Help Me Work Through This (Early) Retirement Plan

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
longinvest
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Re: Help Me Work Through This (Early) Retirement Plan

Post by longinvest »

skinnyinvestor wrote: 20 Dec 2017 15:01
longinvest wrote: 20 Dec 2017 14:47 A portfolio of risky assets (e.g. stocks and bonds) can't safely provide a stable inflation-indexed income. (Give me a SWR rate, I'll give you a sequence of returns that will prematurely deplete the portfolio). VPW sidesteps this by adapting withdrawals to market returns. But, there's no "bottom" on future portfolio returns, so VPW can't provide a safe floor. That's why having stable non-portfolio income is so important, in retirement planning, if one does not want to have to get back to work after retirement at the most inconvenient of times because of bad market returns.
Understood and agree. I'll re-work again with a 25 year gap.
For such a long gap, I would consider building a non-rolling Real Return Bond (RRB) ladder, with rungs maturing every 5 years or 3 years (based on available RRB maturities) with an appropriate face value (considering their index ratio), to eliminate inflation risk. A clever and cheaper implementation of the ladder would take bi-annual coupons into consideration.
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
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Re: Help Me Work Through This (Early) Retirement Plan

Post by skinnyinvestor »

Vacation reading list = FIniki RRB page.

Also, I got confirmation today of the wife's pension eligibility. Unreduced pension at 55 with 30 years service or at 60 with 20 years service. Seems like a no-brainer to work the 7.5 years (20 years service) and no more; use the VPW strategy to bridge to 60 then add in the Wife's pension and delay CPP/OAS to 70.
I assume melting the RRSPs and bulking the TFSA in the bridge period would result in the lowest taxes paid - finiki notes RRBs best held in registered.
I haven't done any of the math yet, but this is what's rolling around in my head at the moment.
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Re: Help Me Work Through This (Early) Retirement Plan

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Still working on the RRB scenario and required reading.

This leads to another complication with needing to hold ex-Canada in Non-Registered account.

Any significant issues holding XAW in Non-Registered accounts?

Considering my overweight Non-reg 'Big Canadian Bank' position (With significant capital gains) and the lack of a 100% ex-Canada option in my DC plan, if I want to hold the RRB in a Registered plan as suggested, I would need to hold XAW (or the like) in Non-Registered account to have the desired asset allocation. As an aside, the Lessons Learned thread has me thinking that I need to stay as simple as possible - especially considering my wife has no interest in these matters.
Speaking of my wife's accounts and simplicity, I was thinking maybe a single balanced fund for all of her Registered accounts? Apparently I cannot buy MAW104 through my discount brokerage. The closest comparable I've found so far is PHN Balanced Fund MER 0.88% (RBF1350) although the past returns are not nearly as appealing.
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Re: Help Me Work Through This (Early) Retirement Plan

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skinnyinvestor wrote: 08 Jan 2018 17:21
Speaking of my wife's accounts and simplicity, I was thinking maybe a single balanced fund for all of her Registered accounts? Apparently I cannot buy MAW104 through my discount brokerage. The closest comparable I've found so far is PHN Balanced Fund MER 0.88% (RBF1350) although the past returns are not nearly as appealing.
It looks like Vanguard is looking for my wife's business!

http://www.financialwisdomforum.org/for ... 3&t=120835

Thanks all for your contributions to the above thread.
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Re: Help Me Work Through This (Early) Retirement Plan

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The more I read from the experienced members on this board, the more I favor simplicity and aggressive savings for early retirement goals.
http://www.financialwisdomforum.org/for ... &t=120865
Save my brain/energy for excellence in my career and more important things in life like relationships with family and the physically active things on the bucket list.

