How I Learned Retirement Could Be Lonely

Please forgive me for being so personal today. In 2019, I completed my third leave of absence. A big long 8 months for that one after shorter but still extended 6-month periods on the first two occasions. You could say I already tasted retirement three times or at least semi-retirement.

I am very grateful for it. My first go at it in 2012 was quite enjoyable, but I have to say I often felt lonely during my last two prolonged stints away from work. I felt less lonely in confinement the last few months than during those last two leaves of absence. Maybe in part because my two ladies stayed at home with me but probably much more because I worked my butt off.

I was lacking the sentiment of making things better. I missed helping others. For me, it’s not just a question of being around people. It’s more about lacking being useful to society.

During our recent isolation, it was completely different. Many facets of that crisis were and still are unusual and tough yet, the fact my position allows me to help out others teleworking makes me feel a lot better.

It’s funning because before that, the psychological aspect of retirement was never on my mind. I would be the last person to talk about it. For me, retirement planning was all about money and accumulating enough of it to stop working. I was not even considering it and secretly laughed about others talking about it. I mean, how could it be a problem to be on vacation all the time?

Being Passionate About Helping Others

So, let’s face it! Retirement can make you feel lonely!

Coming soon!

Being avid Disney fans, 2019 is a great year as a lot of promising Disney movies are coming out. Among others, a live-action version of Dumbo will be released next week. These live-action remakes seem to be the new trend. Hence, we will be able to envoy bigger-than-life re-creations of Aladdin and The Lion King in upcoming months.

Just to name a few more, this prolific year will also give us many brand-new releases from the Marvel franchise, the long-awaited beloved-among-young-girls animated Frozen 2 and the next installment of the Star Wars saga in December.

Speaking of the popular franchise, looks like Disney will manage the open a little ahead of schedule, its out-of-this-world new Galaxy’s Edge or Star Wars land both in its California and Florida parks. Let’s hope this ambitious project can live up to insane expectations. Early preview looks sure appear very impressive and promising.  

It’s also an amazing year on the personal side as we are going back to Disney sooner before all that frenzy. We will wait till things calm down to visit new Stars Wars installations sometime in 2020.

I’m also on the verge of my next 8-month leave of absence. I regained almost all my motivation at work after recent management changes. It was too late to change dispositions of my upcoming leave, but we hope current negotiations will break through and allow me to continue working on a reduced schedule after that. I would like to have shorter but more frequent time off. Coming back after long leaves like 6 or 8 months can be tedious. Some vacation here and there coupled with 4-day weeks during slower periods would be much more suitable to everyone as the organisation would not have to deal with repetitive not-practical replacements.  

We are glad to announce that all this free time will allow us to work on an exciting project that has been broiling in our mind for a while: our 12-Minute Financial Makeover Series. This series will try to provide simple and efficient guidelines to improve and put your financial affairs in order. Look for it in the next few months.

Don’t Blindly Contribute to Your RRSP

Despite my best efforts to plan ahead, everything is kind of happening all at once these days. It’s still pleasant as most of it is positive. The irony is that I will probably have too much time to spare on my leave of absence that kicks off just in a few months. I still wanted to take a moment today to talk to you about RRSPs.

As by all the publicity that we get from financial institutions, it seems like RRSP season is already upon us.

I feel kind of sad when I see a lot of folks rushing to the bank for their last-minute annual RRSP contribution. From my standpoint, here’s the typical scenario. Incited by financial salespeople (I must admit I have a hard time calling them advisors), most people blindly fill up papers to contribute to their RRSP (press hard there’s three copies) because they are told it will be awesome for their finances. A lot of months later (because they take too much time to pay their accountant to file their taxes), they get a RRSP-related tax refund and immediately spend it all away! Ouch!

I think you should at least ask yourself these questions before contributing to your RRSP this year.

Hope for Peace and Happiness

During this festive period, we would like to take a moment to wish you and your family all the best.

Funny enough, we just made a typo and wrote « all the beast » instead. But we think we already got plenty of beast in our sometimes-cruel world.

Let’s hope for something better!

We Can Only Keep Faith

We don’t know about you but taking a pause from these turbulent times seems necessary, as we kind of feel darkness is continually creeping upon us.

Particularly this year, let’s hope for more peace and happiness for everyone in the World.

Fortunately, we can always all do a little more good! Let’s continue to plug along and like Mickey, to spread magic and happiness around!

To paraphrase Star Wars once again, let’s have faith and believe that with Love and patience, the lighter side of the Force will prevail.

