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.

Investment Properties: Can they help your Financial Future?

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Investment properties have long been a cornerstone of wealth creation, offering a tangible asset that can provide both ongoing income and long-term appreciation. For individuals mapping out their financial future, the allure of real estate lies in its potential to generate passive revenue streams, act as a hedge against inflation, and build substantial equity over time. Navigating the world of property investment requires careful consideration of market trends, financing options, and management responsibilities, but the rewards can be significant for those who approach it strategically.

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By Dan Coconate

Special to Financial Independence Hub

The financial benefits of owning investment properties are multifaceted, primarily stemming from consistent rental income and the gradual increase in property value.

Rental payments from tenants can cover mortgage obligations, property taxes, and maintenance costs, often leaving a surplus that contributes directly to an investor’s cash flow.

Beyond this regular income, the potential for capital appreciation means the property itself can become a more valuable asset over the years. This combination of steady revenue and growth in underlying value makes investment properties a compelling option for diversifying an investment portfolio and securing a more robust financial footing for the future.

Deciding how to secure financial stability during retirement can feel overwhelming, especially when considering long-term strategies. Among the options, investment properties are worth exploring. Whether investment properties can benefit your financial future depends on many factors, but they can offer distinct advantages when managed wisely. Read on to uncover how real estate investments might support your retirement goals and gain key insights into the potential risks and rewards.

Maintaining steady Income through Rental Returns

By renting out an investment property, you can generate monthly cash flow that supplements your retirement savings. This income could cover living expenses or fund unexpected costs in your retirement, creating a layer of financial security. However, you must account for costs like maintenance, management fees, and property taxes so potential rental income remains profitable.

Building Long-term Equity

Real estate allows you to build equity over time when the value of your property increases. Unlike traditional savings or stock investments, properties provide a tangible asset that grows in value as you pay down your mortgage. Equity represents your ownership stake, which you can leverage for financial needs, reinvestment, or even retirement travel plans. Consider the area’s housing market trends before purchasing, which impact a property’s appreciation potential.

Diversifying Retirement Savings

Concentrating all your savings into one type of investment is risky, particularly as you near retirement. Real estate is like a diversification tool, reducing dependency on market-dependent ventures like stocks or bonds. This balance may shield you from financial losses if another investment market fluctuates. Keep in mind, though, that real estate isn’t immune to market downturns. Confirm that the candidate areas and property types you consider align with your financial goals. Continue Reading…

Retired Money: An online Canadian Retirement Club

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My latest MoneySense Retired Money column looks at a recently launched Retirement Club devoted to Canadians in or near the cusp of Retirement.

Primarily online, Retirement Club was launched by occasional MoneySense contributor Dale Roberts and a partner, Brent Schmidt. You can find the full MoneySense column by clicking on the highlighted headline:  Retirement planning advice for people who don’t use an advisor.

Roberts, who once was an advisor for Tangerine, is known for his Cutthecrapinvesting blog and in the U.S. for his contributions to Seeking Alpha. While I have no financial or business interest in the club I did become a member. There are regular Zoom calls where (mostly) recent retirees exchange views on topics like the 4% Rule, RRSP-to-RRIF conversions, ETFs, Asset Allocation in the age of Trump 2.0 and many of the topics this Retired Money column often attempts to tackle.

            You can find Roberts’ own announcement of the club – which charges an annual fee of $250 – on my own site earlier in mid-April. (+HST, but it may qualify as an Investment Counsel fee deductible on your personal tax returns). As always check with your accountant, advisor or tax professional).

            My initial impression is that the club seems to involve a lot of work for someone who describes himself as semi-retired. But that seems to be par for the course for financial writers approaching retirement. I’m in a similar boat, as is the American blogger Fritz Gilbert, who recently announced the similarly ironic fact that he was retiring from Full-time Blogging about Retirement. (also in April).

