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.

Retirement Reflections during our 32nd year of Financial Independence

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Billy and Akaisha Kaderli on Lake Atitlan, Guatemala

By Billy and Akaisha Kaderli, Retireearlylifestyle.com

Special to the Financial Independence Hub

In January, 2022 we began our 32nd year of Financial Independence. Few people can say they have 30 years of self-funded retirement by the age of 68 and have a higher net worth after spending and inflation than when they started. This is something of which we are quite proud.

As we have aged, one thing we have learned is that long term is getting shorter every day. Life is to be enjoyed now, not someday:  the older we get the more we appreciate that view. Life is continuously full of opportunities and we want to take them.

Opportunities abound

For example, a couple of years ago we were approached by a startup company which sponsored us for several months in Saigon, Vietnam in exchange for sharing our past experience in the restaurant and service industry and for exposure to our readers through our popular website and blog. That was a fabulous trip, and it got us back over to Asia again.

Then we were approached for a partnership, offering tours to Europe and South America. Can you imagine? There are always opportunities!

These are just two examples of why we say that life is full of chances to grow and learn something new if you want to take them. And neither of these recent options could have been presented to us if we were still working.

Portfolio getting stronger

Since the 2008 financial meltdown the markets certainly have performed well, thereby increasing our portfolio. And for a longer term view the S&P 500 closed at 312.49 when we retired in 1991, producing a better than 8% annual ride plus dividends. So, our advice is to get invested now and in a couple of decades looking back you will have wished you had invested more. Probably a lot more.

We suggest people track their spending now, then multiply that number by 25 to get a rough estimate of the portfolio amount they need to retire. Once you know that amount, in simple terms, assuming the same 8% growth in the future and you withdraw 4% for living expenses, this leaves you 4% to cover inflation and growth so you are all set.

The 4% rule is a guide not set in stone and ours bounces around depending on the markets and our expenses, but on average we have been able to maintain it easily below 4%. Our data over 30 years gives us security knowing that if one year it is higher we can make adjustments the following year to correct it. Then again, the markets could move higher helping us out as well, which is usually the case. Plus, we now are receiving Social Security, so payments and dividends cover our expenses. You can read our reasoning behind this decision here.

Practical considerations

Another note is that because we have a good percentage of assets in retirement accounts, when we turned 56 years old we used IRS rule 72T to withdrawal an annual amount close to our estimated Social Security payments, thus creating a bridge until we actually qualified. Now that we are receiving benefits we have turned off that spigot and are letting the IRAs grow once again.

The age of 72 is now coming into our sight and RMD, required minimum distributions, are the next issue to deal with, but we still have time and no one knows what the tax laws will be then.

With that stated, we still maintain a core holding of buy and hold (DVY, SPY, VTI) which sends us a steady stream of dividends in our taxable accounts as well as tracking the market. But in our IRAs, where we have no tax issues regarding trading, we have been more active using market seasonality with the idea of side-stepping larger declines. Some years have been better than others but we have been taking about half of the market risk than being all in all the time and that is comforting.

Where to retire, cost of living and healthcare

We are not alone anymore, with Boomers retiring at 10,000 a day, we see more retirees everywhere! But in terms of the foreign locations that we visit, the retirement community of Chapala, Mexico is growing at a fast pace. The Colonial town of Antigua, Guatemala has also attracted its share of Expats, and there is a solid and active retirement community in Chiang Mai, Thailand and Panama.

We would recommend Mexico, Panama and Guatemala for their proximity to the US and Canada as well as being on similar time zones as family and financial markets in the States. We would say that Thailand is attractive for its excellent medical care, warmer weather and uniqueness. All of these locations offer excellent lifestyle for cost of living. Continue Reading…

Retirement Options for Small Business Owners

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By John Shrewsbury, RICP

Special to Financial Independence Hub

As a small business owner who is emotionally, physically, mentally, and financially engaged in a growing startup, you may feel consumed in the now. So many small business owners put everything back into their company without setting aside their profits in a tax-efficient way. If you run your business without an eye to the future, you will never reach the point where work becomes optional. Your business is your vehicle to financial independence, but it won’t happen without years of careful preparation.  

The independence and freedom of your entrepreneurial path comes with an array of responsibilities. As the business owner, the weight of preparing for your retirement and the retirement of your employees falls entirely on your shoulders. After all, if you don’t plan for your retirement, who will? Start building retirement savings into your company budget and making it a part of your compensation for running the company.

