Category Archives: Retirement

What’s It Like To Be Retired

Despite the simplicity of the question:what’s it like to be retired? The answer is a bit hard to explain.

I think also part of the difficulty of explaining what it is like to be retired is the default pictures you carry around in your head of what it should be. For the ‘I never want to retire‘ crowd it would be someone just sitting around not doing anything. For the ‘entrepreneur type person‘ it would be starting a new business idea. And for the ‘burnt out employee‘ it would be an endless vacation but of course none of those are correct.

So the short answer is: it’s like Saturday all the time. You still have stuff to do, but you enjoy your day because you have time to relax and not worry about your job. The long answer is a bit harder to nail down.

I think in part the difficulty lies in the flexibility of the retired lifestyle. The flexibility also means that things shift around a bit more than people are used to. I’m not required to get up at a specific time or do things in any specific order. Other than the occasional appointment or event in my calendar I often had days at a time with nothing booked per say.

I also suspect that it is hard to explain because people really don’t grasp the idea of how much Parkinson’s Law applies to your time. For those of you that forget the law states that a given task will expand to the time allocated to it. So now some mornings I’m into a the book that I’m reading and can spend two or three hours just getting dressed, eating breakfast and reading while finishing the morning pot of coffee.

Another issue that comes up is the fact that I let my inner curiosity guide me a lot more in life now. I’ll read about something in the news and want to learn more. So I’ll do a few Google searches on it, read a few articles and/or watch some YouTube videos on the topic. This can depending on the topic consume an hour or two or even days as I request a book for the library and do further research on a topic. All because I’m curious and I can.

And finally I think one of the major issues people don’t understand is the fact you won’t want to do nothing. Okay, you might be a bit lazy at the start but eventually you want to contribute to something and accomplish something else. People really won’t do nothing for years at a time. The desire to create, build or achieve something is still there after you leave work. Each person will do things that matter to them and not anyone else. So progress on their given goals can be all over the map. So I know retirees that flip houses or run for political office or start a business. Some might become an activist for a cause or volunteer for an organization that matters to them. Then specifically for the majority of early retirees we tend to be self motivated people who tend to like to take on long and complex projects like getting to early retirement. So to suddenly do nothing for years on end is just laughable.

So with all that said about what early retirement isn’t, what am I doing with my time? The same things I enjoyed doing prior to retirement. I read a lot, enjoy some movies and TV shows (on Netlix or DVD from the library), cook, brew wine and beer, visit with my friends, do family activities like playing a board game or going swimming and of course writing on this blog and other projects. I just tend to do more of those things and take my time to enjoy the present more. I know hardly earth shattering but that is what I care about.

What do you plan to do in your retirement? Or what did you end up doing if you are retired?

I Don’t Have Enough Money, But I Retired at 40 Anyway

It might sound odd coming from a personal finance blogger, but the truth of the matter is I don’t have enough money for early retirement but I retired before my 40th birthday anyway.  Oddly enough, despite all the readers on this blog no one has really called me out on this so far. Why?

Because I was honest enough to state what I’m doing really isn’t a full on ‘I never plan to work again retirement‘ but rather a ‘I plan on doing some fun work during a semi-retirement.’  And in that little shift of wording on what I planned to do made a huge difference between being able to leave now and being able to leave two to five more years in the future.  You see despite most personal finance bloggers obsession with numbers and saying you need to have around 25 times or more of your annual expenses saved to retired the secret it this: it’s actually bullshit if you semi-retire.  In fact you can think about leaving work when you are around 80% of the way there.

Pardon? Well you see the analysis behind that 25 times your expenses (also know as the 4% rule) is solid, but my beef is with one of the underlying assumptions which is: you never receive any additional money from work or other sources.  Basically it assumes you only use your investment income to live off of, which is fine if you really plan to NEVER work again, but generally ignores certain items in reality.  For example, it ignores you may get some government benefits in your old age (like Old Age Security in Canada or Social Security in the US) and it also ignores the fact it is fairly easy to earn small quantities of income when you don’t have a full time job.