Aimed at self-directed investors

            In his introduction, Roberts wrote that many of his audience are self-directed investors. That jibes with his site’s campaign against high-fee investment funds, in favor of low-cost index funds or ETFs purchased at discount brokerages. While some, like myself, may also use the services of a fee-for-service advisor, many DIY retirees are in effect running their own pension plans. In theory, one of those much-written-about All-in-one Asset Allocation ETFs can do much of the heavy lifting for such investors, but in practice, there’s a fair bit of anxiety about markets, the Canadian government’s rules about TFSAs, RRIFs etc., Asset Allocation, the ongoing Trump Trade War and much more. So it makes sense to gather in one place and exchange views with others going through a similar process.

          In a regular email update to Club members, Roberts explains that “the key concern of Retirement Clubbers is financial security and how to use their portfolio assets in the most efficient and cost-effective manner. That’s why we have a master list of retirement calculators (free and pay-for-service) to test.”

Delaying Government Pensions

         As you’d expect, the Club regularly addresses the major chestnuts of Personal Finance as it relates to those within hailing distance of Retirement. The most common ‘Retirement Hack’ espoused by the Club is to delay receipt of the Canada Pension Plan [CPP] and Old Age Security [OAS] past the traditional retirement age of 65 to allow for more generous payouts at age 70. Most club members lean to taking these benefits as late as possible but of course personal circumstances may dictate earlier start dates.

        To bridge the income gap (from age 60 to 70 for example) RRSP/RRIF accounts will be harvested (spent) in quick fashion: often termed an RRSP meltdown. TFSA and Taxable accounts can also be tapped to provide necessary funding as retirees delay receipt of those CPP and OAS benefits. Continue Reading…

Consider all Retirement Investment Management Options for a Financially Sound Future

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Here’s a look at some of your best retirement investment management options and choices. These include pensions, RRSPs, RRIFs and more.

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Your retirement investment management plan should build in contingencies for long-term medical needs and supplemental health insurance. As well, you should factor in caring for loved ones who are unable to take care of themselves.

When you work out a plan for your retirement, make sure that you aren’t basing your future income on overly-optimistic calculations that will end up leaving you short.

Retirement income can come from many different sources, such as personal savings, Canada Pension Plan, Old Age Security, company pensions, RRSPs, RRIFs, and other types of investment accounts.

 

Learn how your retirement investment management works in a Canada Pension Plan (CPP)

The Canada Pension Plan, or CPP, is the name for the Canadian national social insurance program. The program pays out based on contributions, and it provides income protection for individuals or their survivors in the instance of retirement, disability or death. Since 1999, the CPP has been legally permitted to invest in the stock market.

Nearly all individuals working in Canada contribute to the CPP, unless they live in Quebec, where the Quebec Pension Plan (QPP) exists and provides comparable benefits.

Applicants can apply to receive full CPP benefits at age 65. The CPP can be received as early as age 60 at a reduced rate. It can also be received as late as age 70, at an increased rate.

Here’s a look at some of the pensions or benefits provided by the Canada Pension Plan:

  • Retirement pension
  • Post-retirement pension
  • Death benefit
  • Child rearing provision
  • Credit splitting for divorced or separated couples
  • Survivor benefits
  • Pension sharing
  • Disability benefits

Use a Registered Retirement Savings Plan (RRSP) as a starting place when you look into retirement investment management

An RRSP is a great way for investors to cut their tax bills and make more money from their retirement investing.

RRSPs were introduced by the federal government in 1957 to encourage Canadians to save for retirement. Before RRSPs, only individuals who belonged to employer-sponsored registered pension plans could deduct pension contributions from their taxable income.

RRSPs are a form of tax-deferred savings plan. They are a little like other investment accounts, except for their tax treatment. RRSP contributions are tax deductible, and the investments grow tax-free.

You might think of investment gains in an RRSP as a double profit. Instead of paying up to, say,  50% of your profit to the government in taxes and keeping 50% to work for you, you keep 100% of your profit working for you, until you take it out.

