# Less than 5 years to go for retirement - Strategy for critique



## janus10

Just over a year ago, my wife and I were seriously contemplating retirement once the nest was finally free of the last child (we had supposed it would be 2015). But, fast forward to now, and both my wife and I are really enjoying our jobs - probably the best fits for us in our lifetimes. Above average income, below average stress, geographic benefits (incredibly short drive time for my wife, international travel for me) have all combined to a complete rethink.

If 2 companies are willing to pay us well for jobs we actually enjoy, it seems counterproductive to retire just because we can.

So, our new plan is to retire in 2019 (give or take a year) at which time the nest should definitely be long vacated. The strategy and assumptions would be:


for the next 4 years, max our RRSP contributions by contributing $33k / year
we have $27k of TFSA contribution limit which should grow to $71k assuming it stays at $5,500/yr per person. I.E. we will not be putting any money into the TFSA until we retire.
project that non-registered and RRSPs will grow to $1M (in 2015 dollars) in total by the time we retire (3.8% return after inflation/costs).
downsize the house and buy in a much more affordable neighborhood that we still anticipate will be close to at least some of our children, but also close to US border and major airports. This makes it easier and cheaper to travel whether it is to go to Florida for a month in winter or elsewhere.
take the difference in the net gain for housing switch and put at least $200k aside for the first 3 year's of retirement expenses. As much as our TFSA contribution limit would allow, we would shelter this. 1/3 of $200k would be put in high interest savings, and 1/3 in a 1 year GIC and the remaining 1/3 in a 2 year GIC.
now we would begin drawing down the RRSP first so as to minimize the impact of mandatory RRIF withdrawals. However, to rebuild the "cash wedge", we would need to convert some of the gains into cash-like instruments while siphoning off any non-registered dividends to this cash wedge.
the first 3 years are taken care of; the 5th year would be when my wife could begin receiving CPP early. The 6th year would be when I could begin receiving CPP early. Six years after that, my wife would begin receiving OAS and the subsequent year I would begin receiving OAS. About 3/7ths of our expenses would be covered by CPP/OAS at this point.
we assume we will get full OAS as it is today (adjusted for inflation) at 67, while CPP will be reduced by 36% for taking it early, and another 15-20% because even with the dropout provision, we would still have a few low earning years between 18 and 60.
we would retire with no debt, our current vehicles are 10 and 13 years old so we would retire with one vehicle fully paid for not newer than 3 years, and the kids' university loans would be paid up. We have also assumed expenses 25% more than we anticipate in case there is something major we have overlooked or we end up living finer than we do now.

Is there something obvious I haven't considered or a different strategy to consider in how to drawdown our savings?


----------



## HereToHelp

"$200k aside for the first 3 year's of retirement expenses. As much as our TFSA contribution limit would allow, we would shelter this. 1/3 of $200k would be put in high interest savings, and 1/3 in a 1 year GIC and the remaining 1/3 in a 2 year GIC."
- At first glance I would take a closer look at that assumption. If you are keeping that great of an allocation to short term funds, it looks as though you are you are missing out on the possible greater returns, while not putting your goals at risk.
- Also very tough to comment until you do a detailed cash multi-year cash flow report. A detailed financial plan would give you a clearer picture of your whole sitiuation.


----------



## Ihatetaxes

Just trying to figure out how you are going to sustain the after tax income you plan to have the first three years of retirement once that initial $200k is gone and you are left with RSP's and non-reg worth just over a million plus CPP/OAS. First three years you will have about $67,000/year with no tax liability. What do you project the breakdown of income will be after that?


----------



## RBull

^ I was thinking the same thing on the amount of net income after year 3 comparitively. Also unless I missed it year 4 doesn't seem to be mentioned. 

OAS may not be there for the long term.
Expected returns in next 5 years may be ambitious if/when we have a downturn for a couple of them
Carefully consider housing costs when downsizing. Most people over estimate value of current house and under estimate cost of future home that you would be happy with. We spent a lot more on our "downsized" house. Fortunately we planned for this.


----------



## janus10

Thanks everyone for their input.

HereToHelp - the idea of sheltering the first few years of expenses in laddered GICs is the Cash Wedge concept which seems to be gaining in popularity, especially after the most recent financial crisis in 2007/2008 which delayed retirement, or greatly reduced the standard of living, for so many people. This would represent about 1/6 of our investments.

Ihatetaxes - I reviewed our expenditures that we tracked, compared to others' breakdowns (for comparison and to identify any areas I may have missed or underestimated) and confirmed that the $60k was quite high. Instead, $52k before taxes is more inline with how we expect to live when retired, with a significant amount of discretionary income. My wife and I had some experience being out of work simultaneously for 9 months, so we also know what it is like to tighten our belts and what are truly needs vs. wants. I've also realized that if I retire by end of March of 2019, that should give me my 2019 YMPE (because the bulk of my bonus is paid out in February) and an extra year of RRSP max contributions (I forgot that 2018 earnings will give me 2019 room - D'oh!). Thus, the $200k will now cover the first 4 years of retirement - plus, early in 2023 my wife will start collecting CPP. Based on the new figures, and assuming a 3% nominal return rather than 3.8%, the 1st year of retirement will require an investment drawdown rate of 3.75%, going down the next year because I start receiving CPP, too.

RBull - we currently live in the GTA and have already investigated several communities in areas that we would like to live in. We've gone to several open houses to see what we would need to budget for a really nice, downsized house. It is anywhere from 1/3 to 45% of what our house is worth. I am not projecting our home to have additional value growth beyond inflation for the next 4 years. I've taken the highest amount we would spend for the new house, and the lowest amount for the value of our existing home (minus commission, closing costs, moving costs, expectation that you get less than listing price, etc.).

I haven't plugged the extra year of CPP contributions into my calculations, but it should be negligible all things considered.


----------



## livewell

Seems like a carefully thought out plan to me. The only question I would ask is why have any non-registered savings if your TFSA's have contribution room? I would (with the additional cash flow from the ongoing jobs) keep the RRSP and TFSA maxed out to benefit from the tax free compounding. This will/should more than offset the tax liability from sheltering the $200k cash wedge from tax on interest. Better to keep the higher growth equities in TFSA where you will not pay tax on withdrawal than the RRSP .


----------



## RBull

It sounds like you have a tight plan. Good luck working and continuing on track for your retirement. 

We are really enjoying our recent retirement.


----------



## janus10

Livewell - great question. We have a sizeable non registered portfolio that was setup in 2008. It's only in the last 2 years we haven't contributed to our TFSAS. And that is because we just felt more comfortable having an emergency fund sitting in our bank account rather than in our TFSAS. 

This is due to an unanticipated development where we both lost our jobs within two months of each other and out of work for 9 months. We weren't sure that our new jobs would work out - it took us until 2014 to feel very happy where we ended up.

And, I've always treated TFSAS as places to hold equity rather than safe investments. That is a behaviour I will be changing going forward and may in fact decide to contribute to our TFSAS again this year once the tax refunds come in. 

Maxing RRSPS has been our focus since we met - I have no contribution room left but my wife does. So, I looked again and determined we will be contributing $40k/yr for the next 4 years and a final amount somewhere north of that.

On another note, my wife's main RRSP is a spousal RRSP. Thus, another reason why we wanted to sock away the first four years of retirement expenses into fixed income is to also ensure that when she withdraws from her RRSP it will be taxed in her hands. I'll stop contributing to her RRSP in two years as that should put her ahead of mine and give me time to catch up before we stop working.


----------



## piano mom

RBull said:


> It sounds like you have a tight plan.


My parents in law never had anything close to a million dollars saved and still they had a wonderful retirement. I said "had" because my MIL now has cancer and they don't travel any more. They used to go on at least 2 big trips a year.

I say plan for 2019.


----------



## My Own Advisor

2019 retirement sounds lovely!

As for your plan...
1. max our RRSP contributions by contributing $33k / year - wow....great stuff if you can do this.

2. What are you using the TFSA room for? RRSP withdrawals to TFSA?

3. A $1 M non-registered and RRSP portfolio in 2019 would likely be "enough money". If you have more in non-reg. assets, the better I think. How are you investing the non-reg. money? CDN stocks? ETFs? Income-generating assets? $600,000 non-reg. yielding 4% stocks would be $24,000 per year and you wouldn't need to touch the capital.

4. I think having $200k set aside (in addition to the $1 M) above? is outstanding.

If you still have CPP and OAS to draw from in the coming years, it seems you are set...especially if CPP and OAS can almost cover 1/2 of your expenses. This is excellent.

Overall, a great plan, I hope to get there someday


----------



## gibor365

> Is there something obvious I haven't considered or a different strategy to consider in how to drawdown our savings?


For me , the most unpredictable think when retired is medical care that not covered by OHIP, especially dental care... and older you become, more care you need ....


----------



## Eclectic12

janus10 said:


> ... It's only in the last 2 years we haven't contributed to our TFSAS.
> And that is because we just felt more comfortable having an emergency fund sitting in our bank account rather than in our TFSAS...


I don't understand this ... I have two TFSAs, one with the emergency fund with the main bank - which can be in my hands on a next business day basis (worst case, two business days). There's also a brokerage TFSA for equity investments, where some investments are available two business day basis and some are on a four business days. 

If there's TFSA contribution room available and emergency fund cash - surely tax free in the TFSA is better than paying income tax on it?


Then too, if one decides that the situation has changed and more equity is the game plan going forward - the new TFSA room granted in Jan will allow for this. Where one also wants to cut back on the cash part, one can withdraw in mid to late Dec, which in Jan will become additional TFSA contribution room for the equity TFSA.

... just my two cents.