Business owners in the U.S. have retirement options for many situations

As a small business owner, you have a retirement option for almost every situation. When choosing a plan, your most significant consideration is the cost of contributing. If you can only afford to set aside a small amount of money each year, an individual retirement account (IRA) will serve you well. 

A Simplified Employee Pension plan (SEP) is the equivalent of a jumbo IRA. This plan works best for self-employed entrepreneurs with few or no employees. You can contribute up to 25% of your compensation to a SEP, with a maximum of $61,000 per year allowable in 2022. Keep in mind that if you have eligible employees, an SEP requires you to contribute an equal percentage of their salaries to the percentage you contribute from your own revenue. For example, a business owner with an employee making $100,000 per year would have to contribute 25% of the employee’s salary if they want to maximize their own contribution at 25%. If you have a number of employees, a SEP will most likely be your most expensive option.  Continue Reading…

A Retirement-ready portfolio of Canadian and U.S. stocks

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By Dale Roberts, cutthecrapinvesting

Special to the Financial Independence Hub

In this post I’ll offer up charts on our U.S. stock portfolio and the Canadian stock portfolio. And I’ll put them together so that we can see how they work together. The total portfolio was designed to be retirement-ready. The fact that it beats the market benchmarks is a welcome surprise. At the core of the portfolio is wonderful Canadian dividend payers – the U.S. stocks fill in some portfolio holes. Let’s have a look at our U.S. and Canadian stock portfolio.

I recently received requests to share our U.S. stock portfolio holdings. While I often track that portfolio on Seeking Alpha (the land of stock pickers) that’s not a regular event on this blog. I have certainly shared the Canadian Wide Moat Portfolio on Cut The Crap Investing.

On Seeking Alpha, here is our U.S. stock portfolio. The post may be paywalled for those who have exceeded the 3 free reads on Seeking Alpha. Again, that’s why I will share some details here. But keep in mind, this is not advice. But you may be on the receiving end of some ‘good’ lessons on building the simple stock portfolio.

Skimming the dividend achievers index

In early 2015 I skimmed 15 of the largest-cap dividend achievers. What does skim mean? After extensive research into the portfolio “idea” I simply bought 15 of the largest cap dividend achievers. For more info on the index, have a look at the U.S. Dividend Apprecation Index ETF (VGG.TO) from Vanguard Canada. At the core is a meaningful dividend growth history working in concert with financial health screens. It leads to a high quality skew.

You will find that index ETF in the ETF portfolio for retirees post.

At Questrade you can buy ETFs for free.

I won’t get too deep into the methodology and how and why I constructed our portfolio in this post. I will offer more details in a post next week. Today, I will just get to the fun stuff – the holdings and the return charts and tables.

The U.S. Dividend Achievers

The 15 companies that I purchased in early 2015 are 3M (MMM), PepsiCo (PEP), CVS Health Corporation (CVS), Walmart (WMT), Johnson & Johnson (JNJ), Qualcomm (QCOM), United Technologies, Lowe’s (LOW), Walgreens Boots Alliance (WBA), Medtronic (MDT), Nike (NKE), Abbott Labs (ABT), Colgate-Palmolive (CL), Texas Instruments (TXN) and Microsoft (MSFT). Continue Reading…

Planning for Longevity: How to avoid Retirement Hell

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I never thought that I would fail at retirement and end up in Retirement Hell. But I did.

You see, I spent my entire career – almost forty years- in the banking industry. While there, I learned a lot about money and investing and, over the years, I helped thousands of clients save for their own retirement. Furthermore, my wife is a financial advisor. And yet despite all that knowledge and expertise, I still managed to fail miserably at retirement.

Looking back, I now realize that many of my beliefs about retirement were wrong because they were all linked to the financial aspects of retirement. What I know for sure now is you just don’t fall into a happy retirement because you have a lot of money. You need financial security, of course. But designing a satisfying life takes thought, time and planning on many more levels. You need to know your needs and values, and what makes you happy, and then you have to find ways to satisfy these aspirations on a regular basis. Thinking that you will figure things out when you get there doesn’t work.

