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“I am now part of a group in society that I hadn’t realized I was joining,” writes Joyce White of Vancouver, in a First Person essay. “I’m one of the recently retired, mixing with the longer-time retired. They are taking me in, accepting me. At my local public pool at 9 in the morning in the changing room, I engage in conversations about the aqua-fit classes, the problems of shower temperature, the weather, the grandkids – but I don’t actually have grandchildren, nor am I in those aqua-fit classes – yet! I’m merely at the pool swimming during what used to be my regular working hours, instead of at 7 in the morning. The older and sometimes grey-haired women in the changing rooms see me as one of them, which has come as a mild shock. But really, it’s my problem!”
The transition to retirement, adds White, is meant to be a move to the promised land of travel and relaxation – or at least, to enjoying coffee and a muffin at the coffee shop any time of day. “Friends assured me that I would find it might take all morning just to read the paper, and that this is okay. That part is sometimes true, but I’m finding the journey to building a schedule and continuing to find purpose as I start retired life takes some effort.”
Joyce White shares more of her personal story here.
Can 54-year-old Ivy and Gabriel afford to retire in three years?
This small-town B.C. couple just wants to see all three of their children through to university before they cash out and retire.
Gabriel and Ivy have well-paying professional jobs, three children and a mortgage-free house in small-town British Columbia. Gabriel works in health care, Ivy in education. They are both 54 and earn a combined $182,785 a year.
“We are very frugal,” Ivy writes in an e-mail. “We do all our own home repairs, shop at thrift stores and rarely eat out.”
Short term, they want to “get the kids through bachelor’s degrees” – one has already finished university – and buy an electric car. They have about $144,000 in a registered education savings plan for tuition.
Both Ivy and Gabriel have defined benefit pension plans that will pay a combined $61,550 a year at age 65, indexed to inflation. That’s when their bridge, or early retirement, benefits end and they begin drawing Canada Pension Plan and Old Age Security benefits. Their initial pensions in 2027, the first year they are both fully retired, will total $67,884 a year, including the bridge.
“Can we afford to retire at age 57?” Ivy asks. “If not, what age would be appropriate?”
Their retirement spending target is $65,000 a year plus $15,000 a year for travel.
In the latest Financial Facelift, Ian Black, a financial planner at Macdonald, Shymko & Co. Ltd. of Vancouver, takes a look at Gabriel and Ivy’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Why I’m buying Canadian banks when others are fearful
As Warren Buffett famously said, one of the secrets to investing success is “to be fearful when others are greedy and to be greedy only when others are fearful.”
Well, judging by the recent declines in Canadian bank stocks, writes John Heinzl in his Investor Clinic column, many investors are fearful that the turmoil affecting some U.S. and European banks will soon spill over into Canada. “So, in keeping with Mr. Buffett’s philosophy, today I’m going to indulge my greedy side.”
Heinzl has decided to increase his holdings of three of the four Canadian banks in his model Yield Hog Dividend Growth Portfolio. “Specifically, I’ve added five shares of Royal Bank of Canada RY-T, five shares of Toronto-Dominion Bank TD-T, and 10 shares of Canadian Imperial Bank of Commerce CM-T,” he explains. “I didn’t add to my Bank of Montreal BMO-T position because it was already the highest-weighted bank in the portfolio.”
Read the full article here.
In case you missed it
Not sure how to redeem your loyalty points? Not all redemptions are the same so here’s how to calculate the value
Loyalty points are a great way to offset the cost of groceries, travel, merchandise and more. But every redemption is different, so you need to know the value of your points to ensure you’re maximizing your rewards. And if you find that confusing, well, you’re not alone.
With any redemption, you need to figure out the value of one point first. This is often referred to as cost per point or cent per point (CPP). With this number, you can quickly see how much value you’re getting.
Learn how to calculate the value of your points here.
This is the worst cost-saving move possible when planning a trip
Next to having your passport ready, the most important aspect of planning travel outside Canada is to ensure you have medical insurance coverage, writes personal finance columnist Rob Carrick.
A recent poll by TD Insurance suggests a surprising number of people are skipping this step. Without doubt, travel costs have been caught up in the rise of inflation over the past year or so. But cutting costs by not buying travel medical insurance is risky in the extreme.
The TD poll asked participants who are likely to travel in the next year if they would buy travel medical and trip cancellation insurance. Only 27 per cent of people aged 18 to 34 said yes, as did 39 per cent of people over the age of 35.
Read the full article here.
Retirement Q&A
Q: Should individuals with a large bond mutual fund allocation ($1-million) sell and take the capital losses, or should they wait for the most anticipated recession in history? What other alternative is there for senior bond investors who need a fixed-income component for stability?
We asked Mark Bayko, head, portfolio advisory group at RBC Wealth Management, to answer this one.
By now, most investors may appreciate that fixed income, along with other asset classes, faced some challenges in 2022. Rising inflation and higher interest rates pressured most bond prices, resulting in relatively poor returns for the asset class. Investors with losses in their fixed income holdings have the choice of crystallizing the loss by selling their holdings and using it to offset any recent or future capital gains. This is a viable strategy that should form part of a regular investment discipline.
The more important question in this case may be what to then do with the proceeds? Poor returns in one year don’t necessarily foreshadow weak results to come. In the case of fixed income, bond yields now sit at levels we haven’t seen in nearly a decade, even though they are off the peaks reached late last year. As a result, the asset class should be viewed more optimistically by the average investor as it can serve as a tool within portfolios that can drive a more meaningful share of the returns required by investors and their financial plans than they have in recent memory.
In addition, there is the current investment outlook. All things considered, the global economy has demonstrated resilience to date. Nevertheless, higher interest rates have historically worked to slow things down over time. Given the significant rate tightening that has transpired over the past year, the effects should continue to work their way through to the broader economy as the year progresses. This could result in some equity market weakness and lead to lower bond yields, which in turn could benefit the higher quality fixed income parts of portfolios via higher prices. In other words, fixed income could once again play a valuable role as a diversifier in portfolios during any future periods of market turbulence.
In sum, the priority should be to ensure your portfolio is taking advantage of higher bond yields and being well-diversified to withstand any future bouts of market volatility. That suggests maintaining an adequate level of high-quality fixed income exposure in your portfolio.
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