Cheers


----------



## janus10

My Own Advisor said:


> 2019 retirement sounds lovely!
> 
> As for your plan...
> 1. max our RRSP contributions by contributing $33k / year - wow....great stuff if you can do this.
> 
> 2. What are you using the TFSA room for? RRSP withdrawals to TFSA?
> 
> 3. A $1 M non-registered and RRSP portfolio in 2019 would likely be "enough money". If you have more in non-reg. assets, the better I think. How are you investing the non-reg. money? CDN stocks? ETFs? Income-generating assets? $600,000 non-reg. yielding 4% stocks would be $24,000 per year and you wouldn't need to touch the capital.
> 
> 4. I think having $200k set aside (in addition to the $1 M) above? is outstanding.
> 
> If you still have CPP and OAS to draw from in the coming years, it seems you are set...especially if CPP and OAS can almost cover 1/2 of your expenses. This is excellent.
> 
> Overall, a great plan, I hope to get there someday


The focus has always been on maximizing RRSP contributions first, TFSA second, due to our tax bracket. Since we have never taken any money out of our TFSA, it wasn't clear how painless this process is (I think we all have stories about how difficult banks can make it to get access to our own money). So, because we wanted to have an emergency fund immediately accessible, we went the past 2 years with that in our bank account.

But, with so many questioning why we did this, I think it is time to adjust our strategy to take advantage of the TFSA room again. We can catch up on our TFSA contribution room (2014 and now 2015) and invest in equities. Then, when it comes time in 4 years to create our Cash Wedge, we can pull that out and transfer it to our non-registered portfolio (or even count it as a contribution to our RRSP) and then put the cash proceeds from downsizing the house into some GICs in the TFSA. Hopefully our room will have grown larger due to capital appreciation.

Non-reg portfolio is almost exclusively in Canadian stocks that pay dividends and is about 70% the value of our RRSPs. Of course, the RRSPs will start pulling ahead if only because we will be contributing about $40k / year for the next few years. I'm with you on the idea of constructing a portfolio where dividends could be enough to provide all the income necessary without needing to touch the capital. Our RRSPs, OTOH, are almost exclusively US stocks that pay dividends.

Yes, the idea is that if we can approach $1M in RRSP/Non-Reg and have another $200k in laddered GICs to take us into retirement, it should be a pretty solid foundation because my wife and I are not high maintenance. It will be a shock for my wife to start seeing our balances go down, so it may take 2-3 years before she even thinks of loosening the purse strings.


----------



## janus10

gibor said:


> For me , the most unpredictable think when retired is medical care that not covered by OHIP, especially dental care... and older you become, more care you need ....


Dental care won't be a problem - one trip to a minor hockey game, sitting close to the action where the glass is low, and, if lucky, that should remove all the chiclets from the mouth! 

But, your point is well taken - I have the impression that self-insuring is the better way to go - premiums too high to cover too little, with high deductibles. Likely we will pay out of pocket.


----------



## janus10

Eclectic12 said:


> I don't understand this ... I have two TFSAs, one with the emergency fund with the main bank - which can be in my hands on a next business day basis (worst case, two business days). There's also a brokerage TFSA for equity investments, where some investments are available two business day basis and some are on a four business days.
> 
> If there's TFSA contribution room available and emergency fund cash - surely tax free in the TFSA is better than paying income tax on it?
> 
> 
> Then too, if one decides that the situation has changed and more equity is the game plan going forward - the new TFSA room granted in Jan will allow for this. Where one also wants to cut back on the cash part, one can withdraw in mid to late Dec, which in Jan will become additional TFSA contribution room for the equity TFSA.
> 
> ... just my two cents.
> 
> Cheers


No income tax on our emergency fund since there is no interest paid on the money. In reality, the money was there in case some big expenses came up (we thought we might have to put down the 13 year old SUV but it got a reprieve); we need a new roof; and, my wife wasn't sure if she was going to get this job offer. So, now that the vehicle is still humming along, my wife went from a 1 year contract to permanent, we can adjust our thinking to be less conservative.


----------



## janus10

It's been 3 months since I started this thread and our investment balances have improved: RRSPs up $47k ($15k from contributions); Non-registered up $63k; TFSA up $2k (still haven't made any new contributions - need to have a discussion with my wife about our future); savings/emergency fund up $35k.

Also realized that the idea of using the Cash Wedge could be modified. If I have built up a substantial cash wedge, I could not only use that to fund the short to medium term retirement expenses, but also tap into it when markets are down to buy when things are on sale. It means I want to have 1 or 2 extra years worth of very liquid assets.

My CEO asked me last month how much longer would I continue to work and I hesitated a long time before giving him an answer - not the truth, necessarily, but the answer. I said 5 years but my real thinking is that I will have stopped working by then, or in a very different role (e.g. part time with reduced responsibilities).


----------



## janus10

Another month in the books and RRSPs are up $67k YTD ($25k from contributions); Non-registered is up a heady $90k; TFSA up $18.5k (finally contributed $16.5k); savings/emergency fund still up $35k. That puts total liquid assets at a level where I projected them to be by the beginning of 2017.

One of the best developments is having a discussion with my wife to make sure she was going to redirect her efforts into our financial well being. Interestingly, she seems to be having more of those days where she isn't thrilled with her coworkers. It only takes one or two people to ruin it for everyone.


----------



## My Own Advisor

Janus10 - your non-reg. is up $90K in one month??

If so, wow, great work.


----------



## RBull

^I think it's 90K YTD for non registered and large gains in other accounts although I can't follow what is gains and what is contributions. 

Janus10 are you heavy in oil stocks that tanked last year and are now recovering, or do you have some other magic formula? It may be helpful to share your investing tactics.


----------



## janus10

^^^ Yes, the gains are all YTD and the RRSPs ($25k) and TFSAs ($16.5k) and emergency fund ($35k) have had contributions.


----------



## janus10

Tonight I get to break the good news to the wife. 

My projections were that we would hit, in 2015 dollars, a total portfolio (RRSPs, TFSAs, Non-registered, cash) value of $1M in early 2019. Our balance was $760k in mid-January, but as of this morning, we topped $1M. 

Other than tax refunds totalling $16k, there wasn't any new money input. I moved some money from our cash accounts into RRSPs and TFSAs, and saw some price appreciation in stocks.


----------



## scorpion_ca

Would you mind to share the name of your holdings? $240k gains in five months...amazing.


----------



## janus10

scorpion_ca said:


> Would you mind to share the name of your holdings? $240k gains in five months...amazing.


I'm not sure there can be any lessons learned based on my holdings. My biggest holding is in HXU, the second biggest is in NA (I've held a position in that for more than 7 years), but after that it's just a hodge podge of about 40 holdings none of which is more than 0.3% of overall value. The big change in the last six months is going overweight energy and TSX index.

About $350k (spread across all of the different accounts) is cash just in case something compelling goes on sale.


----------



## My Own Advisor

janus10 said:


> Tonight I get to break the good news to the wife.
> 
> My projections were that we would hit, in 2015 dollars, a total portfolio (RRSPs, TFSAs, Non-registered, cash) value of $1M in early 2019. Our balance was $760k in mid-January, but as of this morning, we topped $1M.
> 
> Other than tax refunds totalling $16k, there wasn't any new money input. I moved some money from our cash accounts into RRSPs and TFSAs, and saw some price appreciation in stocks.
> 
> More than half of the gains were from trading in low beta investment vehicles. This month's results were equal to what I hope to achieve on an annual basis going forward, but I need to work smarter. Even though I scale into a position, I'm still starting too soon and scaling too quickly. My skills need to definitely improve if I am going to utilize this as a long term strategy. I prefer to "hit singles" by taking small profits along the way, but this month I decided to let some winners run.
> 
> I'd also like to learn how I can use options to either mitigate risk or even improve gains.
> 
> First step is to figure out where to invest this month's profits.


First of all, great news to share!
Second, congrats! $1M in assets is a HUGE, literally, milestone.
Third, wow, $240k gain in 5 months??? You must be trading because the indexes haven't climbed that much. Good on you if you can make those calls....

Fourth, why not keep your profits in blue chips and simply let the dividends flow in?


----------



## gibor365

> My biggest holding is in HXU, the second biggest is in NA (


 HXU YTD is up 4.2% and NA YTD is down 1.4.. %. are you sure that your calculations is correct


----------



## 1980z28

janus10 said:


> Tonight I get to break the good news to the wife.
> 
> My projections were that we would hit, in 2015 dollars, a total portfolio (RRSPs, TFSAs, Non-registered, cash) value of $1M in early 2019. Our balance was $760k in mid-January, but as of this morning, we topped $1M.
> 
> Other than tax refunds totalling $16k, there wasn't any new money input. I moved some money from our cash accounts into RRSPs and TFSAs, and saw some price appreciation in stocks.
> 
> More than half of the gains were from trading in low beta investment vehicles. This month's results were equal to what I hope to achieve on an annual basis going forward, but I need to work smarter. Even though I scale into a position, I'm still starting too soon and scaling too quickly. My skills need to definitely improve if I am going to utilize this as a long term strategy. I prefer to "hit singles" by taking small profits along the way, but this month I decided to let some winners run.
> 
> I'd also like to learn how I can use options to either mitigate risk or even improve gains.
> 
> First step is to figure out where to invest this month's profits.


Nice,well done

Enjoy the peace you get from no debt and dollars that will out live you at your rate of return


----------



## janus10

MOA - thanks. My original ambition was to create a dividend generating portfolio that serviced all of my expenses. Perhaps when government programs kick in and I'm not as mentally sharp as I am now, it makes sense to put the portfolio on autopilot. Most of what I buy generates dividends but I have no REITs, nor do I have much exposure outside of North America. That definitely deserves some study over the summer. 

Gibor, I said they were my biggest holdings not necessarily the biggest drivers for my portfolio growth. However, check the HXU price in mid January when I backed up the truck. In spite of the TSX drop today, HXU is 15% higher than mid January. I honestly don't check how my individual stocks are performing. I look at the entire balance of RRSPs and everything else. I'm sure if I did a check, there probably could be the need to do some pruning of stocks that don't belong anymore. Basically, I am not an investor that anyone should model themselves after except for maybe one thing. When I was 16, I gave my mom some money to invest on my behalf and have been hooked ever since. It was fascinating to me to be able to do so little physical work and generate money.