Meanwhile, enjoy peaceful joyful times with your friends and family!

Photo by Lady C

The Impact of Climate Change on Stocks

Despite what many people think like some in power south of the border and others closer to home, global warming has started to greatly affect our planet and already too-many lives consequently have suffered from it. Unfortunately, global warnings are not enough to fight global warming.

Social media and live news probably amplify our exposure to it but you cannot deny that catastrophic events sure are more frequent and violent. Luckily for us, significant disasters have spare our family so far. Nevertheless, we have felt Mother Nature unleashing its power in the form of extreme heat, stronger winds and rain.

We know that human lives have no cost and should be treated with respect and dignity. In the current circumstances, everything within our power should be put in place to save and help as many human beings as possible.

That being said, we are even more worried about the profound impact climate change could have on our economy. If our economic system collapses because of it, we won’t be in a position to help anyone anymore.

We have been reflecting on it for a while and so far, are not reassured. A lot of troubling questions arise and for now, we have failed to find adequate answers. Here are some on those questions.

Stop Wasting Time Looking for Better Short-Term Rates

For merely a decade, Canadian interest rates flirted with historically low levels before the Bank of Canada finally started to gradually raise the prime rate in 2017. Almost immediately, many banks consequently increased their mortgage rates. As expected, they still took a while longer to offer better rates on savings account. So, for an extended period, so-called «high-interest» savings accounts were paying negligible interest.

Competition, especially from their virtual counterparts, now has forced even traditional financial institutions to offer improved rates. But, in the end, does this really matter?

We just don’t think so.

Act for We Not Only Me

In our relentless quest for happiness, thinking about others and acting for the greater good is probably an essential key. It can make you feel wonderful by giving you an amazing sense of purpose and fulfillment. Yet, having the greater good in mind, as with staying calm when your portfolio goes down, is easier said than done. It may become a challenge in the practical scheme of things as everyone can have a hard time coping with the struggles of every day life.

Some of you may find it odd that a DIY investor aspiring to financial independence and early retirement talks that way. Accumulating money may appear like a very selfish thing but in the end, it can also generate extra free time and give better means to take care and help others.

As with many positive individuals out there, we greatly believe in the evolution of Humanity. Maybe things are a tad slow and sometimes appear to go sideways or even backwards but we are still optimistic about general improvement over time.

In the same sense, we profoundly believe in the power of the collective, working together for the benefit of all, instead of just for you. We think you surely will have more success if you fundamentally have good and pure intentions. And you probably won’t achieve much if you are just trying to make more money.

Let’s have a look at our point of view, unique as always, on how to act well for the collectivity.

Treasure Your Freedom

In our world, a lot of people take freedom for granted. Many of us consider it a given right. But it’s also a privilege and we don’t always realize or remember how lucky we are.

Every day, we live as free men, enjoy freedom of speech, have access to wealth and have the enviable opportunity to make choices. So, be grateful and appreciate what you have because…

Many Just Don’t Have That Chance

Some of our neighbors, now closer in this shrinking world, will get imprisoned, beaten or even killed because they are different or if they speak their mind. Other fragile people just lost their mind or never seem to get healthy enough. Other honest folks are not fortunate to get their hands on a little money or a decent job.

Freedom is priceless. Appreciate it while you can and before it’s suddenly unexpectedly taken away from you.

Handling Bad Decline Days

Here’s a typical scenario to test you and your resolve as an investor. Right in the middle of the day, you have a free moment and decide to take a look at your holdings. Because stock info is virtually instantly available these days, after a few clicks, you quickly find out your precious portfolio is down and showing a big loss!

Your reaction may well determine how you will fare as a long-term investor. Your initial sentiment may be a little sluggish and it’s ok as long as you don’t panic and sell. If it makes you feel dizzy and you get sick, maybe stock investing is simply just not for you.

So, the relevant question would be. On paper, would you be willing to deal with a 1000$ loss for the current day? We would, and we are as it often means we will be making much more in the long run.

Our reaction seems easy and simple, but it may not be the case for most investors. Maybe it would be a good idea not to look if you can’t manage your emotions and don’t have the stomach for it. Roller coasters can be a lot of fun for some people but a nightmare for others.

Financial Freedom Insouciant Mindset

A couple months back, after Preparing for it, we took our first steps Out of RRSPs. Since then, our focus has been more about Minimizing Taxes instead of Maximizing RRSP. To briefly remind you, one of our main strategy has been to keep my taxable income just under the lower tax bracket upper limit.

