# Deciding against retirement... Instead, semi-retire!



## kork (Jun 9, 2012)

So after being in this forum for some time and posting occasionally, I've come to realize that I don't think I'll be able to just "retire" when I hit a certain age. 

Instead, we've revised our plan (assuming health related issues don't present challenges, etc).

I'm 36, wife is 43. We've got registered investments around $410k currently + $40k for the Kids (8 and 6) in the family RESP's. If we make a real run for it, we should also be mortgage free in 5 years pretty easily.

My wife and I have always lived in such a way that our lifestyle wouldn't be sacrificed even if we were both working full-time at minimum wage. We purchase everything with savings. No credit cards. New car - Savings. Reno's on the house ($75k in the last 3 years) Savings. We currently have $30k in savings for the rainy day fund.

Our current monthly expenses are around $4000/month after taxes including doubling down on mortgage payments ($1500). We live near the water, across from a park, have a huge yard and have renovated our home in a great neighbourhood. We're 500 meters from a waterfront bike path that we could use to travel across Canada if we chose.

We even have an HD theatre with a motorized reference screen, etc. We live frugally, but splurge on things we love. Point being, we like where we are and aren't really needing anything more. We've resisted the "upsizing" allure even though we've got a 3 bedroom home. I have a lot of smart friends and a lot of them earn a lot of money so the temptation is always there, but we've been good.

So I see a couple hypothetical scenarios.

*#1 - Semi Retire tomorrow.*
While I enjoy my line of work, The most frustrating part is that I'm starting to become the old man shaking his cane at the kids. I believe I have a shelf-life with what I currently do.

So the concept is that if I find a job I really enjoyed (like being a stand up paddle board instructor for example) and my wife could do what she wants to do part-time, we would be able to focus on that while earning enough to pay for groceries, home repairs, travel, etc... The key, however, is that we wouldn't touch our retirement nest egg for another 20-25 years OR unless we were forced to do so. The $410k would grow (hopefully) with our couch potato strategy.

*#2 - Semi-retire when mortgage is paid off*
So with the mortgage being paid off in under 5 years, it would have me remain in our currently situation which is not bad. I work hard, but we spend a lot of time together as a family. With my full-time employer, I never work overtime and work from home 3 days of the week. Pretty lucky.

If we continue the course, we'll have added another $200k to registered investments over the next 5 years + whatever growth or collapse occurs in the markets.

----

I think Option #2 is better. I really enjoy working/keeping busy. Whether it's tinkering at building shelves or writing computer code, I'm always busy and doing stuff. The only reason I'm running through the scenarios is so that I understand what my freedom looks like. Freedom doesn't mean I'll quit my job tomorrow, but if something goes very wrong where I work, at least I can say "been a good ride, I'm outta here to go pet kittens for a living!"

So I guess the simple question is.

With $410k in registered investments and the expectation that between my wife and I, we should always earn enough to pay our bills (which isn't too much) until 65, is it safe to assume that we could both go out and get jobs and maintain our current lifestyle through retirement with some more travel? The goal will be for us to earn $4k/month after taxes until the end of time. Once the mortgage is paid off, that $1500/month could go towards a travel fund.

From those who are more experienced, please poke holes in my plan!


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## cainvest (May 1, 2013)

At your age and good work situation (i.e. doesn't hate job), I'd go with Option 2. Maybe even stick it out past the mortgage pay off so you can start banking that money, at least for a few years. Given that, you could see what your situation is when you're 43-45 and then maybe switch to a lower paying, fun filled job.


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## My Own Advisor (Sep 24, 2012)

I like #2 - Semi-retire when mortgage is paid off (but work just a bit longer full time..)

I'm biased, since this is partly our plan 

Our mortgage should be done in 5-6 years. 

We hope to continue maxing out our TFSAs going-forward, and contributing regularly to our RRSPs. When the mortgage is done, max out RRSPs and use the RRSP-generated loan for topping up non-registered investments for a few years.

That puts us into our late-40s and hopefully at a point whereby we can "live off dividends or distributions", avoid touching the capital and work part-time to supplement our expenses. 

We hope to let our capital grow until we decide to draw it down on our terms.


