A Second Chance

Well that was unexpected.  I opened my mail yesterday to see a rather thick envelop from my pension plan so I opened it and read the letter and stopped walking for a second.  Then I read it again and realized I was getting a second chance to change a mistake that occurred when I left work.

My work pension was a defined contribution plan which I had for a number of years put in various voluntary contributions.  It didn’t seem like much at the time but it ended up being close to a third of my pension’s value when I left work in late 2017.  The total pension is now worth around $167,000.  I also knew that according the rules around the pension I could only unlock the voluntary contribution portion and move it to a RRSP account within 30 days of leaving work.  The reason I would want to do this is it would allow me the option of using that money prior to turning 50 (otherwise it would be rolled in with my locked in money that I can’t use until age 50).

Prior to leaving work I had contacted my pension plan to find out how that would work and I was told they would mail me a letter with my options.  Just one small problem occurred…I didn’t get a letter from them and by the time I thought about it the 30 day window had passed.  Rather than blaming other people, I just accepted I didn’t remember to follow up on that so I now had more money locked away than I wanted but I checked my numbers and I figured I could make it work regardless.  So I just forgot about the mistake and moved on.

Now nearly 17 months after leaving work I now have that letter with my options including the one to move over $50,000 out of my pension into my RRSP.  WTF?!?!? Obviously someone screwed up big time at their end of the situation (since the letter is MORE than a little late) and because of that I’m getting a second chance to move that voluntary contribution money out.  I really don’t care how this happened I’m just thrilled I get a second shot at fixing this mistake.

I don’t particularly need the money but I prefer the flexibility have having that extra $50,000 or so in my RRSP account so I can access it at any time rather than being stuck waiting until 50 to access the money (like the rest of the pension which is locked in).

So now I’m printing off forms and stopping by my bank tomorrow to figure out how to make this happen.  All in all, it’s a nice surprise to have in life.  So did you ever get a second chance to fix a retirement mistake?  How did it turn out for you?

Needs and Wants in Retirement

So a reader emailed me to asked about writing a post on needs versus wants the other day and I had assumed I had covered the topic.  Then when looking through my blog posts it occurred  to me that while I did cover that in a chapter in the Free at 45 book and I had a strong theme on this blog regarding on needs versus wants I haven’t expressly written on it for a while.  So let’s get to it.

People often assume they understand the idea of needs and wants.  After all needs are just basic things you require in life such as shelter, food, water and heat (especially in Regina this winter).  Needs are the things in your life that you literally die without it, which is a good definition for this post. Meanwhile wants is everything else that isn’t a need.  So you need water but you want a coffee in the morning despite some days it feeling more like a need. Yet the problem becomes when we start to explore the line between wants and needs.

For example, shelter.  Yes you need a place to call home.  But exactly where exactly does that cease to be a need and drift into a want.  After all a trailer is shelter and so is a tent, yurt or a small shack and technically so is a 3000 square foot detached house in the best neighbourhood in town.  But the last one is more obviously a want which happens to also fill a need.  But where exactly is that line between a need and a want?  Is a 800 square foot house in a okay neighbourhood a want?  At what point of outdoor temperatures in winter does a tent or yurt cease to be useful shelter?  The fact is the answer starts to turn into more subjective issue.  I may think 500 square feet is too small for a family of four but other might think it is just fine. In general, something becomes a need when you consider it as such in your own mind.  Heck people even use that sort of language about needs such as “I NEED my coffee in the morning.”

Then on the other side of the issue wants are truly unlimited.  It doesn’t matter what you own, have or do  with your wants, you will always want more.  You can win the lottery and next week still want more than you have.  And this is why a lot of people lose their way in our consumer driven culture.  It is always easy to see something else you don’t have and want.  You often see people that are always planning the next vacation or the next shopping trip or the next item to add to their wish list and never happy with what they already own.  You can fall down that well of wants and never find the bottom.