Let capitalism do it's thing and accept the market returns over time with minimal effort and low costs. Given my savings rate will likely trump returns for the next couple of years, this seems to be a better bet than expending time/energy to 'possibly' eek out better than market returns.
Last edited by skinnyinvestor on 14 Feb 2018 16:07, edited 2 times in total.
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Re: Help Me Work Through This (Early) Retirement Plan

Post by BRIAN5000 »

skinnyinvestor wrote: 14 Feb 2018 15:33 The more I read from the experienced members on this board, the more I favor simplicity and aggressive savings for early retirement goals.
http://www.financialwisdomforum.org/for ... &t=120865
Save my brain/energy for excellence in my career and more important things in life like relationships with family and the physically active things on the bucket list.

Let capitalism do it's thing and accept the market returns over time.
:thumbsup:

IMHO with your super high savings rate strive for break even on your investments and you will be fine. (Return - costs, taxes & Inflation = 0)
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Re: Help Me Work Through This (Early) Retirement Plan

Post by skinnyinvestor »

BRIAN5000 wrote: 14 Feb 2018 15:56

:thumbsup:

IMHO with your super high savings rate strive for break even on your investments and you will be fine. (Return - costs, taxes & Inflation = 0)
Thanks Brian. Now, I just have to actually follow this up with action.
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Re: Help Me Work Through This (Early) Retirement Plan

Post by DanH »

skinnyinvestor, you are in an impressive position given your respective ages and that you're raising a young family. Your costs will indeed rise through the teenage years (and beyond) but you are on more than solid footing. Regarding withdrawal rates, it's worth noting that it's a relatively young body of research (though it's growing). But of the research that exists - or rather what I've read - does not contemplate withdrawals starting as early as mid-40s-ish or even 50 if memory serves. So the research on this issue will be helpful to an extent but you must exercise caution in this regard.

Still I will mention that Dr. Moshe Milevsky wrote many years ago (in a rather technical journal article) about a mathematical model to quantify the probability of success/ruin of any withdrawal rate without using simulations or Monte Carlo type analyses. For a while, he made two spreadsheets available that allowed anyone (it was in the public domain) to download them and change the input variables. I have used this neat little tool to add some context to financial plans I/we have done for clients. A quick search online did not successfully unearth either of the spreadsheets but it might be something worth poking around for.

For example, suppose you expect
- an (arithmetic) average real return of 3%;
- a 7% per year standard deviation;
- a starting withdrawal rate of 4%; and
- withdrawals starting at age 50.

This tool says that this strategy has a 22% chance of 'ruin' (i.e. 78% chance of success).
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Re: Help Me Work Through This (Early) Retirement Plan

Post by Peculiar_Investor »

DanH wrote: 14 Feb 2018 17:34 For a while, he made two spreadsheets available that allowed anyone (it was in the public domain) to download them and change the input variables.
Could this post and spreadsheet by our own Shakespeare be helpful? The link in Shakespeare's post is dead (404), so I couldn't compare if the same Milevsky article was the underlying source.
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Re: Help Me Work Through This (Early) Retirement Plan

Post by DanH »

That's the short version, which will do just fine. Users will just have to take care with choosing the remaining lifespan input. Otherwise, that does the trick. Also note that the "return" input is an arithmetic average and is in real terms (i.e. net of inflation).

(I have this version + a 'longer' one showing a matrix of ruin rates at different ages, median remaining years, and withdrawal rates.)
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Re: Help Me Work Through This (Early) Retirement Plan

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Caution Commercial ahead!!

Slowly work on your plan. I haven't Read Wade Pfau's new book but if you read the reviews* it sounds like a lot of Retirement information is collected in this one book. I've asked the library to order a copy, Kindle $8 if you like reading on Kindle.