If you have $410k registered already, that should double in another 10 years without contributions if you're investing in low-cost, mostly equity products/investments.

That will set you up very nicely with a paid off home for any semi-retirement - kudos to you guys


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## 1980z28 (Mar 4, 2010)

Pay out mortgage
Than you will be in a better place to judge your future
Time is on your side


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## Oldroe (Sep 18, 2009)

A lot of talk about work and money.

What else do you and wife do. Mountain biking, fishing ,golf.

If nothing I would start developing interest or keep working.


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## carverman (Nov 8, 2010)

The sad reality of life is that no matter how much you plan in your pre-retirement years, life can hand you a lot of lemons.

I had all kinds of plans for retirement working at Nortel before 2000, they retired me due to downsizing and my poor health in 2002.

My shelf life there was pretty much up anyway at age 56, and most didn't last that long in high tech. 

Now I AM that old man..shaking his cane at the kids coming to my door..LOL!









Never expected to be in a wheelchair at age 69. Had to give up my driving licence on renewal this year (age 69) and get an Ontario picture Id.

In 2000 (15 years ago) , I was still driving a motorcycle, camping, canoeing and doing some travelling..now I can't even finish the things I wanted to do on my "bucket list". 


Nobody expects worse case scenarios in their retirement years, but it can happen, no matter how much you plan.


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## sags (May 15, 2010)

Good reminder Carverman, that with retirement comes growing old age, and with growing old age comes health and other problems.

That is why I laugh when lobby groups suggest the answer to retirement is to keep working, and shudder when the government rolls back the OAS to force Canadians to work longer.

With all this new technology etc, we were supposed to be working 32 hour work weeks and Freedom 55.

Instead people are working 60 hour work weeks and Freedom 75


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## kork (Jun 9, 2012)

All good advice.

When we first started saving, we were saving blind. No real goals. We just knew we "should" be saving. For the past couple years, we've been working to try to figure out our goals. At one point, it was 30 years of compounding interest and having $millions and $millions in the bank, then we learned about RIF's and how CPP works and OAS, etc.

So we sat down and looked at our goals rather than blindly saving and the above two scenarios are the one's we could determine.

We have many hobbies (I've got my Motorcycle license and have spent time at Daytona Beach during bike week, etc. It's awesome riding up and down the coastline on the A1A for hours!). We also, have a family cottage we frequent with Canoe's, boats and and a sandy beach. 

We've got lots of friends, and a fair amount of time to spend with them. Speaking frankly, my wife and I have more time than many friends we know. Lots of friends are gov't workers and others are shift workers... Very few work a stable 9-5. 

I'm not like other members in this forum who are working extremely hard to save all their pennies and not enjoy what life has to offer. We're taking a second family vacation at the end of August. In fact, in 2010, my wife and I spent a year in Florida before my oldest daughter started school for the experience. That was awesome!

My wife and I spend 5 nights a week sitting down to dinner with my kids. She's been a SAHM for the last 8 years to raise our kids.

Mountain biking? Yes. We live on a Bike trail and I put 12KM on my bike each day. My wife doesn't care much for it Fishing? Yes. My youngest daughter even baits her own hooks! Golf... Nope... I enjoy the driving range and mini golf, but not both of them together! Go figure. Skiing? We live within 30 mins of 5 ski resorts... All good!

So in a nutshell, My wife and I were saving blindly for years with the goal of stashing away $. Now we're looking at it coming up with a reasonable goal and the ones above seem better than "Save for the next 30 years and then think... what did we miss?"


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## janus10 (Nov 7, 2013)

Why not wait until your shelf life is up, collect a severance package, and keep doing what you are doing? I'm 50, the oldest (yet one of the most valuable employees because I have the highest sales) at my employer, and I certainly don't understand what hard work really is. After all, I never had to walk an hour to work, uphill (both ways!), to work in a coal mine for 14 hours a day, 6 days a week.

Once your mortgage is gone, and your investments are sitting around $600-$700k by that time, you'll be in a far more solid position which means even more options.

Just wondering out loud... would there be a negative message to young kids who don't really understand finances? "Hey, mom and dad quit working and now when we want anything special they say that we can't afford it. Why don't they stop being so lazy and go back to work like all of our other friends?"