Traditional retirement planning has programmed us to think it’s all about the money, but it’s not. In conventional planning, the focus is always on the number: how much money you are going to need to retire. Few financial advisors/planners talk about the other important stuff: how you are going to replace your work identity, how you are going to stay relevant and connected, and how you are going to keep mentally sharp and physically fit, among other things.

Believe it or not most retirements fail for non-financial reasons rather than financial ones. I don’t want that to happen to you so for the past year and a half I along with five of my friends have been working on a new book — Longevity Lifestyle By Design — to help people design a life they would be happy to wake up too.

Retiring from work is simple. Figuring out what you are going to do with the rest of your life is the hard part.

Our mission is to help improve the transition to retirement and help retirees to design a life that they look forward to living everyday.

We know that many people are going to struggle with the non financial challenges that can often accompany retirement. It happened to me, my colleagues and through my discussions with other retirees discovered that it also happened to many of them as well. Continue Reading…

Issues that arise when Financing your Small Business yourself

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Photo Credit: Unsplash

By Beau Peters

Special to the Financial Independence Hub

When you get an idea for a new business, it’s easy to want to launch it right away. It might seem like a “now or never” situation, and your eagerness makes it nearly impossible to think about waiting a year or two to get things running.

However, it’s not uncommon for small business start-ups to cost thousands of dollars. Applying for small business loans can take time, and if you’re worried about launching quickly, you might be tempted to bankroll your business and use your own money to finance it.

Unfortunately, that’s a risky move. While it might seem like an investment, it could be a bad idea for a small business looking to grow.

If you’ve got a great idea for a small business and you’re anxious to launch it, you already know the importance of funding. However, it’s just as important to recognize some of the risks of financing it on your own. Let’s talk about what that might look like, and some issues that often arise when you’re putting in your own money to get things off the ground.

Mixing Business and Personal Funds

One of the biggest problems that can arise when you finance your small business yourself is drawing a line between your personal funds and what you’re spending on the business. It might not seem like a big deal for the two to commingle, especially if you’re starting out as the only employee. Some of the most common ways of commingling funds include:

  • Using one bank account for business and personal needs
  • Moving money back and forth between accounts
  • Depositing personal money to pay for business expenses
  • Withdrawing from your business account to pay for personal expenses

Not only can commingling funds get confusing, but it could put both your business and your lifestyle at risk. First, if your business is listed as an LLC, you could end up being held personally responsible for any business debts or lawsuits. You’ll also risk your personal assets being exposed.

One of the easiest ways to keep yourself from commingling funds is to dedicate a separate bank account to your business. Even if you end up putting some of your personal money in there for funding, you’ll be less likely to tap into it for personal reasons, and it will be easier to keep things organized and easy to understand, especially when tax season rolls around.

Ignoring the Fine Print

Financing your small business yourself doesn’t always mean reaching into your own pocket. It could simply mean you’re taking other routes to fund your idea, rather than relying on a bank or small business loan.

One popular option nowadays is crowdfunding. In the United States, over $17 billion is generated each year through crowdfunding sites. If you need money quickly, setting up a crowdfunding campaign is a great way to get it while encouraging people to get excited about your new business. It can be a solid marketing tool if you invest some time into it.

However, don’t ignore the fine print when it comes to these campaigns.

There are several different sites and platforms that allow you to ask for money. Each of them has a different set of rules and regulations. Some might require a small percentage of whatever you make. Others will charge a fee. Even if you understand that part, make sure you know what you’re liable for if you reach your funding goal. Many platforms require you to offer incentives to people willing to donate or pledge. It’s important to follow through on those incentives. Not only could you end up getting reported and lose some of your funding, but it’s a bad look for your business if you don’t give the people helping you out what they deserve.

If you decide to go with a crowdfunding site, make sure you understand the rules and are willing to stand by them, whether you make your goal or not.

Not Building your Skills

When you’re starting a business, you have to wear many hats. You might have a great idea, but you’re going to have to learn how to market yourself, deal with accounting, work with technology, and even how to hire the right people. In addition to the hard skills you’ll need, there are plenty of soft skills small business owners should have, including:

  • Leadership
  • Strong communication
  • Organization
  • Emotional intelligence

Not only are these skills important for running your business, but they’re necessary if you’re trying to work with angel investors or you want to secure venture capital. Refining your soft skills can make it easier to communicate with potential investors. By communicating clearly and effectively and showcasing your leadership skills, they’ll be more likely to trust your business plan and your projections. Continue Reading…