*read reviews some good some not so good of his new book and visit his website for other interesting articles/downloads
Wade Pfau's book is an exhaustive examination of sustainable withdrawals from investment portfolios. Written in lucid prose, and accompanied by copious and illuminating charts and tables, Pfau investigates the topic from every conceivable angle. With a generous nod to the findings of others in the field, Wade provides his own incisive insights to further advance understanding of this vital issue. This is a work which deserves a place in the hands of the layman and the professional alike.

https://www.amazon.com/How-Much-Spend-R ... 5c5d3a297f

https://retirementresearcher.com/
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Re: Help Me Work Through This (Early) Retirement Plan

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I recall that. The sheet was linked in the book "Pentionize your Nest Egg" the sheet I had was called FC longevity (Googling that did not turn up any hits for e)
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Re: Help Me Work Through This (Early) Retirement Plan

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I have this in my Pension folder

This is the ODS version. Can also open with Excel if you have.
ruin.ods
(18.08 KiB) Downloaded 112 times
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Re: Help Me Work Through This (Early) Retirement Plan

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Thanks to all for the further reading on withdrawal strategies. I have done significant follow-up reading on this, even though it is pre-mature for action steps. I currently have a big push ahead of me in the next few years as far as accumulation is concerned. I think this is where I need to focus my energy at the moment.

I have a high savings rate, which I need to maximize while I can. Therefore, my energy will be directed mostly at earning the best income possible. Our family expenses are relatively under control with automated savings >$100K/year from base salaries and DC pension contributions. Further contributions will come from performance bonuses, which are variable. As mentioned above, the savings rate will likely trump any market returns for the next few years.

Given these facts, I am trying to simplify the portfolio(s) with few ETFs. I just bought a large lot of XAW.TO in my taxable account. Low distributions, so minimal tax consequences while I am in the current high tax bracket. Furthermore, it offsets some of my large overweight Canadian market exposure.
DW's TFSA and RRSP are currently in a balanced mutual fund. Contemplating rotating to VBAL for lower MER, but that would involve initial transaction costs, costs for re-investment of distributions and new contributions - as well as add more 'thinking' which is not necessarily a good thing :shock: .
(difference in cost ~66bps).
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Re: Help Me Work Through This (Early) Retirement Plan

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skinnyinvestor wrote: 25 May 2018 11:00 Contemplating rotating to VBAL for lower MER, but that would involve initial transaction costs, costs for re-investment of distributions and new contributions
I use a MF to mop-up cash distributions, and smallish contributions, then once in a while (after any 30-day hold period) I sell it and buy what I want. Keeps me "in the market" at all times.
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Re: Help Me Work Through This (Early) Retirement Plan

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skinnyinvestor wrote: 25 May 2018 11:00 DW's TFSA and RRSP are currently in a balanced mutual fund. Contemplating rotating to VBAL for lower MER, but that would involve initial transaction costs, costs for re-investment of distributions and new contributions - as well as add more 'thinking' which is not necessarily a good thing :shock: .
(difference in cost ~66bps).
It is a matter of preference. In a TFSA, I would make one contribution to VBAL a year and use that opportunity to mop up any distributions that have accumulated in the account over the past 12 months. Letting cash distributions accumulate over a period of 12 months until contribution time is no big deal.

With the RRSP, it may depend more on how often one is making contributions, and how big the contributions are. I'd wait until at least $5k has accumulated and then make the ETF purchases to keep commission costs down. Do it robotically/automatically once a month/quarter/semi-annually as the case may be, and there is no reason to 'overthink' the purchase. These are long term investments after all and second guessing market timing is a mug's game.
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Re: Help Me Work Through This (Early) Retirement Plan

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AltaRed wrote: 25 May 2018 11:54
It is a matter of preference. In a TFSA, I would make one contribution to VBAL a year and use that opportunity to mop up any distributions that have accumulated in the account over the past 12 months. Letting cash distributions accumulate over a period of 12 months until contribution time is no big deal.

With the RRSP, it may depend more on how often one is making contributions, and how big the contributions are. I'd wait until at least $5k has accumulated and then make the ETF purchases to keep commission costs down. Do it robotically/automatically once a month/quarter/semi-annually as the case may be, and there is no reason to 'overthink' the purchase. These are long term investments after all and second guessing market timing is a mug's game.
This is true. The Bolded portion is applicable and one of my pet peeves about myself. I have statistically proven to myself that I cannot beat the market consistently, yet I am constantly battling my desire to "tinker'. It's annoying :?
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Re: Help Me Work Through This (Early) Retirement Plan

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It's been almost a year since my first post here and I've been following along and learning quite a bit. Thank you all!

