (or nicer than their old place), which really won't leave much of a nest egg.
3. They want to retire in a more temperate climate (West Coast), where it might be even more expensive to live.

In reality the idea of downsizing and living off the proceeds might be one of the greatest retirement myths we've been fed.

http://www.boomerandecho.com/should-you-sell-the-family-home/


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## GoldStone

How to value the house depends on the individual circumstances. I don't include the value of the house in our NW. We live in a condo townhouse in the central-ish part of Ottawa. The TH is worth about 275K. We can't release equity from the house by downsizing or moving to a cheaper location. There is no spare equity to release! Any nice place where we would want to retire is likely to cost about the same, or more.

The nice corollary to our housing situation is that I feel no pressure to move when we retire. We can stay in our home and save a ton of money on moving expenses.


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## My Own Advisor

Great comment pwm.


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## Cal

kcowan said:


> Or you could move into a nicely-maintained double-wide and put $900k in the portfolio.


LOL. :encouragement:


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## fraser

A financial advisor/so called retirement specialist at our bank in Calgary told us that her experience in Calgary is that when boomers retire and change houses they actually move up pricewise, ie no equity recapture as it were. We were surprised at this. We sold our house last summer. It was too big for us and we had no emotional attachment to it. At the time we did not see anything that appealed to us so everything went into storage and we have been travelling since the end of August.

What is interesting is that during the intervening six months or so, we find that there is a change in the type of home that we may be looking for and rental is a real option. Not sure if this is attributable to travel, not having to pay the usual bills associated with maintaining a large home, or just getting used to living in smaller quarters. We downsized our belongings as well and looking back we feel that it was a great thing to do. Even though, at first, it was difficult to decide what we kept and what we discarded. Now, we are really glad that we did not sell and buy at the same time. It has given us time to consider our options, and our preferences.


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## MoneyGal

My parents (in Calgary, not Boomers) bought a new, slightly smaller, more expensive house...and then fixed up their PR to sell. Once they'd completed the fixes on their "old" house they decided to keep it and stay put; and sold the other house at a gain. :02.47-tranquillity:


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## kcowan

We downsized so that we could home swap. It was very worthwhile to get rid of anything that we had not used for a year or more. It relieves a load. Makes us feel nimble.

(I have also gotten rid of all the stuff from 2 family homes. Why they leave it all is amazing to me. I found my mother's wedding dress... and FILs golf clubs. He had not golfed in more than 20 years.)


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## Rainey

kcowan said:


> We downsized so that we could home swap. It was very worthwhile to get rid of anything that we had not used for a year or more. It relieves a load. Makes us feel nimble.
> 
> (I have also gotten rid of all the stuff from 2 family homes. Why they leave it all is amazing to me. I found my mother's wedding dress... and FILs golf clubs. He had not golfed in more than 20 years.)


Had a similar mid career experience in downsizing when I got a job in Switzerland. Fat contract but came with not much of a moving allowance. It meant we packed what mattered into four suitcases and a hockey bag. We had a 9 mth old at the time and friends and family thought we were mad.

Over the next four years we never bought anything we couldn't walk away from. My wife furnished a four bedroom flat for under 1000 francs -- the transient expat pop fuels an active used IKEA market. When we decided to return to Canada we just gave everything away.

As kcowan says, it was amazingly freeing. We didn't worry about stuff (of course, we found other things to worry about). Once back in canada the accumulation resumed, unfortunately. But I'm looking forward to finding another forced simplification of my life. great way to live.


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## Nemo2

Rainey said:


> When we decided to return to Canada we just gave everything away.
> 
> As kcowan says, it was amazingly freeing.


When my late wife and I sold our house, and most of our 'stuff', on SSI to go fulltime RVing, we found it most cathartic.............we stored (what we considered at the time) our 'treasures', but later, when unpacking back in Ontario, I wondered why we had kept a lot of those.


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## kcowan

One of the biggest money making businesses is renting off-site storage to people who cannot get rid of stuff. They rent for years then finally the stuff gets sold off for pennies.


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## humble_pie

kcowan said:


> ... I have also gotten rid of all the stuff from 2 family homes. Why they leave it all is amazing to me. I found my mother's wedding dress...


i would have a terrible, terrible time getting rid of any ancestor's wedding dress (what about your daughters or granddaughters ? they'd have loved it.)

i hear my grandmother's wedding dress is still floating around somewhere with the cuz. I've never even seen it, but i'm glad it survived.


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## kcowan

humble_pie said:


> i hear my grandmother's wedding dress is still floating around somewhere with the cuz. I've never even seen it, but i'm glad it survived.


I sold it to a nice lady who had plans to reuse it. My sons did not come to the sale even though it was in their town. They offered to help but I declined. The dress was in the bottom of the cedar chest. I suppose if I had known, I could have offered it to the 2 grand daughters. But I was intent on decluttering.

The only thing I saved was the family photos. They have all been scanned now.


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## fraser

It took us nine months to downsize our belongings, and those of others who viewed our basement as a storage area.

Kijiji and Women in Need Agency were our best friends. I am absolutely certain that we will discard things that are in currently in storage when we return. Our outlook has changed very much and we are at the opposite end of the accumulator stage. We came to realize that we just had too much stuff, too many clothes, and too much trash and trinkets.

It is no wonder that people retire with consumer debt. They just buy too much junk and most of it is it the form of depreciable assets that have little or no monetary value the day after they are brought home. 

We gave our niece one of those fancy Keureg coffee makers for her wedding. That is what she wanted. So now she pays something like 80 cents for a cup of weak coffee and has created a mountain of plastic garbage. What a waste of money and polluter of our environment. We do something similar, only it is our trusty Melita cone filter that we have had for years.. We get to select the coffee that we want, grind the beans fresh and it costs much, much less per cup with no plastic to dispose of. I guess that is one reason why we were able to retire early.


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