1980 (or do I call you Mr. Z28?) - this did kind of come up quite fast but as nice as it feels, I still felt better the one time I broke 90 on a par 72 course. :biggrin: but, this isn't like a finish line - the job isn't over just because we achieved this goal. As my wife obviously pointed out due to her financial illiteracy, I don't get to lock in this value. So, the journey will continue perhaps for a year or two, hopefully building up a bigger portfolio while also positioning for ER.

I'm still going to be the coupon clipping, bargain hunting guy I've been all my life. No reason to fix what ain't broke.


----------



## gibor365

> In spite of the TSX drop today, HXU is 15% higher than mid January.


 if you bought it at lowest point and sold at highest, you need to play in casino  You posted gain is 32% ... just curious what could`ve you trade to get it


----------



## My Own Advisor

@Janus,

Well done 

I'm not a trader myself, just buy and holder of stocks and ETFs. That's it. Rather simple. 

As I get older, although I remain somewhat enamoured with dividends, I'm also decreasing the risk in my portfolio by holding more assets in ETF products, more diversification - I expect capital growth this way - but there are never any guarantees which is why I have a hybrid approach of 30-40 stocks from Canada and the U.S. and everything else is indexed. 

For us, I know we can retire when the cash flow from investments will cover most of our expenses. We'll have some pension income to rely on and I never include CPP and OAS payments in our income needs calculations, since I/we will consider that "gravy". 

Looks like you're WELL on your way to making retirement a reality. At what age might I ask? Late 40s? Early 50s?


----------



## janus10

gibor said:


> if you bought it at lowest point and sold at highest, you need to play in casino  You posted gain is 32% ... just curious what could`ve you trade to get it


I don't think I've ever, in my life, bought something at the bottom and sold at the top. I bought a lot near the recent lows (I already owned a significant portion from late last year when it was in the 24's), but only sold some very recently because I saw a much better opportunity to make a lot more money very quickly. Fortunately, I was right. So, I will buy back the HXU that I sold last week at a price lower than what the selling price was.

I already said I'm not very good at timing. :smilet-digitalpoint


----------



## janus10

My Own Advisor said:


> @Janus,
> 
> Well done
> 
> I'm not a trader myself, just buy and holder of stocks and ETFs. That's it. Rather simple.
> 
> As I get older, although I remain somewhat enamoured with dividends, I'm also decreasing the risk in my portfolio by holding more assets in ETF products, more diversification - I expect capital growth this way - but there are never any guarantees which is why I have a hybrid approach of 30-40 stocks from Canada and the U.S. and everything else is indexed.
> 
> For us, I know we can retire when the cash flow from investments will cover most of our expenses. We'll have some pension income to rely on and I never include CPP and OAS payments in our income needs calculations, since I/we will consider that "gravy".
> 
> Looks like you're WELL on your way to making retirement a reality. At what age might I ask? Late 40s? Early 50s?


I think we are more alike than you might guess in terms of our thinking of investing. OTOH, I am projecting CPP and OAS even though we may not need it. It seems more likely to me that CPP benefits may be further hindered (such as the greater penalty for early registration) or even delayed (like the OAS) rather than outright eliminated. The OAS is more at risk, IMO.

What I also project, which probably not a lot of people do, is the idea that my spending in retirement will decrease by the time we are 75, if not sooner. Statistical and empirical evidence supports this for those with significant discretionary income. 

And, I'm the big 5-0. While we are ahead of where we hoped to be when I was 42, we are behind where we could have been. A divorce, children, an illness, and my wife and I both losing our jobs and being out of work for more than half a year, tend to cause plans to wobble.

I think that once our only remaining child who lives with us gets established in her career (probably in 2 years from now as her apprenticeship will be done in about 18 months), then we should be in a position where we will decide to retire, or just semi-retire.

Years ago a co-worker and I were lamenting a very difficult client that provided not only most of our variable based compensation, but was the company's largest revenue source. He told me that he wanted to put himself in a position where he could be in a financial position where if he didn't like working for the company, he could just walk out. Just two weeks ago I had him over for a poker night with my ex-colleagues (he still works for that company, where morale is extremely low after years of job cuts) and we got to talking about Daryl Diamond's book about his ideas of creating a retirement income blueprint. He surprised me when he said he isn't even close to considering that. He, the guy who inspired me to really focus on paying down debt, putting money to work! He makes 6 figures, has a wife who makes 6 figures, and, from what I can tell, no extravagant purchases. He is a bit older than I am, so I was quite surprised that he wasn't financially prepared or even close to it.

This is unlike another person who was let go at that same company, who was in his late 50's and, again, constantly making 6 figures. Now, his wife never worked and they had the same modest home for over 25 years. His situation was that he never even considered retirement once he received the package. It took a few conversations with him before he started to see the silver lining of spending more time on his hobbies, with his wife, and with his friends. 

I think the point I'm trying to make is that it is hard to get to an end goal if you aren't actively working to it, or don't even put a goal in place. My trick after my inspiring conversation with my colleague was to write down where I wanted to see our investments and net worth in the next 5 years, print it out, and put it in my pocket (I like to think Rory McIlroy copied me). When I would take it out and look at it, it would be a reminder to keep focused on the long term journey. It was really helpful to ingrain a mindset early on, but was superfluous once I was well on my way.

I have to give credit to my wife for making sure that we enjoyed the journey along the way - I can tend to be very myopic and probably would have put off a lot of enjoyable experiences that would have hindered our ability to get to FI. She helped me to see that we could enjoy life now AND still save for the future. Our goal was initially to retire at 60, then after a few years in, we adjusted that to 55. Now we can see that our date depends more on what we want, rather than what we can afford.


----------



## james4beach

My critique is that it sounds like (given how much your portfolio is increasing in a short period) that you're way over-exposed to equities!

You said you're 5 years to retirement. What if there's a bear market? Stock market returns over a period as short as 5 years are basically random. After a lifetime of building wealth, you're betting pretty big on the home stretch. That seems awfully risky to me.

Have you modelled what will happen if a repeat scenario of 2000/2008 happens? Will it ruin your retirement?

From reading your posts, it feels to me like you have actually *increased* your aggressiveness in the home stretch ... in a gamble to pull ahead with a 'margin of safety' over the goal ... whereas I think the wiser action would be to reduce your aggressiveness, increase cash and fixed income allocations, and ease off equities. That feels very dangerous to me.

Especially while you're ahead -- as you are now. You gambled and you got lucky. Surely that's the ideal point to tone down the risk taking, to reduce your market exposure?


----------



## janus10

^^^^ Great points. We are about 67% equities and 33% cash. The cash portion would represent about 6+ years of retirement expenses. Our thinking is to have cash and a ladder of GICs to mitigate against a bad sequence of returns. Overall, with only 2/3 equity allocated to equity, we receive about 2% dividend income. 

If I rearranged our equities for dividend focus and cash for fixed income, with the low interest rates available, we would not have enough to meet retirement expenses without capital gains. A combination of dividend and fixed income covering retirement expenses could be accomplished today but only if we downsize our home and place the untapped home equity into fixed income. Our plan though is not to do that until we retire, at which time we should also accumulate another $100k of contributions to RRSPs and TFSAs. 

We have a larger cash position in both relative and absolute terms than probably any other time in our lives (definitely in absolute terms).

Last year was probably my 3rd best earning year and this year probably will be 2nd highest in the last 7 years. 

Preserving capital, as you intimate, is paramount in retirement and barely less so when this close to it. Thanks for the reminder to make that rule #1. And rule #2 is to never forget rule #1.


----------



## janus10

Just a quick update. Markets have just moved back out of correction territory but our portfolio total just made a new high. Active investing strategy has been a consistent winner month after month after month and is the prime reason we are up 40% off our February low (about 5% of the growth has been through RRSP/TFSA contributions).

It looks like I need to be less concerned with my wife embracing early retirement - she works for a small company and there are some key people who love to divide and conquer if you try to make things better. She is looking for a new job (she had hoped that THIS would be her last full time job) but she would even consider a part time job if everything is the right fit.

Everything continues to point to 2017 being the latest for when we are truly empty nesters which paves the way for downsizing our house and moving out of the GTA. 

We've increased our volunteer efforts by working with an organization that opens their doors to feed the poor a hearty, healthy dinner and we could see volunteering at our local hospital in whatever city in which we end up. That should have an additional benefit of increasing our social network. For anyone who has frequently volunteered at a hospital, did you experience an increase in frequency and/or intensity in being ill?


----------



## My Own Advisor

"Everything continues to point to 2017 being the latest for when we are truly empty nesters which paves the way for downsizing our house and moving out of the GTA."

2017 isn't that far away....so that puts your retirement at what, early 50s?

_That's very good janus._

I liked your point above...."it is hard to get to an end goal if you aren't actively working to it, or don't even put a goal in place."

I feel my wife and I are finally working together and in-sync for the same goals. We hope that semi-retirement is about 10 years away for us. We don't mind part-time work but at least that will be mostly by choice. We'll see, so many things need to come together for that to happen.


----------



## janus10

My Own Advisor said:


> 2017 isn't that far away....so that puts your retirement at what, early 50s?
> 
> _That's very good janus._
> 
> I feel my wife and I are finally working together and in-sync for the same goals. We hope that semi-retirement is about 10 years away for us. We don't mind part-time work but at least that will be mostly by choice. We'll see, so many things need to come together for that to happen.


Yes, early 50's.

How did you and your wife get in synch? I'm not sure I could point to an exact moment for us, but definitely talking about it, sharing what we each envision retirement to be, suggesting books for her to read (which are very different than the ones I like about retirement) were all helpful. I've been interested in investing since I was 16 and money since I was 5 whereas my wife is more like me with gardening - if I have to do it, I will, but I'd rather enjoy other things. 

External influences from workmates or friends who are working also helped. When things are tough and people complain about working, it helps make early retirement a reality. Plus, the more we volunteer the more we think about how we could help even more people when we retire - and make a little positive impact in the world. 

We only know 1 person who ER'ed - he was in the RCAF and gets a pension while his younger wife is a self employed Project Manager who works from home and makes close to $250/hour!