Convert an RRSP to a RRIF to create one of the best investments for retirement

A Registered Retirement Income Fund (RRIF) is another good long-term investing strategy for retirement.

Converting your RRSP to a RRIF is clearly one of the best of three alternatives at age 71. That’s because RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal (which in most cases is a poor retirement investing option, since you’ll be taxed on the entire amount in that year as ordinary income). Continue Reading…

You are too young to retire

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By Mark Seed, myownadvisor

Special to Financial Independence Hub

Inspiration for this post arrived from attending a few retirement parties of late with work colleagues, another one as recently as yesterday and a few more to attend this spring.

Is age 50 too young to retire?

What about age 55? Age 60?

After talking to some work colleagues who submitted their retirement letters and who are now moving on, I know their ages. The celebration yesterday was for someone in their early 60s. They talked and yearned about more time at their cottage, doing small home reno projects, and leaving early morning Microsoft Teams calls in the rearview mirror.

They also talked about their desire to retire now since they “had enough” both mentally and financially: support from the latter after working with their financial advisor or planner and doing some retirement math on their own to bridge the gap between spending needs now and when their pension benefits would kick in, at age 65, including their firm intention to take CPP and OAS at that age too.

Although I’m leaping to lots of assumptions here, this makes me believe that the personal retirement savings of some work colleagues (the sum of RRSPs, TFSAs, non-registered investments or other assets) is likely small to modest beyond a workplace pension: in that they needed to work to ensure they were not sacrificing their personal portfolio too much, too soon. I get that. After decades of raising a family, buying a cottage, paying down a mortgage or two along with other expenses I’m sure, it seems my colleague was more than ready to permanently slow down; cut the cord from work and enjoy their time more while they still have decent health. Good on them. 🙂

This individual is however not the first person to mention the following to me:

“Oh, I can’t afford to retire yet but thinking age 63 or so should be fine since that’s when I can get my full OAS and decent CPP income.”

And my work colleague is hardly alone …

In looking at some stats (Source: StatsCan) the average age of retirement is hardly for anyone in their 50s:

You are too young to retire

These are also not easy times to retire…

Rising general inflation, uncertain tax rates, and higher healthcare costs could very well impact many retirees at any age. Myself included. Certainly, starting to save for retirement early and often and getting out of debt faster than most would be enablers – and I hope they have been for us.

You are too young to retire – is early retirement right for you?

Although many Canadians seem to expect to retire between the ages of 60 and 70 above, there is absolutely no hard and fast rules about when you need or must stop working of course.

Your retirement timeline will depend on many factors, I’ve highlighted some milestone ideas below:

3-5 Years Before Retirement

This is where dreams might start becoming a reality. I was there. I wrote about the emotional side of early retirement back in 2021 as my own evidence.

Somewhere between 3-5 years before retirement, it’s probably wise to get some retirement details in order. Accuracy isn’t overly important IMO but the process of planning is. 

I recall focusing on our desired lifestyle and spending habits to go with it: what early retirement or semi-retirement or full retirement might look like:

  • We started estimating our retirement spending levels, our income sources, and inflation factors.
  • We started evaluating our portfolio returns over the last 5- or 10-years.
  • We looked seriously at our sustainable cashflow from our portfolio (passive dividend and distribution income since we’d be too young to accept any workplace pension or any CPP or OAS government benefits).
  • We started tracking our spending in more detail to challenge those spending assumptions.

1-2 Years Before Retirement

As recently as early 2024 for us, things got more serious.

You might recall we became mortgage and debt-free almost 18 months ago.

You might also recall we realized our financial independence milestone last summer. 

