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It is currently Tue Jul 29, 2014 3:49 am




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 Post subject: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 9:26 am 

Joined: Tue Mar 26, 2013 9:06 am
Posts: 3
Totally debt free, have about 103k in retirement savings through the company I work for and a few personal accounts. According to the fund calculator that the company has, I should have about 1million for retirement here in Canada by age 57 which would be my 35th year with this company and make me eligible for full retirement.

I'm 31 with a job paying 88k a year and will move up about 5% a year with a ceiling of 116 a year in today's dollars. Nice income potential there. I'm the sole income in my house which is fine as well. We have education accounts setup for the kids as well.

I'm thinking I want to have more than 1million ready for retirement, maybe 1.7 or something. We aren't big spenders.

What has everyone else done after they are debt free? Sit down with a financial advisor and plan out retirement savings or just pick a number like $400 every two weeks to go into a retirement saving a account like an RRSP here in Canada? $400 every two weeks seems to be a good amount to get me to 700k by 57 given 7% growth. I want to set some amount away for retirement so I can enjoy the rest... I didn't sacrifice for 9 years to become debt free just to become a slave to retirement savings, I want to spend in wants/trips/family.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 10:40 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1716
Location: Ottawa, Canada
First off, of course, is to ensure both you and your wife have adequate life/disability insurance coverage, your wills and powers-of-attornies are in place, you're saving for long-term expenditures like vehicle replacement and kids' college funds, and you have a fully-funded emergency fund.

After that, I'd aim for saving 15-20% of your pre-tax income, which at your income would be around $500-$675 every two weeks.

I'd first direct it into a TFSA and invest it in a handful of low fee index funds (such as TD Waterhouses e-series) spread across several markets (TSX, DJ, S&P 500, and maybe one overseas market).

Once you've maxxed our yours and your wife's TFSAs, direct the rest into your RRSPs, in the same vehicles (low-fee, broad market index funds).

At that savings rate, you will not likely ever hit your RRSP contribution limit (unless your employer has a pension you've not mentioned, in which case the pension adjustment would come into play, adjusting your RRSP contribution limit downward accordingly), but if you do, invest the rest in an unregistered investment brokerage account, still in the same things.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 11:08 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1755
kombat wrote:
I'd first direct it into a TFSA and invest it in a handful of low fee index funds (such as TD Waterhouses e-series) spread across several markets (TSX, DJ, S&P 500, and maybe one overseas market).

I'd skip the DJ and go directly into the S&P 500, as it contains all of the DJIA stocks already. The DJIA is too highly concentrated anyway, as it's comprised of only 30 stocks. I'm not sure that much should be put into the TSX, as Canada is about 2.7% of the world economy. Any significant sum would overweight your portfolio to Canada. I wish that TD Waterhouse offered an extended market (mid-to-small) cap fund to supplement its S&P 500 offering. Perhaps you can find that elsewhere.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 11:40 am 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1321
VinTek wrote:
I'd skip the DJ and go directly into the S&P 500, as it contains all of the DJIA stocks already. The DJIA is too highly concentrated anyway, as it's comprised of only 30 stocks. I'm not sure that much should be put into the TSX, as Canada is about 2.7% of the world economy. Any significant sum would overweight your portfolio to Canada. I wish that TD Waterhouse offered an extended market (mid-to-small) cap fund to supplement its S&P 500 offering. Perhaps you can find that elsewhere.


FYI, there's a currency issue to deal with here: when you buy US-listed stocks they are bought in US dollars on US exchanges; if you buy in Canadian dollars you have to deal with the question of hedged vs. unhedged funds, or you can buy on the US exchange and do arbitrage to convert your dollars from one currency to another -- all of which is a little tricky for beginners.

I think going with the e-Series funds (which are a set of index funds with the lowest MERs of any funds in Canada; to get anything lower you have to go with ETFs) is a good idea. You can easily set up a balanced portfolio of Canadian, US, international, and bond funds with the e-Series -- they offer funds in each of these categories. The MERs are still high by US standards but low by Canadian.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 12:29 pm 

Joined: Tue Mar 26, 2013 9:06 am
Posts: 3
kombat wrote:
First off, of course, is to ensure both you and your wife have adequate life/disability insurance coverage, your wills and powers-of-attornies are in place, you're saving for long-term expenditures like vehicle replacement and kids' college funds, and you have a fully-funded emergency fund.

After that, I'd aim for saving 15-20% of your pre-tax income, which at your income would be around $500-$675 every two weeks.

I'd first direct it into a TFSA and invest it in a handful of low fee index funds (such as TD Waterhouses e-series) spread across several markets (TSX, DJ, S&P 500, and maybe one overseas market).

Once you've maxxed our yours and your wife's TFSAs, direct the rest into your RRSPs, in the same vehicles (low-fee, broad market index funds).

At that savings rate, you will not likely ever hit your RRSP contribution limit (unless your employer has a pension you've not mentioned, in which case the pension adjustment would come into play, adjusting your RRSP contribution limit downward accordingly), but if you do, invest the rest in an unregistered investment brokerage account, still in the same things.


Fantastic info! The wills are in place and we are going to do up the POA right away as well.

We have lots of room in both the TFSA and RRSP, I don't see hitting the limit in the RRSP side either based on the numbers you came up with. I still don't understand why the guide is 15% pre tax income... I don't get to spend my pre tax income, only after tax. Still, $500 every two weeks seems reasonable which is about 15% of my current pre tax.

I also have an RBC Dominion Investor who wants to take on portfolio and he's done great work for my in-laws. I would leave the asset mix up to him as long as his fees aren't crazy which he claims they are not.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 12:40 pm 

Joined: Thu Apr 05, 2007 3:05 pm
Posts: 1321
recklessftw wrote:
I also have an RBC Dominion Investor who wants to take on portfolio and he's done great work for my in-laws. I would leave the asset mix up to him as long as his fees aren't crazy which he claims they are not.


Of course he claims they're not ;-)

But the issue here in Canada is that fund fees are high to begin with, so when you tack on the fees of an advisor you start losing serious money in fees, especially as your portfolio grows in value. This is why so many Canadian investors go the DIY route -- check out the Canadian Couch Potato site for starters; if you're investing for retirement there's really no reason to follow any plan other than that method.


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 Post subject: Re: 100% debt free, now what about retirement?
PostPosted: Tue Mar 26, 2013 3:06 pm 

Joined: Tue Mar 26, 2013 9:06 am
Posts: 3
brad wrote:
recklessftw wrote:
I also have an RBC Dominion Investor who wants to take on portfolio and he's done great work for my in-laws. I would leave the asset mix up to him as long as his fees aren't crazy which he claims they are not.


Of course he claims they're not ;-)

But the issue here in Canada is that fund fees are high to begin with, so when you tack on the fees of an advisor you start losing serious money in fees, especially as your portfolio grows in value. This is why so many Canadian investors go the DIY route -- check out the Canadian Couch Potato site for starters; if you're investing for retirement there's really no reason to follow any plan other than that method.


I will do that, thanks.


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