Then between want and need there is a very fine line that if you can find it really key to having a happy life.  It is called: enough.  Finding it is often a tricky thing as you can pass right pass it without realizing it at first.  How many books are enough for your home library?  How many spices are enough in your kitchen?  And the frustrating part is the answer can change over time.  What used to be enough might be too much later and even later turn into too little.  But once it hit enough you realize you are content there and you don’t really want more than you have.

So how dose this relate to your retirement?  Well I generally suggest you aim your budget to meet your needs and just a few of your wants with your target income in retirement.  In short, aim for enough.  Enough money to do what you want but not too much that you don’t have to prioritize your spending. For example, I can afford to buy all grain brewing equipment or a 3D printer this year not both unless I earn a bit more income.   You should be able to afford what you really want just not all at once.  Of course this amount is still a subjective number which is different for each person but I find talking about enough stops the excessive fantasy spending plan where you live in castle for half the year and drags you back towards something closer to reasonable.

Of course some people might ask: why not aim your budget for just your needs? Well because that can be too thin of a margin of error in the event the markets go to crap for a few years and you want to reduce your spending.  You should have some fat to your spending to allow you to make some temporary adjustments if you need.  You don’t want to end up in a high stress situation where you can’t pay all your basic needs and you end up using debt to fund your needs.

So how did you determine what is enough for your retirement budget?

Feb 2019 – Net Worth

Welcome to my net worth posts where I try to prove to myself and you that I wasn’t crazy for leaving work in the fall of 2017 to start my early retirement.   A few important notes:  we are mortgage free and our goal is have our income/investment gains exceed our spending by 102% on a 12 month rolling average (the extra 2% is a buffer for inflation).

Investments

Accounts

RRSP $58,720
LIRA $17,770
TFSA $95,330
Pension $176,160
Wife’s RRSP $93,950
Wife’s TFSA $86,050
Wife’s Taxable $43,410
High Interest Savings Account $36,490

Investment Net Worth $607,880 ($13,250 increase over last month from investments)

Home Equity

Estimate $395,000

Income

To keep things simple I’m only going to track what income comes into our main ‘house’ chequing account.  I won’t be tracking my wife’s or my businesses income as those don’t really matter until the money moves over to the ‘house’ account.  Also I won’t track investment gains since that is covered above.

  • Wife’s Monthly Payment to House: $550
  • Child Tax: $340
  • Interest $38
  • Tim Odd Job: $125
  • Total Income: $1053

Spending

Last Month $1608

A very quiet month for spending.  Basically we just paid the bills, bought gas and groceries and the usual day to day stuff.

Results

Net Worth ~$1,002,880

This Month Investment Gains & Income/Spending Ratio = (13250+1053)/1608 = 8.9 (Target 1.02 or higher)

March 2018 to Feb 2019 Invest Gain & Income/Spending Ratio = (-6518+18473)/35324 =0.33 (Target 1.02 or higher)

Commentary:

Well this month had a few oddities.  First up a friend needed help with a quick job one afternoon so I helped and got paid $125 for 4 or 5 hours of work.  Not too bad for a last minute thing.

The second more fun oddity was the markets kept bouncing back from the low in December 2018.   We have gain over $30k in the last two months which turned around our numbers nicely.  Our ratio of investments and income to spending is now back to positive at 0.33 for the last 12 months which while behind target our target of 1.02 is not bad.  More importantly, when I tracked our investment gains since I retired we are now back to being $8k higher than I started after being negative for the last few months.

Then finally this month I’ve made significant progress on the new book.  I wrote about 10,000 words this month which equals around 40 pages of text.  I’ve finally got a good routine with my writing and I’m hoping to finish the first draft roughly by the end of next month.  The bad news while a first draft is good I still have to hire an editor, get the layout done, get  cover designed, get the ISBNs registered, and everything else to get the book published.  So you likely won’t see the book until this fall at the earliest.  Once things are progressing on that front I’ll let you all know the planned publication date and where you can get a copy of the book.

Any questions?

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A blog about early retirement and happiness