Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Reopening after lockdown: Switching from Defense to Offense

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By Del Chatterson

Special to the Financial Independence Hub 

Do you know your Basic Defensive Interval? I was asked that question as I left a failed business venture and wandered off into the wilderness of between engagements. For entrepreneurs it’s an important question to answer, “How long can we survive without income?” For a business start-up, it’s the number of weeks or months before you get to break-even cash flow. For an operating business, it’s how long can you survive a disaster without any revenue.

For an individual, it means how long can you continue to cover your living expenses if your monthly income suddenly stops. How much cash do you have set aside to carry you through such an event? We always knew there were unpredictable economic and financial risks that we could not prevent or avoid. Maybe we maintained insurance coverage and had a contingency fund, just in case. But none of us were prepared for a global pandemic that would shut down normal business activity for two or three months. It may be six months to two years before we get back to anything approaching normal business activity.

Tactics for the next phase

We have all found a way to get through this temporary shutdown and contributed to slowing the spread of infection to allow health care workers and facilities to handle the case load. We are now entering the end of phase one of the 2020 coronavirus pandemic, we hope. Is it time to start switching from defense to offense? Caution and constant monitoring will be appropriate as businesses reopen and people go back to work, but it’s time. Continue Reading…

Podcast on Squeezing All the Juice out of Retirement

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Earlier this week, financial planner and author Riley Moynes featured me on his weekly podcast, Squeezing All the Juice out of Retirement. You can find the 24-minute interview here, using any number of podcasting platforms.

I have written about Moynes’ books in the past (such as The Four Phases of Retirement) as well as his son Chris Moyne’s book about the Retirement of pro athletes: After the Game.

While both those books come up in the podcast, Riley Moynes starts by asking me about why I coined the term Findependence instead of using the more traditional term Retirement.

Most readers of the Hub will by now be familiar with this topic. In fact, one of the first blogs we published when we launched the site in November 2014 was this one on “Which is the better goal: Findependence or Retirement?”

However, for the sake of more recent subscribers, I’ll recap that Findependence is merely a contraction for Financial Independence. And Findependence Day is the day you estimate  you will reach your Findependence. All this is explained in the Hub’s sister site and processor, FindependenceDay.com. There you can purchase the Canadian edition of Findependence Day or find a link to the Trafford site to buy the U.S. edition. (The book is a financial novel.) There is also a button at the top right of this site that will take you to the site.

Moynes elicits a fair bit of my recent history since leaving full-time employment in 2014. As i said, I was working from home long before the Covid-19 crisis hit! What is different — and is also discussed in the podcast — is that a year ago, my wife also left her full-time job in the transportation industry, so we’re experiencing the joys and challenges of Findependence together, albeit aided by two well-equipped home offices.

The 4-hour workday

Another topic that we spent some time during the podcast is the concept of the four-hour day. I used to write about this back in my days at the Financial Post, and it also comes up in the book I co-authored with Mike Drak: Victory Lap Retirement. The 4-hour day concept was brought to my attention by a former employer and friend:  published in 1955 by William J. Reilly it was titled “How to make your living in Four Hours a Day Without Feeling Guilty About It.” (not to be confused with the more recent Tim Ferris book, The 4-Hour Workweek).  Continue Reading…

How to fail at Early Retirement

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OPEN to your opportunities

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

First, let me say Billy and I don’t really use the word “fail.”

We believe every situation offers learning opportunities and calling that experience a failure just doesn’t jibe with who we are. In our lives, we want to move forward with the knowledge and wisdom we’ve gained : not benchmark it emotionally by calling it a failure.

We read Financial Samurai’s Sam Dogen’s  piece on how he claims to have failed at early retirement.

We have great respect for anyone who puts their personal life out there to the public as a source of education and benefit for others, and Sam has done that.

Sam retired at age 34 with 3 million dollars (US$): six times more than we had, 30 years ago. Now, at age 42, he claims that he “failed” at early retirement (even with $250k passive annual income: 5 times what the average retiree has, for the following reasons:

They had a child (with all the costs involved including education at kindergarten level at $2k month)

He underestimated how low interest rates would go (he’s invested in bonds, real estate and dividend-producing stocks)

Rising health insurance premiums for his healthy family (which continue to rise in order to subsidize those who are less healthy)

The bliss of early retirement didn’t last as long as he thought it would, or in other words, he now wants to do more than play tennis and sleep in. (This statement is bewildering to us.)