----------



## janus10

For the last 2 months, I've been taking every Friday off because I had carried over so much vacation time from last year it was mandated that I used it. It was nice.

Now, my wife wants to go ask her boss if she can work out an arrangement whereby she only works 4 days a week. She is not optimistic, but perhaps is laying the groundwork for next year.

I actually thought we would be closer to being empty nesters, but it hasn't worked out well for my step daughter career wise (my daughter graduated from uni and secured a job well before her finals - in spite of that, she can't afford to live on her own and instead moved back with her mom). Frankly, if it weren't for my step daughter's boyfriend and their plans to save up money and buy a house, she simply could not afford to live on her own based on her current income. So, they both now live with us and are still not appreciating the opportunity they have to learn how to rein in discretionary spending.

So, I'll be having a talk with them because I don't believe they quite have a grasp on how difficult it is, financially, emotionally and physically, to own a home. And, if they are serious about having a family, then it will be even a bigger shock.

I'm reading all back issues of MoneySense and capturing all kinds of articles to share with them (thanks, Texture subscription). 

While I had hoped 2017 would be our ER year, I have started to set expectations to sometime mid to late 2018. After I speak to them, maybe they'll change their minds about how quickly they'll be ready to move out on their own.



So, we may need to hang in there for a bit longer than we thought. I've grown a bit more frustrated with my boss and his grandiose ideas on how to grow our sales. The problem is that he is costing all of us in sales a great deal of money for commitments that he made to the executive team that not one of us thought was in any way realistic.

If certain payouts don't come to fruition at the end of August, I'm sitting down with the CEO and telling him what the reality is. If they won't make changes, I certainly will. Ironically, that would benefit 2 of my colleagues since they could split all of my accounts and a couple of them would see a huge increase in their variable compensation.


----------



## strathglass

janus10 said:


> We've gone to several open houses to see what we would need to budget for a really nice, downsized house. It is anywhere from 1/3 to 45% of what our house is worth.


Your strategy is interesting because it is very similar to the strategy my wife and I will use.
In our case We expect to spend 50-67% of the proceeds from the sale of the current GTA house on a new rural house, freeing up about 500k to add to the current (mostly registered) savings.

The issue is who knows how long the current crazy GTA prices will last...you've seen all the news.
So we plan to sell this fall if we can be ready or next spring latest: this is really about 2 years sooner than ideally we would like.
Have you given any thought to speeding up your sale to avoid any bubble bursts?
You can do like we plan to do and rent for a year or so...gives us time to find a new place.
Since we are looking more rural the selections are not quite as much as a normal residential place.
We are thinking of maybe 1hr+ east of GTA, where are you looking?


----------



## Spudd

Strathglass, we moved to Cobourg from Toronto and have been very happy so far (a year and a bit into it). Check it out.


----------



## gibor365

Spudd said:


> Strathglass, we moved to Cobourg from Toronto and have been very happy so far (a year and a bit into it). Check it out.


On average , what the difference in prices between GTA and Cobourg?



> We are thinking of maybe 1hr+ east of GTA, where are you looking?


 We were thinking of maybe up to 2hr from Pearson, direction doesn't matter....


----------



## Spudd

I couldn't really say but it's a lot cheaper here. When we moved, houses here were less than half the price they would be in Toronto. You can look on Realtor.ca to get an idea.


----------



## strathglass

We've been looking rural so north of Cobourg/Port Hope and south of Peterborough.
Can't really compare GTA to that area since it is rural ...also not so many properties for sale.
But as I said we would expect to pocket 500k after getting the new place, which seems realistic based on what we've seen.

The reason I said about an hour east (we are already in east end of GTA) is to ensure we are distant from potential future Pickering airport. Although prospects for that airport are at least diminished/delayed under current government, still want to be careful about that one. If not for that, we wouldn't be looking so far east.


----------



## janus10

strathglass said:


> janus10 said:
> 
> 
> 
> We've gone to several open houses to see what we would need to budget for a really nice, downsized house. It is anywhere from 1/3 to 45% of what our house is worth.
> 
> 
> 
> Your strategy is interesting because it is very similar to the strategy my wife and I will use.
> In our case We expect to spend 50-67% of the proceeds from the sale of the current GTA house on a new rural house, freeing up about 500k to add to the current (mostly registered) savings.
> 
> The issue is who knows how long the current crazy GTA prices will last...you've seen all the news.
> So we plan to sell this fall if we can be ready or next spring latest: this is really about 2 years sooner than ideally we would like.
> Have you given any thought to speeding up your sale to avoid any bubble bursts?
> You can do like we plan to do and rent for a year or so...gives us time to find a new place.
> Since we are looking more rural the selections are not quite as much as a normal residential place.
> We are thinking of maybe 1hr+ east of GTA, where are you looking?
Click to expand...

As someone earlier warned, don't be surprised at how much you may end up spending when 'downsizing'. We have looked at more houses and we see the kinds of fit and finish we have lived with for over a decade and it wouldn't be as easy as we thought to go more basic. So now I could see us buying something more in the 50-67% of what our house is worth range just like you.

Definitely no way we are selling until we quit work because those two events go hand in hand. The only possible albeit slim chance that would happen is if someone wanted us to remain in the house as tenants.

We are looking west and south because we are already in the West of GTA. It would keep us relatively close to family and Toronto and buffalo airports. No more than 90 minutes away from Pearson area for example.


----------



## Koogie

janus10 said:


> We are looking west and south because we are already in the West of GTA. It would keep us relatively close to family and Toronto and buffalo airports. No more than 90 minutes away from Pearson area for example.


We moved to Dundas a year ago when we semi-retired. Quite like it and also the Ancaster area. It is not at all like the preconceptions of Hamilton that most people who drive the QEW have. 
We looked all over this area and also into the Niagara peninsula. St. Kitts is also an option if you want to be further out and the houses there are very cheap. You are dependent on the QEW to get anywhere else mostly though, so that is a drawback. If you want to go small town/rural, I really feel that Port Colborne has a bright future. It has a great location/situation and verrry cheap prices but probably needs another half decade/decade to shed a lot of its post industrial decay.


----------



## Mechanic

What if you see a house you like and its more ? It happens. Just happened to my wife and I. In the process of supposedly downsizing we found a place that we both really liked in a location we liked. Only problem was it was bigger and was 60% more than we sold the other place for.


----------



## OnlyMyOpinion

Mechanic said:


> What if you see a house you like and its more ? It happens. Just happened to my wife and I. In the process of supposedly downsizing we found a place that we both really liked in a location we liked. Only problem was it was bigger and was 60% more than we sold the other place for.


Wouldn't that mean your main priority was to move, rather than to unlock some of the value tied up in your current home to help provide for retirement in 5 years?


----------



## janus10

Mechanic said:


> What if you see a house you like and its more ? It happens. Just happened to my wife and I. In the process of supposedly downsizing we found a place that we both really liked in a location we liked. Only problem was it was bigger and was 60% more than we sold the other place for.


I can only speak for myself but I didn't get to where I am because I confuse wants with needs. I've seen all kinds of things that I can afford and don't buy, and they are in the hundreds or thousands or tens of thousands of dollars. I'm not about to go against my grain and buy a multi-million dollar home because I like it. We may as well stay where we are!

There are always things that I wished I could have, but am not willing to make the sacrifice for today, or tomorrow, to obtain it.


----------



## My Own Advisor

"I've seen all kinds of things that I can afford and don't buy, and they are in the hundreds or thousands or tens of thousands of dollars."

New homes and new cars that cost >$50k come to mind...

More people need to have this mantra


----------



## olivaw

Mechanic said:


> What if you see a house you like and its more ? It happens. Just happened to my wife and I. In the process of supposedly downsizing we found a place that we both really liked in a location we liked. Only problem was it was bigger and was 60% more than we sold the other place for.


I can understand how this would happen. My wife and looked at show homes a few years ago. Some of those upscale homes are awfully tempting and awfully expensive. Fortunately, we talked ourselves out of upsizing. 

Mind you, the renovations and repairs to our 1970s era home have not exactly been cheap. .


----------



## My Own Advisor

I keep following this thread and hoping we'll be where you are eventually....

1. Max out RRSP contributions. I'm done, need to work on wife's account. Your contributions of $33k per year is outstanding.

2. I assume you haven't maxed out TFSA(s) due to large RRSP value? Move extra RRSP money (withdrawals not spent) to TFSA?

3. With non-registered and RRSP assets close to $1M, and I assume no debt, you should be able to withdraw $30-40k per year nicely and never run out of money. Downsizing the home and putting that equity into a new home, and making some money off the existing home is extra buffer.

4. Then you have CPP and OAS to look forward to which should bring in, conservatively, $1,000 per month easily after-tax.

5. The "cash wedge" I'm looking to build up is about one year's of expenses. I would draw down that every year while a new "cash wedge" is created with dividends and distributions. I'm not sure how big your cash wedge will be?

Overall, you've done very well to retire in 50s and have $1M in the bank. Likely the envy of most Canadians!


----------



## janus10

My Own Advisor said:


> I keep following this thread and hoping we'll be where you are eventually....
> 
> 1. Max out RRSP contributions. I'm done, need to work on wife's account. Your contributions of $33k per year is outstanding.
> 
> 
> 2. I assume you haven't maxed out TFSA(s) due to large RRSP value? Move extra RRSP money (withdrawals not spent) to TFSA?
> 
> 3. With non-registered and RRSP assets close to $1M, and I assume no debt, you should be able to withdraw $30-40k per year nicely and never run out of money. Downsizing the home and putting that equity into a new home, and making some money off the existing home is extra buffer.
> 
> 4. Then you have CPP and OAS to look forward to which should bring in, conservatively, $1,000 per month easily after-tax.
> 
> 5. The "cash wedge" I'm looking to build up is about one year's of expenses. I would draw down that every year while a new "cash wedge" is created with dividends and distributions. I'm not sure how big your cash wedge will be?
> 
> Overall, you've done very well to retire in 50s and have $1M in the bank. Likely the envy of most Canadians!