At some point, ER can be an inspiration - perhaps too early and it looks like a waste of your skills and potential. Much like we say to our kids, if you gave it your best, then you've done all anyone could expect regardless of the outcome. Will young kids think you didn't give it your best?


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## kork (Jun 9, 2012)

I may very well continue doing what I'm doing or I may continue down the path to a new area of expertise which is what I'm also currently doing. Currently taking online courses for a different area of my industry I'm really, really strong in.

But I'm growing very tired of screen time... Always in front of my computer, hence, the allure of a paddle board company or something different.

But, I might also continue doing what I'm doing because I do enjoy it, but just fewer hours.

In terms of the kids message and working hard, etc... Good point Janus10. Never really thought of that, though... Like I said initially, I don't think we'd fall flat and do nothing. In fact, we'd possibly get busier in semi-retirement just by the nature of our character... 

While the idea would be to work less, I may want to work 10 hours a day with my teenage kids and have them be paddle board instructors on the weekend to help them make some $ and build their entrepreneurial spirit! But alternatively, I may also want to work 24 hours a week during the summer and only on rainy days because...well, the beach is too good to pass up!

I'm not sure, but the goal is to be able to have the financial freedom to not be 50 and starting thinking about saving for retirement... The goal is at 40-45 to have the flexibility to do whatever I want to do without the concern of how well I'd be compensated, as long as I'm able to earn "something" to pay the bills.

It's funny, a year ago I was speaking to my doctor about my anxiety and concern of retirement and she said something really insightful... "Kork - you work full-time with a good job. You also own your own company doing what you enjoy and you developed software that's been sold across the country and provides a small, but comfortable residual income. Do you honestly think that you'll just stop working one day as long as you remain in good health?"

Hence, here I am.

Lots of people dream about winning the lottery... I dream of making my own.


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## gibor365 (Apr 1, 2011)

> Once your mortgage is gone, and your investments are sitting around $600-$700k by that time, you'll be in a far more solid position which means even more options.


 Our mortgage gone 10 years ago, our investments more than $600-$700k, I'm 49, my wife 40 ... but it's not easy to retire  . Our company got outsourced , so I'm waiting in "natural way"  for package... and my wife just likes her job (even though always complaining ) .



> I'm not like other members in this forum who are working extremely hard to save all their pennies and not enjoy what life has to offer.


 don't think there are many members like this  Yes, I'm trying to save, but we going abroad 3-4 times per years , so we spend abroad all our 1 month vacation


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## kork (Jun 9, 2012)

gibor said:


> don't think there are many members like this  Yes, I'm trying to save, but we going abroad 3-4 times per years , so we spend abroad all our 1 month vacation


No, there aren't many. But there are some younger members are looking to "work their tails off and get out" before they're 40 not heeding the advise of more experienced members who are saying "you need to enjoy your youth... you'll never get it back."

There's a song I listen to every 6 months or so to help ground myself... "Everybody's free to wear sunscreen" by Baz Buhrmann.

Enjoy the power and beauty of your youth, oh, never mind
You will not understand the power and beauty of your youth
Until they've faded but trust me, in 20 years, you'll look back
At photos of yourself and recall in a way you can't grasp now
How much possibility lay before you and how fabulous you really looked

https://www.youtube.com/watch?v=MQlJ3vOp6nI


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## kork (Jun 9, 2012)

gibor said:


> Our mortgage gone 10 years ago, our investments more than $600-$700k, I'm 49, my wife 40 ... but it's not easy to retire  . Our company got outsourced , so I'm waiting in "natural way"  for package... and my wife just likes her job (even though always complaining ) .


So Gibor, you're essentially where my plan is to be in 5 years. What are the hurdles you've experienced? Are you currently working? Semi-retired? 

I don't think a package would be in my future so I wouldn't be in a position to wait anything else. Company is a niche agency with a small number of staff.


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## Oldroe (Sep 18, 2009)

So I retired 7 years ago.

I got to watch 100's retire. My 1st thing no job for 1 year. Next thing a schedule bed at 10 up at 5. It works for me.

Seen lots of guys get there days and nights mixed up. It turned into a mess.

It took some getting use to being paid once a month. 1st two weeks party like a rock star last to weeks welfare (not really), 5 week months stamps (not really) but you will notice.