Many details around the whole process, like the first transfers and withdrawals, made me realize my salary wasn’t essential anymore and that I could stop working whenever I wish from now on. It felt like I literally was at the doorstep of financial freedom.

Strangely, a completely different mindset quickly set in. I deeply felt like everything was now cool and okay. Furthermore, it seemed like it would always be alright. That freedom was a relief and a wonderful feeling. To some extent, the burden of many financial obligations was finally off my shoulders.

But there was another odd side to it. I felt invincible, almost indestructible and some kind of carelessness settled in. It’s tough to precisely describe it. You could call it detachment, nonchalance, disinterest, insouciance…with an added touch of selfishness. In short, I didn’t care about other people and what they thought of me. Having enough money kind of made me feel like I didn’t need others anymore. In that insouciant mindset I became somewhat negligent. With that financial security, I now felt like I could get away with anything.

Gradually Building Up a 12-Minute Workout Program

Till my late thirties, I remained quite fit. I had no real merit as exercising came easy to me. In fact, I always used to do it having fun, playing games or doing sports like golf, badminton, hockey, etc. 

A couple injuries and a knee surgery later, things were getting a tad more complicated. Predominantly due to a lack of time, of interest and opportunities, more and more, working out became a hassle. Far from being a workout maniac, I have to say gyms are not really my thing.

The problem is, even if you don’t like it, exercise is kind of mandatory for us, mere human mortals. Over time, I gained weight and my general health gradually deteriorated. My morale eventually started to be affected as I was increasingly prone to illness. I had to do something to get out of that lethal spiral. 

Then, the 12-Minute Method came to the rescue. I got the ball rolling with workout sessions of only 12-Minute every 3-4 days and progressively built up to 48 minutes every other day.

Fixed vs Variable Mortgage Rate Mistake

In the fixed-versus-variable mortgage rate debate, one cannot argue that historically, variable rates have been a better long-term option. There’s still some risk associated to the variable option if interest rates happen to rise. With the fixed option, you are basically offered to pay a premium to kind of take out that risk.

But things are not that simple and obvious. In practice, rates would have to rise fast and rise a lot to really hammer down the variable option and make it the worse choice. In the end, in most cases, the fixed rate premium may simply be too costly. At least, that’s what we learned from our personal experience.

To make a long story shorter, we started our mortgage life using the optimal variable-rate option for the first 5 years. In 2006, we switched to a fixed rate afraid of a hike. In fact, that dreaded eventuality only manifested itself timidly more than 10 years later, in 2017. Choosing the fixed option was a mistake. That huge misstep cost us about 10K$ only in interest in the following 5 years. Because the amazing power of compound interest works both ways, our mistake surely cost us thousands more since then.

Drawing conclusions may be easy after the fact, but this is a classic case where your emotions get in the way of sensible financial decisions.

In late 2010, we were already convinced about Variable Rates being The Right Long-Term Choice For Our Mortgage yet we struggled and still made what appears like the safer choice locking in a fixed rate for 5 more years.  With retrospect, that decision was not as bad because the spread between variable and fixed rates remained much smaller. In the end, it looks like it will cost us only a couple hundred dollars more.

The great news is that our mortgage is now virtually paid off, eliminating additional opportunities to make the same mistake again and again.

Still on the bright side, we are doing very well financially despite several mistakes of the same magnitude. It looks like it's not about being perfect, but rather more about learning, working thru it and being good on average. 

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Utilities on Our Radar

By nature, steady utility stocks can provide a rock-solid base for any portfolio. They sure bode well with our long-term relatively conservative approach.

Usually, the problem can be to acquire them at attractive prices as they rarely fluctuate a lot and hence, get on sale. Luckily, things may be different lately as circumstances like changing interest rates and new US tax regulations are hammering down many utility stocks.

Most people may think it’s a bad thing as they won’t like seeing their stocks go down. But like us, savvy investors just see it as a unique opportunity to buy additional shares at low prices.

Many utility giants with a proven long-term track record will easily adjust and do very well in the long haul after these short-term setbacks.

Although we won’t stop using them in the near future, oil and gas alternatives are becoming less popular and won’t last forever. That’s why we now prefer corporations that focus more on electricity and renewable energies.

Here are some utility stocks on top of our Watch List right now:

Maximizing RRSP vs Minimizing Taxes

Contrary to popular belief, maximizing your RRSP may not always be synonymous with minimizing your taxes. Sure, your contributions will bring down your taxable income in the short run and you probably will get a refund soon, once you file your tax return. But after all is said and done, you may also end up paying more tax.

