Weekend Reading – Can you really retire on $500,000?
Welcome to my latest Weekend Reading edition, wondering if you can really retire on $500,000???
I tackle that from a YouTuber in this edition and I share a bit more…
In case you missed the last Weekend Reading edition, working through retirement with higher inflation:
And, I recently posted our latest dividend income update for retirement spending too!
Weekend Reading – Can you really retire on $500,000?
Thanks to my friends at TD Direct Investing for posting this interview below:
While recent surveys found that Canadians believe they need to save an average of $1.7 million to retire comfortably…(see link here)… the average Canadian aged 55 to 64 held just under $400,000 in liquid financial assets like workplace pensions and investments ahead of their retirement years…so seems like there is a big disconnect on retirement income needs and wants versus what folks really have – here in Canada at least.
And Duane from RetireEarly500K in the U.S. has a similar take, you don’t need a million bucks or more to retire there either, or do you??
Duane, thanks to some geoarbitrage of sorts moving from Los Angeles to the lower-cost Arizona desert using a 60/40 stock/bond portfolio mix retired on just over $500,000 invested in his late-50s.
Some things I agreed with and not so much from Duane:
Agree:
- I think his pessimistic view on higher inflation (closer to 4% over time) and lower nominal returns (before inflation) is smart planning overall.
- Seems Duane watches his money closely in retirement, which seems wise, and
- Good on Duane to leave the workforce (if he was not happy!) and continue with his FIWOOT (Financial Independence, Work On Own Terms) YouTube channel passion project. You should try to retire to something…
I prefer Financial Independence Work On Own Terms (FIWOOT) versus FIRE
Now some things I struggled with from the guest on retirement income planning / his planning:
- A shift into more bonds as he ages is likely not wise, given bonds are not as likely to keep up with inflation long-term – so Duane is likely going to have to re-think getting out of the stock market at age 73 like he mentioned, certainly so, if there is longevity.
- Although I don’t know Duane’s healthcare or healthcare insurance status, he might be surprised by any healthcare costs as he ages – so the longer he lives the more money he might need to support aging in place. The same would apply for Canadians to think about.
- He seems to rely on his YouTube channel for a good portion of his income, to support him spending a modest $3,000 after-tax per month. I know for me at My Own Advisor and with our new YouTube channel, that business income makes up a very, very small portion of our retirement income and we would be more than fine without any of it. This site and that channel are just fun passion projects. I hope you continue to enjoy them. 🙂
Can you really retire in Canada on just $500,000?
You probably could but your ongoing, long-term, spending needs would be need to very modest like Duane, you might need a long-term passion project to retire to for income, and don’t forget about funding 1. needs + 2. wants + 3. including some buffer throughout retirement.
Money surprises can and likely will happen.
This is my simple retirement income planning formula.
More Weekend Reading – Beyond can you really retire on $500,000?
A thoughtful article on why dividend ETFs don’t work the way you think they do – but they still work well overall for income investors including moderating investor behaviour.
“Finally, do not dismiss the behavioural side of investing. If receiving a monthly or quarterly dividend helps you stay invested, avoid panic selling, and continue contributing during market downturns, that has genuine value. Compounding is sometimes easier to appreciate when investors see cash arriving and being reinvested rather than simply watching prices fluctuate on a screen.”
From my favourite thought-leadership newsletter, Farnam Street:
Henry Singleton on remaining flexible:
“I believe in maximum flexibility, so I reserve the right to change my position on any subject when the external environment relating to any topic changes too.”
A reader recently asked me about the The Bucket Approach to retirement income planning, as to avoid some advisor fees to figure it out. Well, this is a good overview.
I also posted this below on my site you can find that and related articles anytime in the Archives, very similar thinking and looking back, many years later, very interesting to see that I’ve largely followed this approach into early retirement today…
Happy investing and have a great weekend!
Mark