And you need space and the wife needs space. It's 8 hrs everyday.


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## Sampson (Apr 3, 2009)

What we have chosen to do so far...
is continue working until a healthy portfolio could fund the remainder of our days. This doesn't mean that we save blindly, no do we sacrifice one bit of our life style now, sure we could spend more, but it wouldn't give us any more happiness.

Since you enjoy your work, why plan to shut this down immediately? I would suggest you spend your time now planning the career change, whether it be SUP instructor, or other field. Once the plan has taken shape, you will have worked and saved a bit more, increased your financial buffer, and given yourself Findenpendence. If at any point after that, the job goes sour or you really want to do something else, then money will not be a problem.

I'm conservative, so I would not make such a change at $410k. You might like your job now, but if you were 'retired', or semi-retired for 5 years, you might not want to go back ever. This seems to be the message from those who have cut down hours or change careers to less lucrative ones, no one every wants back. If the new career doesn't pan out, $410k is not a large safety net to fall back on.


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## cashinstinct (Apr 4, 2009)

I don't understand how $410k is enough in the 40s for a family?

You are doing great, I would continue for now.


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## kork (Jun 9, 2012)

cashinstinct said:


> I don't understand how $410k is enough in the 40s for a family?
> 
> You are doing great, I would continue for now.


$410k today, untouched for the next 20-30 years until we're ready to start to tap into it and "retire" like most/many people hoping to retire.

Perhaps semi-retire is the wrong word. Perhaps it's a career change where saving money isn't the main goal since that foundation has already been put in place.

I'm not wanting to stop working. Just "work less" or "work different." I'm wanting to do something with less screen/sitting time.


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## Sampson (Apr 3, 2009)

kork said:


> $410k today, untouched for the next 20-30 years until we're ready to start to tap into it and "retire" like most/many people hoping to retire.


I guess only you can answer if this is enough.

(a) When would you retire in the 'traditional' sense of the word?
(b) How much money will you need? (how much will you spend in retirement?, how long will you live?)
(c) What is your estimated real rate of return for the next 20 years? will that give you what you need in point (b)
(d) How well protected will you be from sequence of returns risk? (this could mean your number from (b) gets wiped down 20%-50% by a market collapse
(e) What other sources of income will you have in retirement?
(f) How much tax will you need to pay? i.e. depending on your strategy for unwinding the RRSP monies, and also what your other income will be, RRSP could face significant tax liabilities

Steve41 has a calculator that many people really seem to like that addresses a lot of this issues.

Really, these questions only determine when you would change paths, not whether you will/should do it. I think its a fantastic decision (#2) and one more in our generation will take. Pay the mortgage off and the options will be even greater.


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## cainvest (May 1, 2013)

cashinstinct said:


> I don't understand how $410k is enough in the 40s for a family?
> .


410k now (with nothing added) in 25 yrs with a avg 5% return is almost 1.4 mil, that and being mortgage free I'd say you sitting pretty good.


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## kork (Jun 9, 2012)

Sampson said:


> Steve41 has a calculator that many people really seem to like that addresses a lot of this issues.


Is this calculator available online or is it an xls file?


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## cashinstinct (Apr 4, 2009)

cainvest said:


> 410k now (with nothing added) in 25 yrs with a avg 5% return is almost 1.4 mil, that and being mortgage free I'd say you sitting pretty good.


Yeah for sure, don't want to say otherwise  If it's untouched, it's good.


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## gibor365 (Apr 1, 2011)

> No, there aren't many. But there are some younger members are looking to "work their tails off and get out" before they're 40


 My son, university student, has a plan to work very hard until 35, than retire and become full-time independent investor


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## gibor365 (Apr 1, 2011)

> So Gibor, you're essentially where my plan is to be in 5 years. What are the hurdles you've experienced? Are you currently working? Semi-retired?


 No, I'm still working .... but when I get package , I won't be eager to look for a new job  .... gonna be "temporary retired" and than maybe "full-time retired" or not 
Hurdles ... imho, in order to retire comfortable we need about 1.5mil (if we'd closer to CPP/OAS and my wife DCPP earliest redemption - maybe 1.1-1.3mil) OR/AND annual dividend/interest inclome around 60K... we still a bit far from both targets...
Also, my wife has pretty good career and not planning to retire until she's 50 - 55... and I'm not really comfortable to be retired, when my wife is working.... even though when I was already working, she was attending elementary school  ... when I get laid off and get package , it's a bit different than "volunteery" retirement...