The good news is that, as far as RRSPs are concerned, fairly simple fiscal planning can go a long way. The key is to compare your present (or contribution) tax level with your probable withdrawal tax level.

Because taxes increase with your income level, ideally, you want to contribute when your income is high and withdraw when it is low. In the same fashion, you want to avoid unnecessary contributions when your income is abnormally lower and limit withdrawals in periods where your income is higher.  

Our Best Wishes

Wow! It’s already that time of year again! I can’t believe 2017 is almost a thing of the past...

Perhaps a sign we are not getting any younger, let’s hope it’s also an indication we are enjoying ourselves. Don’t know about you but for us, pleasant times always seem to go by much faster. And age kind of amplifies that feeling.

With big emotions, both good and bad, the last year sure still went by in a flash!

Enjoy Precious Time with Family and Friends

With a brand-new year already at our doorstep, we hope you can take a break from our hectic modern way of life and enjoy precious moments surrounded by family and friends.

Last year’s tumultuous experiences sure gave us an eye-opening perspective and renewed our focus to strive for a healthy balance life.

We are now more grateful and appreciate all we already have. We also savor our privilege of choice and cherish many possibilities to help others.

Have Faith and Dismiss Obscure Thoughts

New Star Wars movies always inspire us corny analogies and statements.

Luckily for you, this one will be quite classic and simple: « May the Force be with you! ».

We just love when a touch of Disney’s magic brings back Star Wars’ wisdom into the mix. We should be well served in the next couple years.

We will also have a great chance to experience the powerful Disney-Star Wars duo up close as we are going to Disney soon.

We look forward to sharing our magical venture with you in an upcoming post.

Meanwhile, let’s hope the Jedi in all of us can survive longer and won’t cave in to the sometimes-irresistible temptations of the dark side.

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Preparing to Take Assets Out of RRSP

Early in the year, we talked about taking time to think and analyze the possibilities surrounding future withdrawals from our investment accounts. In the initial stage, our reflection concentrated on questions like how? And how much? At this point, we will sadly report that our efforts have not significantly paid off. We have not demystified the 4% rule yet. Neither did we develop or stumble upon a better alternative.

All that analysis still eventually oriented us towards the when?

Too Much RRSP May Equal Too Much Tax

As a result, we recently discovered our RRSP value may be too high and are now considering withdrawing money from it sooner than expected. In that context, it looks like we will deregister an important portion of our RRSPs to avoid future tax problems. Essentially, we discovered that too much money in our RRSPs may result in paying a lot more tax later in life or having a big tax bill attached to our heritage, mostly destined to our lovely daughter.

We will admit having too much money is a good problem to have. But it’s important to start taking measures now to possibly avoid wasting an important chunk of it later. With retrospect, investing more in TFSAs instead of RRSPs would have been a better choice, from a fiscal standpoint at least. Fortunately, it’s not too late for some type of gradual rebalancing.

Our RRSPs grew up faster with larger contributions and higher returns than projected. In that regard, part of the credit can be attributed to our successful DIY investing approach.

Changes in our pension plan conditions also greatly impact our future financial situation. Unfortunately, planning for an early retirement kind of goes against the grain. Consequently, we made very conservative assumptions during the last round of negotiations as initial talks amputated pension benefits by almost half for early retirees like us.  

The final agreement was better or less bad than anticipated, we will only lose about 10% of our retirement payouts. Again, this will probably end up generating additional taxable income later.

With all those factors combined, the perspective of paying more tax during retirement than in active life unexpectedly becomes very probable.

As an example, you can see from the Leaving Money in RRSP Chart that, just a 100K$ portion accumulated in your RRSP today, at 45, could generate a nasty tax bill of more than a million bucks 40 years down the road. RRSPs can be a great tool to avoid paying taxes now as it differs your fiscal obligation. But if your ultimate tax rate is high like in this example at 50%, you might end up paying a big chunk of that deferred tax back.

Now that we know we are going to take money or stocks out of our RRSPs, it’s time to explore related technicalities.

Gradual Transfer to Tax-Friendly TFSA

Let’s briefly get back to how much? Projecting income and corresponding tax levels over an extended period is far from exact science. You can still have a general idea of fiscal implications and take actions that should improve the situation.