Hi MOA, I wouldn't be shocked if you get there and perhaps earlier than you have planned for because you are constantly educating yourself and this is a passion for you.

1. RRSP contributions - it is a lot easier to contribute large amounts when you make a very good income, have paid off your mortgage and don't have car payments. So, it is, to me, unremarkable considering the fortunate situation we are in. I think for the 2015 tax year we contributed close to $40k. In reality, my wife is at that borderline income where the TFSA vs. RRSP argument is valid. I've stopped the spousal contributions because we are now close to retiring. Why did you take care of yours and not your wife's? Difference in marginal tax rate or she has a work pension and you don't?
2. TFSA - my wife has some additional room. She will be topping it up as I just recently found out she has $15k sitting in a savings account. That was a pleasant surprise as she has always been complaining about not saving enough. So, chalk up the situation about not maxing to laziness I guess. And ignorance. Two helpings full.
3. The priority has changed to one where we need to preserve capital. Don't screw it up now that we have arrived where we want to be. Increase the safety margin until we actually retire. I'm actually very, very slowly starting to move into a higher cash position by selling some equities. However, we do have debt - an investment loan which I'm paying only 2.7% interest rate on and the dividends more than pay for the annual interest charges before we even get into the tax credits. I think we would like to take out about $60k/year but put $11k of that into our TFSAs. I projected $42k/year after taxes and TFSA contributions, should give us everything we need.
4. I built my own CPP calculator and can adjust it for dropout provision, early retirement and taking it early. I'm actually anticipating that we will each receive more than $1,000 in today's dollars when we finally get both. Can't remember right now what we expect out of CPP when we each turn 60, but it should account for about 20-25% of our needed income for fixed and discretionary.
5. Our cash wedge would be about $300k, or 5 years x $60k/year. We will have no other income (assuming we fully retire and don't get bored enough to take on even part time jobs) except from our investments for the first few years. Why are you thinking only 1 year of expenses for your wedge? Because you have a solid list of dividend aristocrats as the cornerstone of your income?

You know, it sounds nice to retire in early 50's but my dad didn't have nearly the net worth in RRSPs and a house that I do. BUT, he had a workplace DB pension. So, when he retired (about 56 I believe) early with his then wife (who had a smaller DB pension), they could have been set for life. And, really not see any significant change in their lifestyle - they weren't big on travel or hobbies, so their needs were simple.

My dad and his wife never came close to the income that my wife and I have enjoyed, especially the last few years. Yet, their pensions alone afforded them the kind of income I would be happy with. Factor in CPP and OAS and I'd trade places! After all, guaranteed money with no concerns about market fluctuations. The only risk was that if they needed a great deal of money, they would have no resource to tap.


----------



## OnlyMyOpinion

janus10 said:


> ... anticipating that we will each receive more than $1,000 in today's dollars...


That seems high to me if you are taking it at age 60 in 3 years, but it sounds like you've done the math?


----------



## janus10

OnlyMyOpinion said:


> That seems high to me if you are taking it at age 60 in 3 years, but it sounds like you've done the math?


Haha - sorry for the confusion. That was for both CPP and OAS at 65. I think CPP probably would be around $1,200/month combined, but I'd have to run the numbers again.

And, we are still a good 6 1/2 and 8 years from early CPP.


----------



## Shanline

Just read out your plan after retirement. Look like a decent plan and effective. Though I have lot's of time for retirement. But I will surely follow the above tips.


----------



## My Own Advisor

Thanks Janus10 - we'll see.....so many things have to come together for us in the coming years....

1. RRSP. Mine is maxed out thanks in part to a DB workplace pension *and* I started contributing to this account in my early 20s. My wife did not. She has a good job now so spousal RRSP makes little sense. I hope to see her RRSP maxed out in 2-3 years with her contributions.

2. TFSA. We have no room until 2017. I think it's smart for you to max these accounts out.

3. The priority has changed to one where we need to preserve capital. "Don't screw it up now that we have arrived where we want to be."

I'm starting the same journey, since I hope part-time work is 7 years away before age 50.

This means we are:
a. increasing our cash wedge every year going-forward. e.g, this year, say $11k. Next year, maybe $13k. etc., etc. We are not increasing this via selling anything. 
b. ensuring we have a diversified basket of dividend paying stocks (30-40) to cover most of the CDN market.
c. ensuring we have more U.S. dividend paying stocks (up to 20) to cover cash flow from U.S. - U.S. travel money eventually.
d. index invest everything else for long-term growth.

4. CPP and OAS - no really worrying about at all. Any money we get should be gravy - at least that is the plan.

Continued success!!


----------



## gibor365

janus10 said:


> Haha - sorry for the confusion. That was for both CPP and OAS at 65. I think CPP probably would be around $1,200/month combined, but I'd have to run the numbers again.
> 
> And, we are still a good 6 1/2 and 8 years from early CPP.


How did you calculate your approximate CPP? I found it very confusing to calculate if you stop working before 60 and start getting it at 60...



> b. ensuring we have a diversified basket of dividend paying stocks (30-40) to cover most of the CDN market.
> c. ensuring we have more U.S. dividend paying stocks (up to 20) to cover cash flow from U.S. - U.S. travel money eventually.


 so you're planning to have up to 60 individual stock + several ETFs? Some will tell it's too much


----------



## janus10

gibor365 said:


> How did you calculate your approximate CPP? I found it very confusing to calculate if you stop working before 60 and start getting it at 60...


I like math. It was a math exercise and thankfully I had some of the examples in Dogger's thread against which to test my calculations.

Tomorrow I sit down with my boss. I will tell him that unless they are willing to make some big changes, we need to find an exit strategy for me. For example, if I could work only 3 days a week, cut down on the travel, and make close to what I'm making now, then we have something. Putting my energy into 3 days would allow me to accomplish more per/day than I do now. And, having 3 days off (1 day would be filled with errands and house work) would be a massive lifestyle upgrade. 

Now, where would I go? I don't know - this may be my retirement, or it may be a temporary retirement, or I may just end up doing something similar, or something very different.

My wife doesn't want to quit just yet because she likes her job and her boss. And she is very much ok with me retiring now - I offered to take over all of the housework, which would definitely be a bonus for her. She did state that I had to found some regular activities out of the home. That won't be a problem (although I reserve the right to stay in bed under the covers when it is -15C outside!).

I am already feeling a huge burden lifting off my shoulders, although there is a slim chance that my work will find some way to structure a new role and compensation package that would keep me there. Even so, I'm not sure for how long because once I got my head around leaving them, it would be hard to accept staying on for more than a year.

Now, working for another company could be very exciting because there would be a new start and a great deal to learn.

Interesting times indeed...


----------



## canew90

Though you may be years away from 71, keep in mind the minimum RRIF withdrawal requirements. They are taxed at your highest rate and can become a real pain. We have just under $1mil in our rrif and have to claim close to $60k as income. We do transfer to the tfsa and non-reg, but it still causes a big tax bite.
We didn't have the option, but I definitely would have max'd out a TFSA before putting so much into rrsp if we had the choice. I would have gladly paid a bit more tax then rather than later because tax rates rarely go down.


----------



## steve41

Remember...... RRSP vs TFSA is virtually a saw-off. If you die prematurely, the the TFSA has the edge, if you live to nice ripe age the RRSP has the edge.


----------



## gibor365

> My wife doesn't want to quit just yet because she likes her job and her boss. And she is very much ok with me retiring now - I offered to take over all of the housework, which would definitely be a bonus for her. She did state that I had to found some regular activities out of the home. That won't be a problem


 It's very similar to our situation 



> Though you may be years away from 71, keep in mind the minimum RRIF withdrawal requirements. They are taxed at your highest rate and can become a real pain.


So, don't switch to RRIF is you get termination/severance pay or EI .... another option


> If your spouse is younger than you, you can use their age to calculate your minimum amount. This is a good strategy if you have other sources of income and want to leave your money in your RRIF for as long as possible


http://www.getsmarteraboutmoney.ca/.../Pages/Making-withdrawals-from-your-RRIF.aspx
In this case it's more flexible as minimum will be less and there is no maximum, however, if you withdraw more than minimum, you gonna pay withholding taxes and you'll have problem if RRIF is spousal (attrition rule if you withdraw more than minimum)


----------



## Shanline

gibor365 said:


> In this case it's more flexible as minimum will be less and there is no maximum, however, if you withdraw more than minimum, you gonna pay withholding taxes and you'll have problem if RRIF is spousal (attrition rule if you withdraw more than minimum)


It's possible to withdraw more rather than deposit?


----------



## janus10

Spoke to my boss. Basically he asked for me to stay until end of September as we have a big corporate event then and it would be ideal for me to be there. That's OK as I'll end up getting another month of commission.

He also said that there will be some significant changes in the sales organization to reflect our maturity as a company and provide the foundation to allow us to double revenue in 3 years. Thus he asked me to hold off on deciding anything for a couple of weeks while the executives look at everything. I'm sure I'm not the only one unhappy with this year.

So, I still have four options open and full retirement is the leading option.


----------



## janus10

Handed in my resignation letter and now the countdown begins. I had envisioned knowing a good year in advance so that I could get a day desktop calendar and peel the days off one by one.

There isn't time for such nonsense! I only have 39 days to go!


----------



## Spudd

Congratulations! It'll be a happy Halloween for you this year!


----------



## My Own Advisor

janus10 said:


> Handed in my resignation letter and now the countdown begins. I had envisioned knowing a good year in advance so that I could get a day desktop calendar and peel the days off one by one.
> 
> There isn't time for such nonsense! I only have 39 days to go!


Wow. Great stuff Janus 

Congrats!!


----------



## janus10

Thanks Spudd and MOA.

Just got a consulting offer today. Part time and they are asking me what my hourly rate would be. This is a precursor to becoming a full time employee.

Probably will quote a high figure to see what they think. No sense trying to be cheap and cheat myself since I don't need this.

A days work could pay for a nice cruise for my wife and I. That's a good trade off. 