So let’s break each one of those down.  First off you will be getting some kind of income from your government when you get older.  You can debate how much depending on which country you live in and how well funded the given program is.  As an example, in Canada the Canada Pension Plan (CPP) is rock solid and has enough to easily make its obligations for my retirement.  On the other hand the Old Age Security program is paid out of the current yearly revenue for the government and thus has a significantly higher degree of being altered in the future to change either the qualifications to get the money or reducing benefits or increasing the age to collect it.  Yet despite all of that I’ll likely get something from both programs and during my model work for my retirement I just assumed half of the OAS payments.

Now onto that second point about earning income.  The internet seems awash in articles about having a side hustle to earn extra income so if you even just keep on doing a hustle you can likely bring in $3000 to $5000 a year fairly easily.  For example, minimum wage where I live is currently $10.96 per hour and even at half time (20 hours a week) that is $11,398 per year income.  Or if you do just 10 hours a week you could still pull in $5669 a year and that is at minimum wage.  Imagine for a second how little you would need to work if you get a higher wage.  In my particular case I’m going to take a stab at writing fiction for some income first and if that doesn’t work out I will consider other options.  Also it helps my wife has decided to keep her home based daycare running for a few more years which provides some income for us.

In the end, the reality of the situation is this.  If you are prepared to do some work after you leave your job and you are willing to depend somewhat on government benefits you can likely get away with about 80% of your target savings amount and reduce your working career by a few extra years.  Of course there are risks doing this such as not having any other income for long periods or poor investing returns.  Yet managing those issues is entirely possible.

You just need to have some backup plans in case things don’t work out and also keep a bit of a cash buffer around to allow you avoid work for periods of time if required.  So in our case we have one backup plan which is linked to my wife’s decision to shutdown her daycare.  We would downsize the house and move.  This should free up some money from the house and also reduce our property taxes going forwards.

But the reality is your current situation of having a job also has risks.  We just tend to ignore them as we are so used to having them.  For example, job security is largely non-existent.  The reality is that if the company is willing to spend the money they can fire  you or lay you off at any moment without much of a reason either.  We know this but we just don’t think about it all that much.  So what you are really doing with an early retirement is just changing your risks, not removing them.

So what do you think?  Would you be willing to enter a semi-retirement to get out of work sooner? Or are you more interested in not having to ever work again?

Managing Your Retirement Money

I’ve noticed something since being retired that doesn’t get discussed that much among personal fiance bloggers. Prior to early retirement we tend to focus exclusively on growing our net worth. It’s all about the increasing balance of our investment accounts and paying off debt. Yet after hitting my ‘number’ and going into my semi-early retirement I have noticed the worries and concerns don’t even really look at my net worth so much. Instead I’m now focusing on my cash flow.

Which when you think about it makes sense.  After all if your income from your investments and other sources continues to exceed your spending over the long term you likely won’t ever run out of money. So while I still worry about living within my means it is now more focused  on managing our cash flows. Of course if your cash flow is constantly negative then you may see your net worth declining if that negative cash flow exceeds your investment growth.  But in short if you are constantly in a positive cash flow you rarely need to look at your net worth anymore.

So this is the game I as playing right now. Can our dividend, interest and small business income exceed what we spend on average over a year?  With that in mind I thought I would explain a bit how I plan to manage our money going forward.

First off let me state that I don’t plan to look at my accounts daily or do anything stupid like day trading.  Our portfolios are designed to require very little management from us on a day to day basis and I want to keep it that way.  But of course this doesn’t exclude you from doing some work on the investments, it should keep the amount of time required to a low level of an hour or two per month with one notable exception.

That exception is that each year around the start of November I would do a little maintenance on our accounts and move money around as required to rebalance the RRSP accounts which are all invested in index funds (but I only do that when the gains are around 20% or so and then shift a chunk from equity to bonds).  Why late fall/early winter?  Well because that allows me to take money out of the RRSPs if required with a fairly accurate estimate of any earnings we have made for the calendar year.   This is important as any RRSP withdrawals are subject to a withholding tax which is used as an estimate of our income tax owing on the withdrawal.  So by doing near the end of the year we only give the money to the government until we file our taxes the following spring and we will typically get most of that money back as a tax refund since our actually income tax bill should be very low.  Please note for 2017 I didn’t actually do this since I have pre-saved our expenses for 2018.