How to Manage Your DIY Portfolio While on Vacation

Earlier this month, we talked about our 21-Day Summer Trip Around the UK and many seem to wonder how we are able to take care and manage our DIY Portfolio while enjoying rather extensive vacation.

So, the big question this time is what do we do with our holdings when we get away from home for 3 long weeks?

Those who know us already anticipated our short answer which simply is: nothing different!

For starters, we never take a lot of time to manage our portfolio and sure don’t have to monitor it on a day-to-day basis. We normally take only a couple minutes each week to look at our holdings and set up upcoming operations.

If we are available, we usually like to manually process our stock buying and selling. From time to time, we still must rely on automatic orders like when we know we will be busy working. Programmed orders can always be bypassed if more time becomes available afterwards.   

We just treat trips or vacation as completely booked periods. Three fully-occupied workweeks would be handled the same as three weeks of vacation.

So, before our summer trip, being on a buying mode, we simply set up buying orders on selected stocks from our Watch List that would trigger at specific thresholds. Using our own tool, we typically like to buy stocks that would reach a Dip Factor of 3, 3.5 or 4. For your information, no orders were triggered during our latest trip.

With internet now accessible from almost anywhere, if necessary, we could access our online brokerage accounts and input transactions while on vacation. Then again, privacy may be an issue. One more reason we prefer not to.

A quick anecdote. We were in the US a couple years back when markets plunged because of one of the debt-ceiling crisis. US media was talking about it all the time. Being there, we felt the pressure even more and were tempted to consider selling some of our stocks. We were fulling invested at the time and we had no buying or selling orders set up. Being on vacation with limited internet access, we had no way to manually input transactions on our autopilot portfolio. In the end, we were very fortunate we had no opportunity to give into the panic because markets went back up a few days later after the crisis was resolved.

We are very proud to limit time we spend managing our DIY Portfolio. Our conservative passive style of investing sure helps us accomplish so. It also allows us to always enjoy our vacation a little more!

Photo by Lady C

Ideas to Deal with Rising Mortgage Rates

On September 6^th, the Bank of Canada implemented its second rate hike of the summer. We must assume it’s only the beginning as the Canadian economy has been doing quite well. Essentially, rising interest rates is the main option for the Bank of Canada to keep inflation under control in booming economic conditions.

As a result, Canadians can expect borrowing costs to get higher. In that context, the principal preoccupation of many house owners is having to pay more for their mortgage.  

So, what can we, simple mortals, can do about it?
  

Stay calm as you probably have time to adjust

Stay calm! There’s nothing critical yet. First, significant hikes won’t happen overnight and will be gradual. Second, effect may not be that immediate so you still have time to prepare for adjustments. Online mortgage calculators can allow you to anticipate eventual increase of your payments.

For very popular fixed-rate mortgages, payments won’t be affected till renewal. Many variable-rate mortgages involve fixed payments also only affected at renewal. You’ll end up paying more interest and your balance will accordingly be a little higher.

12-Minute Solutions

You have a problem, a difficult situation to resolve…

We probably have a 12-Minute solution, an insightful suggestion for you!

Analyzing problems differently, thru 12-Minute lens, can be quite refreshing and you’ll see that solutions can be much easier to come by adopting that special angle: the unique 12-Minute point of view.

Despite its powerful nature, we still suggest learning our somewhat atypical technique by applying it on lighter problems first. After a few training runs, being familiar with its subtleties, it will be simpler to tackle on more challenging difficulties.

Troubled by nagging problems, many get confused. Most of the time, they’ll think they are doing too little. But they could also be trying too hard and even doing too much.

Squirrel Your Way Out of the Rat Race

Tired of being trapped in the never ending rat race? Of living or surviving we should rather say, till your next paycheck, burning through money almost as you touch it, always wanting more and seemingly getting less?

A solution exists: simply act more like a squirrel!

Squirrels are expert savers. They work very hard to find their favourite delicacy: precious nuts. So after struggling to discover some, they stash most of it away. They know provisions will be quite useful when harder times come by.

The squirrel in you knows the value of money and can avoid wasting it. He knows how hard you worked and how much precious time you spent to earn it. He’s inclined to save in anticipation of rainier days and convinced stashing some away will someday get you free. Financially free but also liberated to spend as you wish the rarest resource of our so-called advanced era: your invaluable time.

Saving more, spending less and by the same token, struggling less can be a wonderful liberating idea.

So get some inspiration from our squirrel friend and escape the excruciating rat race. Besides, it may never be possible to get ahead of it and even less to win it anyway.

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