The part time consulting is a nice segue because there's no way I'd want to commit to a full time position.


----------



## My Own Advisor

I think you're very smart to work 1 or 2 days per week max. Again, well done


----------



## avrex

I noticed your news on the other thread.

I just wanted to come over to this thread to congratulate you on your Retirement this Friday.

Enjoy it. You'll have more time to trade.


----------



## janus10

Thank you very much! I just finished my last business trip. And I told a (soon to be former) client of mine to get back to me in the new year. If I'm still interested and available, then we can talk about consulting for them on a contract basis.

A month from now my wife and I will take a nice cruise. So many things to do - very much looking forward to it 

My overall cash position is about 60%. Our biggest portfolio is up 120% since the February lows while our RRSPs are up about 35% since then. 

I have done very little trading since I got out of my short vol play after Brexit. Just a few writing covered calls and that long vol via bull call spread.

I would say that while everyone I've spoken too has congratulated me, there has been a subtle underpinning of disbelief and even jealousy on occasion. That's why I'm not saying anything to old work colleagues from my previous employer. I don't want them to get the wrong impression that I'm gloating.

I'll post next month with what my plans are to keep busy.


----------



## My Own Advisor

Looking forward to hearing your plans. That is inspiration for many of us!


----------



## Lost in Space 2

I didn't catch your age, early 50's? I'm quite impressed that you made this insipte of a divorce, it's a huge finacial set back. 

I retired 6 years when work dried up and the wife is fast approaching her end date, hoping for 61 for her. I'm shocked at how many of our friends are planning on working to 67 or even 70!


----------



## janus10

Lost in Space 2 said:


> I didn't catch your age, early 50's? I'm quite impressed that you made this insipte of a divorce, it's a huge finacial set back.
> 
> I retired 6 years when work dried up and the wife is fast approaching her end date, hoping for 61 for her. I'm shocked at how many of our friends are planning on working to 67 or even 70!


Yes, FI/RE at 51. A divorce is probably better to have earlier on in your life as you have longer to recover from the effects both financially and emotionally.

So, you'll be retired 7 or 8 years before your wife calls it quits? I doubt my wife will be working past next year - in fact, it wouldn't surprise me if she is done by next summer. I hope that she has already started to see some of the benefits of me taking over most of the household chores and various errands. That should make it easier for her to handle the inevitable stresses that result from working.

So far the biggest activity that I've spent time on since retiring is volunteering - that's keeping me very busy during the day and 1 evening per month (which is when my wife can join me).

The second biggest usage of my time is running around doing errands that are seasonal (getting vehicles ready for the winter, putting up the Christmas lights, shopping for various things). So, that should pretty much be eliminated shortly.

One of the very positive changes is spending more time exercising - some days I even exercise twice, although that is a bit tiring with all of the other running around. But, since we are off on vacation next week, I needed to get reacquainted with that "beach body" I used to know. We "plan" on working out during our week off - let's see how diligent we are!

I haven't been able to find the time to finish a couple of books on finance, nor my BIG book on options. I'm hesitant to take it on the trip in case I don't end up reading it.

Since I retired 3 weeks ago, our portfolios are up a little more than 5% in spite of holding 60%+ in cash. Instead of Trump being so bad (which I actually was planning for) it has turned out well... so far. 

Thanks to TCK.B, FCX, oil and especially market turmoil in Jan/Feb and Brexit, we have had a very good year with our portfolio. We have recovered from the lows of Feb 12 to gain over 120% in our margin account, with much smaller gains in our RRSPs (40%) and TFSAs (55%).

I'm trading a lot less and with a lot less capital. Just biding my time for a substantial pullback.

Oh, and it is nice to drive during the day and not have to be worried about time. If someone wants to cut me off, or race to the next light, I can just ignore it. That's a nice perk. Parking when grocery shopping (or the all too frequent trips to Home Depot) are a breeze now.

So, all in all, 4 out of 5 stars at this early stage.


----------



## lonewolf :)

I would consider a deferred annuity (laddered) for some of your RRSP money maybe a portion linked to CPI Or go for bigger payout hold a little gold & silver in none registered account. I would use TFSA for GICs & none registered for playing markets.


----------



## My Own Advisor

Janus10,

I'm curious if you're still "on track" for everything to stay FI?

1. You have non-registered + RRSPs still worth ~ $1 M? Do you consider that "enough money" to maintain retirement? (I assume yes but curious about you....)
2. What about your TFSAs? What value will that/they be? That's in addition to $1 M? Also, I assume you'll keep that intact; i.e., withdraw from RRSPs and then non-reg. first before withdrawing from TFSAs?
3. Could you live off non-reg. + RRSPs until CPP and OAS kick in? (see #1)
4. Is the cash in addition to your $1M nest egg?

Lots of questions but working on our own plan and curious to see yours - trying to always learn from folks who have been there and done that!


----------



## janus10

lonewolf :) said:


> I would consider a deferred annuity (laddered) for some of your RRSP money maybe a portion linked to CPI Or go for bigger payout hold a little gold & silver in none registered account. I would use TFSA for GICs & none registered for playing markets.


Deferred Annuity? Take a portion of money now, it gets invested, but payouts don't happen for a decade or so? I must have heard of this, but it never registered, probably because I keep thinking to wait to look at annuities when I'm close to 70.


----------



## janus10

My Own Advisor said:


> Janus10,
> 
> I'm curious if you're still "on track" for everything to stay FI?
> 
> 1. You have non-registered + RRSPs still worth ~ $1 M? Do you consider that "enough money" to maintain retirement? (I assume yes but curious about you....)
> 2. What about your TFSAs? What value will that/they be? That's in addition to $1 M? Also, I assume you'll keep that intact; i.e., withdraw from RRSPs and then non-reg. first before withdrawing from TFSAs?
> 3. Could you live off non-reg. + RRSPs until CPP and OAS kick in? (see #1)
> 4. Is the cash in addition to your $1M nest egg?
> 
> Lots of questions but working on our own plan and curious to see yours - trying to always learn from folks who have been there and done that!


Well, it's only been 4 weeks, so it would be a little hard to get too off track just yet! 

The RRSPs and non-reg are a bit over $1M now. And, since my wife continues to work, we shouldn't have to deplete much of it. I expect them to continue to grow but not necessarily as quickly as they have done this year.

The TFSAs are a bit over $50k and we will see how we can take money from the margin accounts and shelter that into the TFSA next year when the new contribution is available. I'd like to get them over $100k by 2019. Stretch goal? $1M in our TFSAs by 2025!

Yes, RRSPs first, then non reg and then TFSA last. The non reg has grown so fast that while it was less than half of the value of the RRSPs near the beginning of this year, I could see within a year that it will be surpass them, especially once we start taking money from RRSPs.

My goal is for the non reg + RRSPs to be higher values than now, inflation adjusted, when we are eligible for CPP. That means we would have to withdraw a fair bit less than their growth, or from another perspective, they will have to grow faster than we can take money out. 

Of course, another factor is what will be the situation when we downsize. It seems I continue to underestimate how much our home is worth. Thus, there is the potential that we will be able to see a bigger equity release when we move (I'd say within 2 years), but I'm not counting on that.

The 60 - 40 ratio of cash to equities was only referring to our investment portfolio. When there is a market pullback, we will deploy some of that cash to take advantage. We also have about a years' worth of expenses in various chequing/savings accounts.

Once we get to $2.5M NW, then I might reward myself with a newer vehicle. I've spent more than $1,000 on my 2002 vehicle this year to keep it going and I'm using it more now that I volunteer so much. I wouldn't be so keen to beat up a newer vehicle - there's a freedom in not caring if your vehicle gets scratched or dirty. 

If things go well in the next few months, I would like to take my dad to New Zealand. That wouldn't be a cheap trip and I haven't even discussed it with him yet. But, I'm going to be the cliche retiree - travel will be one of the big expenses in early retirement.


----------



## My Own Advisor

Thanks for the detailed response. Amazing work to get to where you are by age 51.

You have confirmed the same approach I should take, if possible - deplete RRSPs first, then non-reg. then TFSAs. You have also confirmed that having some side-income / part-time job to pay for some expenses + $1 M portfolio is "enough money" to retire on - assuming no debt. 

Finally, you have confirmed that New Zealand would be nice


----------



## 1980z28

Nice to see that your plan for retirement has arrived
Very nice indeed


----------



## steve41

Do not deplete your RSP first.... foolish. The only time that makes sense is if you expect to die prematurely.


----------



## My Own Advisor

Steve, you couldn't be recommending TFSAs first so I assume you're thinking to deplete non-registered account before RRSPs? Why? RRSPs are a deferred-tax burden. Depending on your assets, non-reg. is tax efficient. TFSA assets are the most tax-efficient - tax free.

Can you explain further? Don't you want to rid yourself of tax-laden assets sooner than later? The older you get, age 50, 60, 70, or whatever don't you generally aspire to be tax efficient as soon as you can?


----------



## GreatLaker

My Own Advisor said:


> Steve, you couldn't be recommending TFSAs first so I assume you're thinking to deplete non-registered account before RRSPs? Why? RRSPs are a deferred-tax burden. Depending on your assets, non-reg. is tax efficient. TFSA assets are the most tax-efficient - tax free.
> 
> Can you explain further? Don't you want to rid yourself of tax-laden assets sooner than later? The older you get, age 50, 60, 70, or whatever don't you generally aspire to be tax efficient as soon as you can?


Not Steve, but my fee-only financial planner recommends drawing from non-registered first, then RRSP, then TFSA. For me it means basically TFSA will never be accessed unless investment returns are really bad. That approach is tempered somewhat by withdrawing a small lump sum each year from RRSP after retirement up to age 71 in order to minimize OAS clawback.

I think the reason is tax deferral. RRSP withdrawal is taxed at full marginal rate so you defer higher taxes until later, thereby deferring more taxes. The benefit of using planning software like RRIFmetic or using a financial planner is the ability to run scenarios to get the highest retirement spending rate without assuming too much risk, or the highest tax-efficient estate value.


