Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.
Almost one in five insolvencies involve pre-retirement debtors in their 50s, and more than one in 10 (12%) involve seniors in their 60s and 70s.
What’s the problem? Shouldn’t older Canadians have a lifetime of savings to rely on as they enter their Victory Lap? Many do. If you had a well-paying stable job that allowed you to save and build assets, have an employer-provided pension, or have been fortunate enough to own a house during the current real estate boom, you are probably in great shape heading into your golden years.
Many over 50s still have dependents
However, not everyone in the over 50 crowd is as fortunate. Continue Reading…
What is financial independence? How do you get there?
Financial independence means work is optional. You have enough money to live the way you want without having to earn money.
When you get there, life changes. You have freedom. You can do only what you enjoy or find meaningful.
If you don’t like your job or your boss, just quit. Your life is full of options. You can make the most of your own life.
When you get there, you can have a quiet confidence. You are financially secure.
Your plan should start with understanding your inner motivation and defining specifically the lifestyle you want to have once you are financially independent. It is your opportunity to determine your future.
Becoming financially independent requires planning and effort, but it is worthwhile to live a more fulfilling life. “It’s not about the money. It’s about your life.”
“Real freedom is financial freedom.” When is your Findependence Day?
Achieving financial independence is a very broad topic. Writing nearly 1,000 comprehensive, professional financial plans specifically for real Canadians has given me a deep insight into what really works.
The big Canadian banks in the heart of downtown Toronto
We’ve recommended buying the five top Canadian bank stocks since the 1970s, but not everyone has agreed with that advice.
Canadian banks have gone through periodic and sometimes lengthy slumps, like any other stock group. They occasionally make costly management errors. On rare occasions, they have suffered from adverse regulatory decisions.
This is what pessimistic investors might say about top Canadian bank investments. But because these stocks have grown, paid high dividends and have generally been available at highly attractive prices, they’ve provided well-above average investment returns for decades.
Investor worry and the banks
Some investors fear the banks will lose out to “fintech” (upstart financial technologies, comparable perhaps to Uber or AirBnB). Or they wonder if the banks will get caught unawares when interest rates make their long-awaited upward move.
Our view is that the banks had a long time to prepare for the inevitable rise in interest rates, and the inevitable coming of fintech competition. In fact, they will probably wind up prospering in fintech, if not dominating it, as they did in stock brokerage, insurance and other financial areas that they have entered in the past few decades.
On the whole, investors have underestimated top Canadian bank investments for as long as I’ve been in the investment business. As a result, these stocks have often traded at attractive share prices. Because they were growing, and cheaper in many respects than other stocks, they gave conservative Canadian investors a near-ideal combination of pluses: above-average dividend yields and records; low-to-moderate ratios of per share price-to-earnings; and above-average long-term capital gains.
Look for top Canadian bank stocks with consistent dividends
And below is an excerpt from the chapter highlighted in the review. We may also run at least one other excerpt in the coming weeks. Over to you, Clay!
By Clay Gillespie
Special the Financial Independence Hub
Retirement isn’t an event; it’s a process, and it begins years before you actually retire. Working with hundreds of clients over many decades, I’ve come to realize that retirement success is best achieved in five distinct stages. Each stage reflects a different aspect of who you are and where you want to be in retirement, and it all begins with a dream.
1.) Dreams stage
The Dreams stage of retirement typically begins about five or six years prior to actual retirement. This is the time when people have decided to retire but aren’t yet sure of the date. It’s the time where retirement goals and hopes for the future become defined and a preliminary retirement plan is developed. For couples, especially, retiring now becomes an ongoing topic of discussion, not just something brought up in passing.
2.) Reality stage
The Reality stage usually occurs between 6 and 24 months before retirement and its temporal proximity really starts to hit home. Lifestyle issues come into greater focus, along with fears that one’s retirement nest egg may be inadequate. This is a crucial time from a planning perspective. Old Age Security (OAS) and Canada Pension Plan/Quebec Pension Plan (CPP/QPP) applications need to be made, income streams need to be consolidated, taxes need to be minimized and portfolios need to be optimized for income and growth.
I recently had a chance to discuss a new Canadian advisory on dividend stocks with the people responsible for that newsletter. The advisory comes from TSI Network, founded by Pat McKeough, whose investment approach I have always respected.
The advisory is TSI Dividend Advisor (shown above), and it grew out of a long respect for the power of dividends.
Pat and his investment team have always viewed dividends as a sign of investment quality. By extension, dividend stocks become the most reliable foundation of an investment portfolio built for growing wealth and financial independence.
This confidence in dividends is accompanied by a detailed examination of dividend-paying stocks to identify those with the greatest potential to sustain, and raise, their payouts.
The 8 key points they use to evaluate dividend stocks grew into their Dividend Sustainability Ratings. This proprietary ratings system became the backbone of the new TSI Dividend Advisor. It was launched late in 2016 to impressive reviews in the media and a flood of subscriptions from Canadian investors.
Here are some of the keys to that success, from the editors’ point of view.
Jon Chevreau: First of all, Pat, thanks for your time. What role do dividends play in a successful portfolio? How can they lead to Findependence?
Pat McKeough
Pat McKeough: Top dividend stocks are a key part of a successful portfolio. Top dividend stocks can produce as much as a third of your total return over long periods. These payouts are drawn from earnings cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or monthly as well.
At TSI Network, we think investing in dividend stocks is one of the best investment decisions you can make to achieve Findependence. Dividends serve as a way for companies to share the wealth they accumulate through successfully operating their businesses.
JC: Manystocks have dividends. What makes a top dividend stock?
Jon Chevreau
PM: Top dividend stocks provide steady dividends: a sign of investment quality. Some good companies reinvest profits instead of paying dividends. But fraudulent and failing companies hardly ever pay dividends. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks. For a true measure of stability, focus on companies that have maintained or raised their dividends during economic and stock market downturns. These firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, top dividend stocks provide an attractive mix of safety, income and growth. Continue Reading…
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