On a day to day basis we normally use our cash in the high interest savings account to cover expenses.  To simulate a pay cheque we have setup auto transfers twice a month to the main chequing account.  For now I’ve defaulted that amount to $1000 twice per month.  If I don’t use the money in a given month I just push it back over the high interest savings account when I calculate our net worth at the end of the month (and write a blog post about that).  Also keep in mind that our cash position in our high interest savings account when I left work in the fall of 2017 was at over $50,000 which is a bit larger than normal.  This is because it was also holding our 2018 TFSA contributions of $11,000 in that account.

In addition,  twice a year we drain off the cash sitting in our TFSA and taxable accounts and put that into the high interest savings account to pay for our day to day spending.  We don’t reinvest our dividends and distributions, but rather just let them accumulate in those accounts during the year.  I plan to take the money out at roughly six months apart.  One will be in November during my annual financial RRSP balancing session and the other will be in May.  At the moment those dividends are just under $10,500 per year (this recently just went up since Husky Energy just started paying their dividend again).

Meanwhile my wife’s daycare business transfers a monthly amount over to house once a month ( this is currently $550/month).  Then towards the end of the year she also does a lump some payment to cover the cost of her Rough Rider season tickets.  I had previously offered her the option to retire with me but she decided she wanted to work for a bit longer.  With that extra income in mind I left work about a year earlier since I didn’t need the capital to cover off her income right away.

Meanwhile any cash I earn (from writing or what ever I do that happens to generate some income) I’m putting that into our slush fund for vacations, house renovations and car replacement.  I retired with a $20K slush fund balance in that which is also stored in our high interest savings account.  So with our current draft taxes of 2017, I should see a refund of over $4000.  I’ve already decided to put 90% of that towards the slush fund and put the other 10% to buying some equipment to set me up for all grain beer brewing.

While we are currently getting some Child Tax Benefit cash each month that is currently moved directly to the kids’ RESP account.  That will end this year after the RESP account gets to around $80,000 (which is our overall savings goal for that account).  At which point we will stop the transfers and just roll that cash into our monthly spending on the kids (currently this is mainly clothes for my 13 year old who seems to be getting taller each week (don’t get me started on what he is doing to our grocery bill) and then activities like swimming lessons).

Of course all of the above is more or less my planned framework.  Reality will be different.  Case in point, after I file my taxes for the 2018 tax year I fully expect our Child Tax Benefit to increase dramatically in July 2019.  This will allow us the odd situation of really not having to touch the RRSP at all if we so choose.  So even when I go to take some money out of my RRSP this November I really won’t need all that much.  This is part of our longer term plan to account for my wife’s retirement in the future.  By not touching that RRSP accounts for a few years they should grow enough to cover off my wife’s business income to the house (at least that is the plan).

This of course then brings into the eternal debate do you take money out of your RRSP up to your basic deduction each year even if you don’t really need the money?  Why would that be a good idea?  Well because that money will effectively be a ‘tax free’ withdrawal from your RRSP.  Yes you will have the withholding tax applied initially but after you file your taxes you will get the money back.  But if you don’t need the cash you will likely put some into your TFSA but that amount is less than the basic deduction amount.  So then you end up with having to start a taxable account and potentially have a tax liability with that.  Which then leads you to wonder if you should just take out your TFSA contribution plus any cash you need to live on in the next year and quit at that.  To be honest, I haven’t fully decided on this yet.  I’m currently leaning towards taking less than from my RRSP and dealing with slowly melting the RRSP down and moving it into the TFSA.  In my wife’s case, this gets even more messy because of your business income will likely be much higher than mine and closer the the total basic tax deduction.  And we won’t touch her spousal RRSP until 2019 at the earliest to ensure any money we pull from that account is not attributed back to me  – you need to wait three years from the last deposit to make sure that doesn’t occur which is why I stopped putting money into her spousal account literally years ago.  I know it is confusing, but those are the rules so I just work within them.

So hopefully all of that helped you understand how we manage to pay for our expenses now that I don’t have a job.  I suspect that I haven’t been clear on everything so please do ask any questions in the comments.