----------



## redsgomarching

The only reason I believe to withdraw funds from TFSA is that it does not cause any clawback in OAS/GIS payments if I remember correctly, meaning, the withdrawals on the tfsa are not included in one's income. Truly an amazing plan if it continues this way. Assuming 5.5k yearly contribution room and having it currently maxed at 46.5k with average returns of 4% is 360k. 360k can generate nearly 15k of taxed free income!!!!


----------



## janus10

My Own Advisor said:


> Thanks for the detailed response. Amazing work to get to where you are by age 51.
> 
> You have confirmed the same approach I should take, if possible - deplete RRSPs first, then non-reg. then TFSAs. You have also confirmed that having some side-income / part-time job to pay for some expenses + $1 M portfolio is "enough money" to retire on - assuming no debt.
> 
> Finally, you have confirmed that New Zealand would be nice


Oh, yes, New Zealand is gorgeous and the people are very nice and laid back. Golfing is ridiculously cheap (I remember passing by a course, kind of out of the way, and the cost to play was about 20% more than a large bucket of balls on a driving range in the GTA).

Frankly, based on what I've read on your blog and your goals, you should be in fantastic shape when you retire. I think you'll be in a position to retire earlier than you state, but then it becomes more of a mental and emotional challenge rather than financial ("are we sure? are we really REALLY sure we can retire now?!")


----------



## janus10

GreatLaker said:


> Not Steve, but my fee-only financial planner recommends drawing from non-registered first, then RRSP, then TFSA. For me it means basically TFSA will never be accessed unless investment returns are really bad. That approach is tempered somewhat by withdrawing a small lump sum each year from RRSP after retirement up to age 71 in order to minimize OAS clawback.
> 
> I think the reason is tax deferral. RRSP withdrawal is taxed at full marginal rate so you defer higher taxes until later, thereby deferring more taxes. The benefit of using planning software like RRIFmetic or using a financial planner is the ability to run scenarios to get the highest retirement spending rate without assuming too much risk, or the highest tax-efficient estate value.


In the scenarios I have run, the RRSP withdrawal first IS the most optimal way. Now, I haven't run it in a few months, but I can certainly revisit it with new assumptions and projections.

I think one of the implicit assumptions is that the growth in a non registered will be very similar to the growth in an RRSP. Imagine, however, where the growth is significantly different between the two... or imagine that one anticipates that depleting the non reg first leads to a very large RRSP that soon becomes an RRIF with forced withdrawals that put one in a very high tax bracket. 

I'd be surprised that there aren't any scenarios where RRSP first is not the best solution because I've seen it with simulations time and time again. There are exceptions to the rule.


----------



## 1980z28

Same plan here for rrsp


----------



## janus10

Just as an example of what I alluded to, on February 11/12th, our margin account was about $20k less than my main self directed RRSP. As of today, with no additional contributions (or withdrawals) to either, the margin account is greater than my main self directed RRSP by $136k. They hold very different investments and I use different strategies with both.

The RRSP is only up about 40% YTD (excluding contributions of course) while the margin account is up over 95% since the beginning of the year. I don't want to draw down from the higher growth portfolio - and I am not projecting gains approaching what we've seen this year for the future. However, I will anticipate that the margin account should grow significantly more in percentage and absolute terms.


----------



## steve41

GreatLaker said:


> Not Steve, but my fee-only financial planner recommends drawing from non-registered first, then RRSP, then TFSA. For me it means basically TFSA will never be accessed unless investment returns are really bad. That approach is tempered somewhat by withdrawing a small lump sum each year from RRSP after retirement up to age 71 in order to minimize OAS clawback.
> 
> I think the reason is tax deferral. RRSP withdrawal is taxed at full marginal rate so you defer higher taxes until later, thereby deferring more taxes. The benefit of using planning software like RRIFmetic or using a financial planner is the ability to run scenarios to get the highest retirement spending rate without assuming too much risk, or the highest tax-efficient estate value.


I have talked about this before...... 'most individuals and financial planners avoid the issue of life expectancy'. When you factor in the acturarial aspect, then the following happens...

If you attack your RRSP early and you die prematurely, your estate will be advantaged, if you shelter your RRSP preferentially and you live to a ripe old age your estate will likewise be better off. 

(the reverse is true for both scenarios) 

Steve


----------



## OnlyMyOpinion

GreatLaker said:


> Not Steve, but my fee-only financial planner recommends drawing from non-registered first, then RRSP, then TFSA...That approach is tempered somewhat by withdrawing a small lump sum each year from RRSP after retirement up to age 71 in order to minimize OAS clawback.





janus10 said:


> In the scenarios I have run, the RRSP withdrawal first IS the most optimal way...I'd be surprised that there aren't any scenarios where RRSP first is not the best solution because I've seen it with simulations time and time again. There are exceptions to the rule.


_This is the song that never ends, Yes it goes on and on my friends ... _ 

We batted this one back and forth and ended up on GreatLaker's side of the pond (note optimizing OAS is not a consideration). 

I can only suggest that a person make sure the $ difference in scenarios is significant enough, within the context of the assumptions that have to be made (ror, inflation, longevity, tax regs, etc.). 

It is not necessarily just a risked npv based decision. One of the less tangible things that swung us to spending our non-registered from age 59-72, then shifting to RRIF income, was the need to crystalize our capital gains (losses ) in a planned fashion over several years of retirement. I am personally much more comfortable making those decisions through my 60's rather than waiting until my 70's and beyond. It will also provide for periodic lump sum gifting earlier from non-reg assets.


----------



## kcowan

steve41 said:


> If you attack your RRSP early and you die prematurely, your estate will be advantaged, if you shelter your RRSP preferentially and you live to a ripe old age your estate will likewise be better off.


You say that your estate always wins. What about avoiding OAS clawback? Does that not favour early RRSP withdrawals? What about spousal income splitting? Does that not favour early (65) RRIF?


----------



## steve41

I didnt say that.... "the reverse is true" means If you shelter your RSP and die early or attack your RSP and live to a ripe old age, your estate loses.


----------



## janus10

OnlyMyOpinion said:


> _This is the song that never ends, Yes it goes on and on my friends ... _
> 
> I am personally much more comfortable making those decisions through my 60's rather than waiting until my 70's and beyond.


This is a good point and one I've thought of. Hopefully I'll be like my parents (in terms of mental clarity) but better (in terms of physical wellness).


----------



## janus10

It's been 3 months since I've retired (my wife continues to work) and I'm enjoying it quite a bit.

Part of it is to not have to deal with questionable decisions (not unethical or illegal!) by management and the pressures and stress from a sales position that requires extensive travel.

I've got a nice routine with my volunteering gig and it provides a welcome social aspect where I can have a few laughs while doing something which helps those much less fortunate than I am.

I've taken a cruise soon after retiring and next month I'm off for nearly a month long trip to New Zealand and Australia. I wanted my dad to see these places before he gets any older and I know he wouldn't have done this on his own.

I was under the weather around Christmas so I read seven books over 9 days - that's more than I probably have read in the past two years! Really enjoyable books and the unadulterated pleasure of being so selfish with my time was a bonus.

I'm spending a bit more time trading and have figured out a much less risky strategy that's paying off nicely. Our portfolio is up more than $100k since we retired. YOY our NW is up significantly not in any small part because the entire market is up massively since last year at this time. I had grossly underestimated the value of our house, but even adjusting for that our NW has increased just about $500k YOY.

Half a mill up in a year and portfolio up $100k in a quarter? More please! One more year like that and my wife promised she will retire, too. 

More than half of our portfolio remains in cash to minimize the risk of getting walloped by a market correction as well as having capital ready to deploy when things go on sale.

Our nest should be empty this year. That will allow us to get the house ready for sale making the process easier. My wife is appreciative that I've taken over the vast majority of the house work. Getting the kids to step up hasn't gone as smoothly but it's better than it was.

My 2002 SUV is giving me real problems with the transmission in cold weather. So it looks like a newer vehicle will be required before next winter - that will be a big expense for the year.

I cashed in a small RRSP (it was a TD mutual fund based on the Nasdaq) and I've told my wife to stop contributing to her RRSP and concentrate on her TFSA. She still contributes to her work DPSP and she will be vested this year.

All in all, it's been a nice first three months. I started this thread just over two years ago and it's rewarding to see our 5 year plan didn't take nearly so long. Usually it works the other way.

I still feel like there isn't enough time to do everything but that's also because there seems to be so much more enjoyable things to do.


----------



## Dilbert

It's great to hear things are going well for you. You struck a chord with me, as I am about thirteen months from my retirement goal and work in Sales, too. I'm so looking forward to not having the corporate pressure and the monotonous travel to deal with any longer.


----------



## janus10

Good for you, Dilbert. I hope each day you look forward to it a little bit more and it makes food taste better, and flowers smell sweeter.

What I haven't mentioned is that two companies with whom I worked in strategic partnership while at my last employer have asked me to unretire.

I can't see myself doing it. One wants a full time contract position and the other a part time contract position.

The part time job leaves me plenty of time to do other things that I need and want to do. But, after paying both portions of CPP and with RRSP and capital gains and dividends and interest income, I'll be left with less than half probably.

The full time will pay very well but it brings back the stress and wipes out my ability to do what I want when I want.

Not too appealing right now in either situation.


----------



## Dilbert

I hear you, I annually get some some fairly generous stock awards that vest over three years at a rate of one third a year. Some I am going to have to walk away from ultimately, as I must be employed by them in order for the vest to occur. The stress and hassle of continuing to work just to receive them, just isn't worth it to me. Not an easy decision, but I'm okay with it.


----------



## janus10

If it isn't clear that I'm not cut from the conservative cloth of investing, here is an example.

I am holding a hedged position in Natural Gas (a calendar spread) and while it is in a significant unrealized gains position with a lot more room to move in my direction, it wasn't always so.

Thanks to a massive run-up coinciding with the winter high and contract rollover, our margin account was at a pretty low point on December 28th. But, I knew that time was on my side. Even though it dropped almost 15% from the previous day close. A few days later, when we started the New Year with markets open on January 2nd, that account was up 16.5% on the day.

