Hello

[ScottishCanadian]

Hi, I have read many posts and would be interested in retiree’s experiences.

About myself, I am 50 and my wife is 51. I am retired from the military collecting a current indexed pension of $35,000. I currently work for the public service, and have an approximate retirement date of 58. Reason for this date is my wife is a high school vice principle and doesn’t reach retirement until 59.

Our combined income exceeds $200,000 per year. Jobs are secure.

Assets

House $700,000 in Edmonton AB area
Mortgage finished next year
Starting March 2014, savings of $5,000/month, currently going to pay our mortgage off. No change to our lifestyle once in savings mode as we still spend freely and pay cash for all purchases. No debt otherwise.

Combined RRSP’s $120,000 mostly mine and maxed out.
My wife will have about 50,000 in available contribution room next year, after which we will fill tax free savings accounts and then move to dividend etf's to minimize taxes.

Pensions on retirement $50,000 each ($100,000 total) before tax, mostly fully indexed although my wifes will be slightly lower at 80%, and I will have better after tax net due to military benefits

Both have carry forward medical and dental benefits. I have double dental policies through a military retirement dental plan

I estimate our savings through the next 8 years to be $480,000. Investment returns…no idea but I plan on 4.5% related to my current portfolio as I am conservative and plan to keep that way.

I invest mostly in Canadian dividend ETF’s and laddered government and corporate bonds with short durations, and retain 10% min cash for deployment when an opportunity presents itself.

My wife has not set a retirement date but I believe she will retire by 60 at latest. For myself, I may work an extra year if she does not retire until 60, dependant on my job satisfaction. I could retire with full benefits at 56 as I have worked for one employer since 18 YOA.

I have an interest in at least two 2 or 3 week vacations during winter months, specifically between Jan-end Apr each year. Winters are long up here. And at least one summer vacation within continental America.

Here is my question, so far the retirement plan is working well in the fact we can bring debt down without any risk to portfolio, pensions are the fundamental anchor and diversified, one Fed, the other backed by billions of dollars in oil.

On the accumulation phase how are you dealing with risk? In retirement, have you structured your portfolio to ensure you minimize losses, and how has this affected your retirement goals?

At a minimum I plan to live up to our pension income in retirement. About 75,000-80,000 after tax. Investments will be the juice to slide on vacations.

Thanks in advance

ScottishCanadian

[JoeWras]

Welcome!

Well, with that pension, and medical covered, you are pretty good to go. Question, is the pension COLA'd? That would be one factor.

The other thing that jumps at me is if you need the $700k house. I see Edmonton's average price is about $400k (wow, that oil money must be flowing). Still, I would guess your pricey house has carrying costs. Just something to think about later, not necessarily right now. Of course you may have plans for such a house which is fine and have factored in all the carrying costs.

For your questions: doesn't sound like you have a lot of risk. The old general rule is more equities early in life sliding to bonds/conservative later. Just how much allocation do you have in the ETFs? And are they all equities? If you are at 60% for your age, I wouldn't worry about it at all. You could push it even higher since you have a long horizon and your main income won't come from the nest egg anyway.

PS: maybe if your investments do good, you can pony up for those Oiler's season tickets in addition to vacations. Or... maybe not, that might break the bank.

[ScottishCanadian]

JoeWras

Thanks for the reply, housing in Edmonton is hyperinflated so 700,000 house is nice but not same as in US right now. Regarding carrying costs, part of the cost for the house was very advanced technical equipment and insulation that keeps costs at least half of an older house. Taxes, believe it or not are only about $1,500 more than average house. I actually live in one of the surrounding towns that has a very large business tax base from multiple refineries in the township. Oil is everywhere here, and if they ever fix the pipeline issue so we can ship it we have approximately 200 billion of investment lined up.

Both pensions have COLA mine 100% and my wifes 80%

Equities are 60% Gov/Corp bonds 15% ea, cash 10%

I guess the question I was asking is related to security of principle and investor psychology when you don’t have to swing for the fences. I am just now getting my head around retirement and the fact it is 8 years away. I also understand I need at least 4% nominal return to keep ahead of inflation, 2-3% the last 10 years.

Thanks Again,

Scottish Canadian

[Meadbh]

Welcome, it looks like you two are in a great position. With respect to structuring risk, it seems to me that your job and pension in the public service can be regarded as a bond (as discussed by Moshe Milevsky in "Are you a Stock or a Bond?"), so that gives you some license to increase your weighting in equities. As your wife is working in the oil industry, unless she is with a junior explorer, chances are her job and pension are pretty secure too (unless the Bakken shale brings the price of oil down too much). Index funds are great for avoiding the onerous MERs we see in Canadian mutual funds, BUT a Canadian dividend ETF likely has a significant allocation to commodities, including the very oil company that DW works for! If that is the case you may need to diversify a bit. It might be a good idea to build your own dividend portfolio that focuses on sectors other than oil. Given the need to trim government spending in Alberta, don't be surprised when your expenses go up!

[Koogie]

Try asking your questions also at the Canadian version of this forum.
Canadian Financial Webring Forum

Financial Webring Forum • About Us

[obgyn65]

To answer your questions below, I am very risk averse. One of the most conservative participants in this forum I believe.

My way of dealing with risk is to maintain a large portion of my NW in cash. Just trying to change my AA little by little.

Thinking also about buying more annuities.

If you are Scottish, you may have the UK state pension too. Have you considered that also ?

Quote:

Originally Posted by ScottishCanadian On the accumulation phase how are you dealing with risk? In retirement, have you structured your portfolio to ensure you minimize losses, and how has this affected your retirement goals?

[ScottishCanadian]

No Uk pension as we moved when I was a kid.

ScottishCanadian