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## CalgaryPotato (Mar 7, 2015)

I guess like others I'm not sure what semi retire means for you. You said you spend $4000/month. $48K/year after taxes is still a lot of money. If I was you, I'd probably keep working full time until the mortgage is paid off.


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## gibor365 (Apr 1, 2011)

CalgaryPotato said:


> $48K/year after taxes is still a lot of money.


Just cannot get how 48K/year can be a lot of money.... I did some calculations how much minimum $ we need in retirement, so substructed all money we spend on kids (excluding food, as it's complicate ) , all travel, recreation (except gym), 2nd car expences, Presto, furniture, money we spend on our senior moms etc. So we spend 48K/year only on food, utilities, property tax, 1 car (without major repairs) and gym!


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## Spudd (Oct 11, 2011)

kork said:


> Is this calculator available online or is it an xls file?


It's a Windows program (only runs on XP unfortunately). http://www.fimetrics.com/buynow.shtml


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## cashinstinct (Apr 4, 2009)

it's a lot of money to generate actively (not from investments) to call yourself "semi-retired"

it's a career change


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## kork (Jun 9, 2012)

Spudd said:


> It's a Windows program (only runs on XP unfortunately). http://www.fimetrics.com/buynow.shtml


I can spin up an XP VM pretty easily. Thanks for the link!


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## cainvest (May 1, 2013)

gibor said:


> So we spend 48K/year only on food, utilities, property tax, 1 car (without major repairs) and gym!


I don't think you're in the frugal category ... with 48k/yr I could have a great time and likely still max my TFSA.


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## Afp (Mar 19, 2013)

cainvest said:


> I don't think you're in the frugal category ... with 48k/yr I could have a great time and likely still max my TFSA.


Same here. 48k/year is plenty. I live close to work and my expense is less than 20% of my gross income (condo paid off so mortgage free). The money that I pay tax each year on my T4 is more than double of what I spend on myself.


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## gibor365 (Apr 1, 2011)

cainvest said:


> I don't think you're in the frugal category ... with 48k/yr I could have a great time and likely still max my TFSA.


My wife tells me that I'm extremely frugal 
Probably if we'd living not in GTA (property tax), buying basic food in "Food Basic" or No Frills or Dollarama we could've save more  
Currently (after becoming extremely frugal , as per my wife ) our annualized spending for 2015 (based on 1st 6 months) stand on $86,168, this is a big success comparing to 2014 when we spent 105K


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## carverman (Nov 8, 2010)

gibor said:


> My wife tells me that I'm extremely frugal
> Probably if we'd living not in GTA (property tax), buying basic food in "Food Basic" or No Frills or Dollarama we could've save more
> Currently (after becoming extremely frugal , as per my wife ) our *annualized spending for 2015 (based on 1st 6 months) stand on $86,168,* this is a big success comparing to 2014 when we spent 105K


That's not frugal.:biggrin: I live off $25k a year after tax pension, pay property taxes, *pay my remarried EX*$300 a month from my pension (indefinite court order for the rest of my natural life..welcome to Ontario), give to charities (Ottawa Humane Society etc), don't own a vehicle (just a scooter/wheelchair to get around) and I'm still putting away money each month in my TFSA. 

I could probably cut that down some more to about a $1 a day (for food) if the need arises.

of course my excess dental charges ($1800+ and it's still not over yet...no dental plan).... has blown away any savings over the last 3 months. 
Now when I open a can a cat food for my kitty each day...it is looking rather tasty..but so far, it's not replacing my KD (Kraft dinner).


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## kork (Jun 9, 2012)

Okay, so I've given it much thought. 

I'm getting a bit cautious with the recent correction in the market. I'm going to try and explain my thought process as well as I can.

A month ago it was.