I honestly haven't spent much time on the "withdrawal" stage plans yet. Mostly, I've been focusing on my earnings (career) and accumulation. The ticket to my financial independence goal, at this point, is really in the savings rate. With my current savings rate and five years or less to go, the compounding effect of time has much less of an impact than in the typical situation. That, along with recent market performance, has led me to accumulate uninvested cash balances.

That said, I have secured another 10% increase in my base salary starting Jan/19. Unless the world ends in the next month, I will also be looking at my largest ever annual bonus paid in Q1 2019. On those fronts, I have exceeded my target. I'll have no problem saving 85% of the after-tax amounts of those. I did promise the family a vacation or two if I met those goals, so that's where the bulk of the other 15% will go. I'm trying to be more aware of balancing my savings goals with nurturing family relationships. I strongly prefer to spend on experiences rather than things, so that's the reason behind the vacation spending.

As mentioned, a lot of the accumulation in the last year is in savings accounts. I've purchased some ZDI.TO and XEI.TO in the TFSA on recent weakness. Added some VGRO to RRSP accounts, but have a lot of the same holdings as a year ago... and quite a bit of cash ~30%+. I'll likely add more XAW.TO to non-registered accounts when I get around to pulling the trigger with the cash - particularly after my bonus gets paid out in the new year.

I reviewed my Life and Disability insurance this past week. DW and I still have 14 years remaining on our Term Policies and the amount is sufficient given our lack of debt. Thinking about canceling my disability policy as I have significant group disability coverage through my employer and when/if I leave this employer, I won't need any additional disability. I'll review this with the agent. Our wills need to be updated, so that is on the to-do list. Cash has been set aside for RESP and TFSA contributions, which will be done in early January.

Otherwise, I think I'll continue to work on maintaining/increasing income and optimizing spending in 2019. It's pretty boring, but I suppose boring is good at this stage...

Cheers everyone!
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Re: Help Me Work Through This (Early) Retirement Plan

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Saving 85% is lots. After all, what is the possibility you may not live to enjoy the savings? Blow that dough.

What you do with your cash (and when you do it) is up to you. If I suggested something, you can rest assured I'd be wrong. Looks to me like you are doing ok.
I don't intend to offend anyone, that part is just a bonus.

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Re: Help Me Work Through This (Early) Retirement Plan

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kumquat wrote: 24 Nov 2018 00:08 Saving 85% is lots. After all, what is the possibility you may not live to enjoy the savings? Blow that dough.

What you do with your cash (and when you do it) is up to you. If I suggested something, you can rest assured I'd be wrong. Looks to me like you are doing ok.
Just for clarification. The 85% is the amount of the raise and the bonus after tax that I can save. Not 85% of total after tax income.

It’s hard for me to find things to spend money on. I need to work on what my core values are and try to optimize spending there. DW and I went to Greece and took a cruise of the islands last spring, Bought a new camper for the family last summer and going to Mexico for two weeks at Xmas this year with DW and kids.
I don’t buy ‘stuff’, so maybe more family trips? Planning on bringing my mom along when I travel to West and East coasts for work next year.
Mom has never been to either coast so I’m going to fly her out and spend a few days at each one with her after my work is done. She will be 65 next year and those and Hawaii are her bucket list. So, maybe plan extended family trip to Hawaii in the next 2 years??

For context, I grew up in a trailer park and my Dad has been on disability since his mid 20’s. I’m used to not having a lot or doing a lot and still being happy.

Owning ‘things’ that I need to repair, store, insure, organize etc. causes me stress... the camper was a huge deal for me to actually pull the trigger. Given my background, I have a scarcity mindset built in, which is why the FIRE movement struck a chord with me.