So, with patience, and some additional trading in commodities , our margin account is up 48% since then which marks a multi year high.

I doubt many people, especially retirees, would be able to live with that kind of volatility in their second biggest asset. Hence why I'm not an example to follow and learn from, except as perhaps a counter example.

Don't strain your collective necks shaking your heads.


----------



## hboy54

janus10 said:


> If it isn't clear that I'm not cut from the conservative cloth of investing, here is an example.
> 
> I doubt many people, especially retirees, would be able to live with that kind of volatility in their second biggest asset. Hence why I'm not an example to follow and learn from, except as perhaps a counter example.
> 
> Don't strain your collective necks shaking your heads.


I would have thought that most would consider me the most reckless around here. I hereby bow down to the fearless leader.

My wife is taking a LOA with the intent of retiring the following year. She and you have certainly well benefited from "sequence of returns risk" upon retirement. It was a stunning year at this end for the portfolio.

Enjoy your retirement.

hboy54


----------



## janus10

Had a breakthrough in the margin account. Yes, it's been a great trading month, but that's only part of it (no weed stocks have ever been part of my investment portfolio). With the recent tanking of Natural Gas, the margin account is 3x what it was on Feb 12 2016. Now up $270k just from late December when Natural Gas hit its peak.

Good thing, too. My 2002 Santa Fe is starting to have some serious transmission problems. I should go eat Chinese and see if my fortune cookie says "You will be transported in new surroundings"

Next month should be quiet as I will be on the other side of the world. Hopefully, nothing spooks the market until I get back.


----------



## janus10

Partway through my trip to New Zealand and Australia with my dad, I really wanted to be home. I was glad to have been able to make this once in a life time trip happen for my dad, but I didn't enjoy it as much.

I actually started to dislike retirement - vacations are for VACATING something you don't like (usually work). But, leaving my wife and family behind was what occurred on this vacation so it was a lot less enjoyable than I expected. (I had also been to these parts of the world previously so perhaps that diminished the enjoyment).

The hours at the Food Bank for volunteering completely disappeared for various reasons, so I started to really feel down about what value I was bringing to the home and community. I've tried applying for volunteer jobs - it is somewhat similar to a paid job! Still haven't received any responses (although I was contacted out of the blue for a directorship at a non profit animal shelter - unfortunately I've not owned a pet so that is out of the question) but I'm hoping to get a spot in a hospital where you get to hold preemies for a couple of hours. That sounds like a truly fantastic role, help provide physical contact when their parents aren't around.

I had a good talk with my wife who said I shouldn't feel guilty for retiring early and that my taking over the household chores really helps her enjoy her weekends. What makes it worse is that things aren't ideal at work, but she is too scared to retire just yet - and my roller coaster of emotions isn't helping.

BUT, with the weather getting much better, I've been going on daily walks and that has really been enjoyable. My injured shoulder has healed somewhat (not enough to resume exercising, let alone dusting off the golf clubs) through twice daily physio. My wife and I had a mini break up to Blue Mountains which is the first time I've been there - really beautiful and we thoroughly enjoyed it. In a couple of weeks I'm taking my daughter on a mini break, so that should be fun.

Last week I got myself a new vehicle - completely loaded with the latest safety features, more money than I've ever spent on a vehicle and the first brand new vehicle for me since I got my first job. It is SO much nicer than my old 2002 SUV (which I sold privately in 1 day at full asking).

I think my wife wants to wait (if she can, her job seems under threat of transitioning to the US) until next spring to retire. Retiring before the winter could be too tough a transition if my experience was any indication.

I've also resigned myself to the idea that we may stay in the house a little longer than planned. Our daughter and her bf aren't making the kind of progress we hoped in terms of getting their finances on track for moving out. I think our daughter may have finally turned a corner, but we've seen this story before.

I also joined meeting.com and attended my first meeting within days. It turns out it was just a presentation by a business hoping to gain clients. I was the only non-incented person to attend. I'm going to try again and look for something different because that is NOT what I want out of these get togethers.

In summary, early retirement (even with all of my reading of it ahead of time and great ideas) turned out to be emotionally more challenging than I anticipated. But, I'm feeling more settled and in a routine because I gave myself permission to enjoy it without guilt.


----------



## kcowan

Meetups are for interest groups and the selection is crucial. I belong to one that does 10 mile hikes around the lower mainland. I would definitely give them another try. I think you will enjoy retirement more when you wife retires and your daughter leaves. Afternoon delight should really convince you that you are living you life. I know what you mean about travelling with Dad. I used to spend Sundays with him on his agenda. I would take him to Toronto Island or up to his cottage at Woodland Beach. Here https://www.meetup.com/The-Toronto-Expat-American-Meetup-Group/ is an example.


----------



## Eclectic12

Thanks for the update.

I can relate to the vacation disappointment but not so much to the retirement dislike or the lack of volunteering opportunities resulting in down emotions.
It sounds to me (feel free to tell me I am wrong) that the volunteering is a substitute for work as opposed to moving onto retirement.


When retirement happens for me, I will see if it is a somewhat similar emotional challenge or not. After watching my dad expect he would be called for advice from work after retiring then be at loose ends to the point of providing more efficient steps to boil water to mom - I have built into my pre-retirement activities some of the ones that I expect to do in retirement so that it won't be a cold turkey switch.


Everyone is different so what is effective will also be different.



Cheers


*PS*

My co-worker has had his kids leave the house so one of the things they did to help was decide on two activities a week that each one picked. He picked for summer golfing/winter curling while she picked dancing lessons. He figures that this will help ease them into future retirement of much more time together as the kids consumed their time.


----------



## janus10

I had no idea it's been so long since I posted an update. I think with a new year upon us, it is time to also think towards a new 5 year plan.

There have been some big changes - my wife joined me in early retirement in late September. She, too, has had some difficulty adjusting to it, but for the most part she is really enjoying it.

Throwing a monkey wrench into our plans was that on her last day at her job, we bought a new home. Unfortunately, after 3 weeks of decluttering, fixing, painting, etc. we finally had the house on the market about a week after Thanksgiving. And, even after dropping the asking price by $50k, it still sits unsold. We anticipate that we won't find a buyer until probably the spring, now.

We took the chance of buying before selling because we were finding it difficult to find a home and a place that we both would love to move to. If we had known that it would take so long to sell, we probably would not have taken the plunge.

That is especially true because of the stress of trying to get a mortgage when we were both retired without any pension. Ironically, we had lived mortgage free for years and now we have a whopping $700k mortgage while not working! We feel quite comfortable holding this mortgage in spite of having a self funded retirement, and we are very much enjoying adding our personal touches to our new home.

But, let this be a cautionary tale for those who might find themselves in the same spot as we did. It is a difficult concept for banks to consider loaning people a lot of money to buy a second home when we could show little steady and guaranteed income. I just took a look at our non-registered account - it held about a 40% cash position at the start of 2017 and ended with a 30% cash position. In the 12 months, however, I did actively trade and we showed an increase of 52% for the year. This was absolutely critical for us as I had to take out $200k to help with the downpayment for our new home. This account, in spite of the $200k withdrawal, ended the year at a larger balance than when it started.

At the beginning of the year I cashed in an RRSP mutual fund (the only one I had owned) and received about $15k after withholding taxes. That was the only withdrawal that I had - my wife got a severance package from her work in a lump sum and sheltered some of it. She will be cashing in her small work RRSP (about $12k) and I will take out some from my RRSP (which primarily held about a 60% cash position but I did a few trades during the year and it ended up about 25% overall) to help cover the mortgage payments until we can sell the house. All in all, I think our investments across TFSAs, RRSPs and non-registered grew about $350k for the year.

Our plan for 2018 is:

1) SELL OUR HOUSE - hopefully get a buyer in March and close in April.
2) Take the net proceeds from the house and pay off our HELOC and 20% of our new whopping mortgage, increase our payments by 20% as well. (We should be able to retire the $700k mortgage within about 4 years if we determine that paying a penalty isn't worth it. Until we actually know what we'll net, nothing has been decided.)
3) Assuming we don't completely discharge the mortgage immediately, then we can put aside some money for a nice backyard project for our new home, maybe replace my wife's 2005 vehicle, and a lump sum into our savings accounts to cover off expenses for the rest of the year.
4) The remainder will go into our non-registered account where I hope to continue my short volatility trading strategy which has worked very well in 2015, 2016 and 2017. I'll have a lot more capital to use so I would hope to obtain greater profits in absolute (and maybe even percentage terms). 2017 was a great year to hold short volatility positions throughout the year - it was not so kind to my strategy where I only hold them after a significant spike. We never saw the kinds of spikes, in either frequency nor strength, in 2017 like the two previous years.
5) Once we are established in our new home, which is about an hour away from where we live now, we will need to find some volunteer opportunities like we have enjoyed here. In addition, my wife wants us to investigate traveling abroad to volunteer for extended periods of time, which I think is a wonderful idea. This will need some investigating as we don't know of anyone who has done this.

Our longer term goal is to continue to grow our investment portfolios so that in 5 years we can surprise our 3 kids with help to jump start their efforts towards financial independence. It will be interesting to see how they mature during that time, but for the most part, they have shown a good grasp of being prudent with spending below their means. They won't be wise to our plans to help them during this time - and it won't be enough to come close to making them FI, but it will cut out a few years from their pursuit.

I've become a bit better at being a handy man, but I still have a lot to learn and know that there are things I'm better paying a professional. I plan to take up golf again, continue to exercise (our new home has a finished basement and we've identified a room that will be our home gym vs. our unfinished basement with equipment scattered around), volunteer even more, read for pleasure and take up a new pursuit, as yet unidentified. I'll also continue to coach family and friends about my short volatility strategy - our kids were able to get a small taste in 2017 and it worked out very well for them in spite of the less than ideal conditions and their very limited capital.

Thus, 2017 was a good year all things considered and my wife and I are looking forward to an even better 2018.


----------