1. Kork isn't wealthy, no trust fund, no inheritance. Just hard work and determination.
2. Kork and his wife have been working really hard to make hay while the sun shines and have managed to save around $410k with a couch potato strategy in RRSP's and TFSA's.
3. Kork talks to his father who indicates that Kork might be in a position of clawbacks with CPP and OAS, especially with OORP if he keeps going the way he is, hammering RRSP's. He also reminds Kork that he can't just live off the RRSP interest... Needs to convert to a RIF and draw from the principal.
4. With his discussions with his dad, Kork recognizes that with 20+ years to retirement, he's done a pretty decent job saving and can slow or even stop saving for retirement. Compound interest will take him the rest of the way.
5. Kork gets excited with the prospect of doing something completely different for a career and "semi-retiring" softof Kevin Spacey - American Beauty style, but perhaps with paddle boards. Earn enough to pay the bills, but no longer needing to save like a mad man!


Today it's a bit different.

1. Kork has been reading many threads in CMF and is getting nervous.
2. Kork no longer assumes he'll get an average of a 6% yearly return. Some years might be higher, some might be lower but over the next 20 years, we may see limited growth.
3. Kork concerned that consumption that drives our markets may slow down as we near "upper limit" of sustainable life on our planet.
4. Kork thinking that the future isn't nearly as rosey as the past.
5. Kork thinking that in 2036 when he's ready to retire... His investments will be worth $410k or even lower.

If I could reasonably assume a 6-8% return over the net 20 years then I'd feel much better. But then I look at the crash of 1929 and the 25 years it took to get back.... If we "crashed like that next year" it would take me all the way to retirement just to catch back up...


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## Sampson (Apr 3, 2009)

Interesting and enlightening last post. I wouldn't let doom and gloom cloud your judgement also. Look to see how many of your peers are in the same financial position as your family.

However, I'll always come back to sequence of returns risk and longevity risk as the 2 more important factors in being able to turn the taps off. You can reduce your market risk closer to retirement simply by shifting monies to non-correlated assets (bonds, cash, real estate etc), however, this will reduce the return on the money, therefore you will have to live with a lower (than 4%) withdrawal rate.

This simply means you need to accumulate more to be safe/certain (or enroll in a DB ).

Given that you like what you do, the risk of shutting it down now is too high. Pay off the house, continue to save like mad for 5-10 years, then you'll be in a position to do anything you want.


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## OnlyMyOpinion (Sep 1, 2013)

As they say "it's a corker"  The conundrum we all wrestle with - 'how much do I need? and 'what are reasonable assumptions?
A couple of notes: There is no CPP clawback - it is based entirely on how many years you contribute and how much. 
OAS does depend on your income but I would not stop saving now just to try to minimize clawback in 20 yrs. I would still save and take full advantage of RRSP's and TSFA's - not to the extent of total frugality now, but to the extent you can, i.e. more is better.
Yes, when you convert your RRSP to a RRIF, the minimum amount you must withdraw each year is prescribed and ultimately draws down principal and earnings. See: https://www.tdcanadatrust.com/products-services/investing/retirement-income-options/withdrawal-cht.jsp
With a diverse couch potato portfolio, a 6% nominal return over 20 years still seems reasonable, even if we are in a 'new normal' of slower growth and interest rates. Maybe get some level of comfort by using a 4% scenario as well and see where that lands you. 
The other thing to consider is that there shouldn't be a big 'cash in' that occurs at 20 years - you will likely want to have built up a cash/fixed income amount sufficient to see you through the first 5 years of 'no job/income', but the balance can continue to stay invested and shifted to FI over the next 20, 30, 40? years of retirement.

P.S. There are a gazillion out there, not sure if you have read this (US) one by Bernstein, "How Millenials Can Get Rich Slowly" http://www.etf.com/docs/IfYouCan.pdf


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## kork (Jun 9, 2012)

So another question... Let's say the markets tank... Does the cost of living often tank along with it as well? Food gets cheaper, gasoline, etc? Or is it the other way around? Oil drops which causes the markets to stumble?



OnlyMyOpinion said:


> P.S. There are a gazillion out there, not sure if you have read this (US) one by Bernstein, "How Millenials Can Get Rich Slowly" http://www.etf.com/docs/IfYouCan.pdf


Yes, in fact, I passed it along to my younger colleagues under thirty about 6 months back!


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