Options, Choices, Opportunities

We at Retire Early Lifestyle have always focused on providing our readers with options. There is no one-size-fits-all for anything, so why try to fit into a limited description of your retirement?

We don’t believe Sam has “failed” at early retirement; we think he is locked into his own personal version of “limited thinking.”

Eliminate your Stinkin’ Thinkin’

For the continuing education of our readers, let’s look at his reasons one at a time. Continue Reading…

Reassessing your Retirement plans in the COVID-19 era

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By Scott Evans

Special to the Financial Independence Hub  

Living through a global pandemic magnifies the importance of being prepared for the unexpected in your financial future. In light of upcoming months of potential economic instability, whether you have only begun to think about retirement or already have a comprehensive plan, now is the time re-assess your retirement strategy.

The COVID-19 pandemic has added a new level of uncertainty and fear to many retirement portfolios. There is the potential for more volatility or declines in retirement assets resulting in the need to save more prior to retirement, or work longer than originally planned. With that being said, now is not the time to panic. Now is the time to take the time to re-assess, and if necessary, adjust your plans so that your retirement goals stay on track.

Reassessing your plans

A comprehensive financial plan should do a lot more than just forecast returns on your investment assets.  Your retirement plan should have a solid foundation that starts with being prepared for the unexpected. For example, having an emergency fund of three to six months income should provide you with a buffer if you lose your job or face a major expense. Life and disability insurance can protect your family from unexpected health issues that would otherwise derail retirement plans. And creating a will ensures the assets you’ve built up will go to the right people.

Once you’ve got your foundation you can turn to your retirement plan. To get started, you should be considering your future cash flow requirements during retirement, and the assets and sources of income that will be available to you. These may include your personal retirement savings, real estate, as well as pensions and government benefits.

Securing your retirement investments

A well diversified investment portfolio is key to battling uncertain times, both now and in the future. Below are some tips to keep in mind to handle volatility:

  • Your asset allocation should be based on your own retirement goals and your own risk tolerance. The recent market volatility is a good time to reassess your comfort level with your current allocation. If you have been losing sleep at night over the market volatility be sure to share that with your advisor. Continue Reading…

Retired Money: Should seniors take the 25% RRIF reduction option in 2020?

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My latest MoneySense Retired Money column looks at a specific Covid-19 measure the federal Government provided to seniors with RRIFs: the option to take 25% less than usually required in 2020. you can get full details by clicking on the highlighted text: Should retirees reduce RRIF payments during COVID-19?

Normally, seniors must convert their RRSPs to a RRIF or a registered annuity before the end of the calendar year they turn 71. Then they must start withdrawing a certain mandated annual percentage of the value of the RRIF each year, starting the year after it was set up. In recent years, it has started at a 5.28% rate at age 71, rising steadily until it hits 20% at age 95.

These withdrawals are fully taxable, and there have been concerns that this may deplete capital faster than can be replenished by the miniscule returns on fixed income.

On March 25, 2020, soon after the Coronavirus panic became apparent, the federal government’s COVID-19 Economic Response Plan gave RRIF owners the option of taking 25% less than the mandated annual minimums in 2020. (This also applies to Life Income Funds and locked-in RRIFs.)

Matthew Ardrey, vice president and wealth advisor with Toronto-based Tridelta Financial, cites the hypothetical example of Dave, who has $100,000 in his RRIF on Jan 1. 2020 and turns 72 later in 2020. Normally his 5.4% minimum withdrawal would be $5,400 but with the change in legislation he can choose to take out just 4.05%, or $4,050. He can also choose to take more than the minimum if he wants.

Various reasons to take out less than required

MoneySense.ca/Photo created by freepik – www.freepik.com

Why go this route? The main reason is to reduce taxes payable for the year, keeping in mind RRIF payments are fully taxable income. RRIF income may impact OAS benefit repayments: a client near the OAS threshold for repayment may end up under that threshold it if the election is chosen.

Apart from tax and OAS considerations, there may be valid investment reasons. If the RRIF holder is heavy in equities and underwater after market declines, Ardrey says the reduced minimums may give the portfolio a chance to recover, and on a tax-deferred basis. Continue Reading…