In a way, the math is the easy part. It’s the psychology that’s the struggle!
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Re: Help Me Work Through This (Early) Retirement Plan

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Further to the discussion in the Retirement - Is it overrated thread about Early Retirement seen here:

viewtopic.php?f=30&t=108701&start=500

I am giving consideration to working longer - at least the 6.5 years until DW qualifies for her pension with 20 years in (Can't collect until 60 y/o).
Given that the next move up for me would be a pseudo C-suite job and would involve managing people and a much lesser quality work/life balance, maybe I can accept that this is my limit and ratchet down the intensity to my liking. The extra time would allow me to pad the retirement kitty with more of a buffer and allow me to spend and give more along the way. Since my wife will still be working and kids are still in school, it's not like I could take off for months at a time yet anyway. More shorter vacations with everyone along the way, paid for by working a few extra years at a pace that is reasonable...but...

The difficult part of this for me is that I've always been striving for more and better and that is hard to 'turn off'. Maybe similar to the idea of learning to switch from a saver to a spender? The frugal ways become part of who you are. I think striving for achievement is part of who I am. I'll need to think about how to satisfy that achievement in different ways. Channel it into being a better son, husband and father. The difficulty is that money is an easy metric to measure. Family relationships are not as black and white.


Does anyone have any thoughts or experience on this matter?
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Re: Help Me Work Through This (Early) Retirement Plan

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skinnyinvestor wrote: 27 Nov 2018 08:24 The difficult part of this for me is that I've always been striving for more and better and that is hard to 'turn off'. Maybe similar to the idea of learning to switch from a saver to a spender? The frugal ways become part of who you are. I think striving for achievement is part of who I am. I'll need to think about how to satisfy that achievement in different ways. Channel it into being a better son, husband and father. The difficulty is that money is an easy metric to measure. Family relationships are not as black and white.

Does anyone have any thoughts or experience on this matter?
Highly dependent on individual personality and what drives one to get up in the morning. If you do NOT want to put in more hours and take on more corporate politics and brown nosing suck up, accept that where you are, is where you are, and make some short term goals to channel your energy into being a better son, husband and father. Example: Take on coaching that soccer team for an excuse to say to the slaves in the office....sorry, can't stay to work on that f'ing budget, I have a soccer team to coach after work. Similar would be a hard commitment to spouse to take off some of her load. Those are hard wired commitments that changes the dynamics. Not easy to do and may take a whole calendar year cycle to get into that new groove, but a necessary one in my opinion.

After having spent many years in the C-suite of a subsidiary, but really as a junior executive in the overall scheme of a multi-national, I recognized I was not prepared to do what it takes to 'try' and move up into that next tier. It was not worth the politics and time commitment versus spending more precious time smelling the roses, leaving on time more often from work. It was a case of shifting from overdrive in career ambition from the prior 30 years and settling in for comfort until I FIRE'd. That meant no more super reviews, no more ever increasing bonuses and RSUs, but it meant no more pressure for out-performance. Didn't always feel like the most rewarding time those last several years, but in hindsight was indeed a whole lot better than a drive for higher and more.
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Re: Help Me Work Through This (Early) Retirement Plan

Post by Shakespeare »

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Re: Help Me Work Through This (Early) Retirement Plan

Post by skinnyinvestor »

Thank you Alta and Shakes.
I will definitely work on both of your suggestions and report back here.
Ironically, I’m out of town on business as I type this getting ready to head to another cocktail reception and a late dinner to follow...
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Re: Help Me Work Through This (Early) Retirement Plan

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Working on more work-life balance.
Just booked a 5 night trip to Nashville at Easter with DW.
Total for return flights (Aeroplan) and Downtown Nashville Hotel (Marriott Points) came to $172.00 CAD. :D
Not exactly "blowing that dough". However, I imagine that Opry tickets and other food & entertainment will be pricey...

As an aisde, I can't believe I actually found decent flights to book with Aeroplan points! It's on United, not Air Canada, so maybe that is the trick??
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