In the year or so leading up to any big decisions, more detailed planning kicked into higher gear:

  • We started to explore ways at work to test some semi-retirement assumptions; the desire but also the financial flexibility to work part-time vs. full-time (i.e., could we still make ends meet).
  • We started to look into post-retirement healthcare insurance options, where needed.
  • We started to talk about our purpose (if not working at all) – what would we do with our time?
  • We started to position our portfolio for upcoming withdrawals.

< 1 Year To Go Before Retirement

Although we might be in this timeline, not sure, since part-time work is now occurring with our solid employer (this could continue for both of us??) but this is where the real retirement countdown calendar probably begins for most people…as you strike full-time working days off your calendar: Continue Reading…

Canadian Utility ETFs offer Lower Risk and tax-advantaged dividends

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Utility investments typically benefit from stronger economic activity, and a top Canadian utilities ETF will let you take advantage of this: if you watch for low fees and sound stock holdings

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Utility stocks are shares in companies that provide electric power, telecommunications, pipeline services and so on. Canadian utility shares have always been great sources of tax-advantaged distribution income.

While most utility stocks are steady income producers, some utilities also offer opportunities for growth. This happens mostly when utilities expand into new markets or geographic regions.

We still feel that investors will profit the most with a well-balanced portfolio of high-quality individual stocks, but ETFs can also play a role in a portfolio.

Holding utilities, or a Canadian utilities ETF, can be a sound component of most investor portfolios.

What kind of companies are included in Canadian utilities ETFs?

Canadian utilities ETFs typically include companies from several sectors, such as electric utilities providing power generation and distribution, natural gas utilities, water utilities, telecommunications companies, and pipeline operators that transport energy resources.

What are the risks of investing in Canadian utilities ETFs?

The main risks of investing in Canadian utilities ETFs include regulatory changes that could affect utility companies’ profitability, interest rate sensitivity that can cause price drops when rates rise, and concentration risk if the ETF is heavily weighted toward a few companies or specific utility subsectors.

Characteristics of the best utility investments

The best utility stocks, or ETFs that hold them, can deliver predictable, lower-risk dividends.

Traditionally, the utilities sector is said to suffer when interest rates rise: or if the market is worried about a rise.

This is because utilities typically have a lot of debt as part of their capital structure, and higher rates make it more expensive to raise money and refinance existing debt. As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.

However, higher interest rates are usually accompanied by increased economic activity and growth. That stronger economic activity is good for utilities: It pushes up demand for their power and so on and at the same time boosts the electricity rates they charge their customers.

Regardless of those positives, as interest rates rise, investors often sell off, or avoid, utilities stocks, and that can push down their price. Given the formula for dividend yield — specifically, annual dividend rate/stock price — a falling stock price (the bottom number in the fraction) pushes up the yield. In other words, when the stock price goes down, its dividend yield goes up.

How are Canadian utilities ETFs structured?

Canadian utilities ETFs are typically structured to track specific indexes using different weighting methodologies, with equal-weight and market-cap approaches being the most common.

When looking for investments in the utility sector, investors should avoid judging a company based solely on its dividend yield. That’s because a high yield can sometimes be a danger sign rather than a bargain. For example, a company’s dividend yield could be high simply due to its share price having dropped sharply (because you use a company’s share price to calculate yield). That low price can be a sign of an imminent dividend cut.

Apart from a good dividend yield, the utility stocks you invest in should have a long history of paying (and raising) their dividends. For a true measure of stability, focus on those companies that have maintained or raised their dividends during economic and stock-market downturns.

 Are Canadian utilities ETFs a good investment for stability and income?

Canadian utilities ETFs typically provide stable income through consistent dividends and lower volatility compared to broader market investments, making them generally suitable for investors seeking stability and regular cash flow.

The best ETFs are focused on simple goals. Instead of picking and trading investments, operators of these ETFs manage investors’ money “passively,” with the goal of duplicating the performance of a market index. This lets the operator charge very low MERs (management expense ratios) compared to an average MER on conventional mutual funds of 2%-3%. Continue Reading…