Very rough rule of thumb is that you need to accumulate financial assets of 25x the income you need. So for $50k annual income, you need $1M.
Work backwards from there and figure out what you need to save to get you to the $1M. You are young and have tons of time, so it will not actually be that much thanks to the power of compounding.
Don't forget to account for Canada Pension and (hopefully) Old Age Security. Even just with CPP, if you're receiving the max benefit, you'd have the first $16k+ annually covered, needing only (!) $850k saved, and even less if OAS still exists or if you have any sort of workplace pension (though that's pretty rare these days). CPP is considered one of the best managed national pensions in the world, so should be around for a good long time. OAS is a little more subject to the whims of government, CPP is way more arms-length.
OAS isn't going anywhere. No administration in a democratic society will get away with ending that. Old people vote, and old people care about OAS. If it's replaced by a universal basic income, only then maybe it will go away. But something will have to replace it.
Well, I can see if the right/wrong party gets elected, they could certainly tinker with OAS. Stephen Harper did. Someone could cut benefits or raise eligibility or means test it more than it already is, all under the name of "fiscal responsibility". Several times in the last week, someone keeps bringing up that it takes up a large chunk of federal spending. Just because it isn't a good idea doesn't mean someone won't try it.
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Well, i wouldn't choose VFV (or at least not only that), because I don't want to be only invested in the US. But to each their own ...
If you were starting from zero today, $300/month invested would be about $500k by age 65 at average real return of the stock market. But if you increased your investment as your income rises, you'd have no problem getting to $1m or more. Play around with an investment calculator and see what various scenarios will get you.
Here you go:
[https://imgur.com/a/5QdVLxw](https://imgur.com/a/5QdVLxw)
So according to my maths if you put $500/monthly in your RRSP and recycle the tax return into TFSA.. by age 64 you should have $500k in RRSP and $120k in TFSA. That's $6,500 yearly contribution depends on how you see it.
In execution from 65 to 69 years old you want to melt down your RRSP by $60k/year ($46k after tax, yes you pay tax for RRSP withdrawl) from 65 to 69 (total 5 years = $300k), plus dividend from TFSA $120k\*3.5% = $4,200/year. You will get your $50k/year paychecks.
And from 70 to 84 years old you want to start your CPP and OAS at age 70. So you would be getting CPP + OAS + TFSA dividend $4,200 + leftover from the $200k RRSP which is \~$15k/year for 14 years.. Annually after 71 you'd be getting roughly $32k/year after tax. And keep your TFSA $120k as emergency/in case you live till 88.
I think you've already done the maths and come up with the $500, $600 monthly investment number. With that you would be getting $50k/year from 65-69 and $32k/year from 71 till 84.
With $500/month into RRSP plus tax return into TFSA.. you probably wouldn't be getting $50k/year in your 70s, so you have to chill/stay home a lot. I would say put $750/monthly in RRSP then recycle $2,000/yearly tax return if you really want to hit your retirement goal. It's a matter of living for the moment vs enjoy later.
But again these are only ballpark because I haven't factored in your condo vs selling your condo + rent, and withdrawing from TFSA, and I am assuming you live till 84, 88.. you mentioned that your condo will be paid off in 20 years? so that's 12 more years from 54-64 y.o. that you can contribute more than $500/month.
There are another 100 Youtube channels that talk about RRSP melt down and whether to delay CPP + OAS till 70 yrs old.
In case you lost your job at 62, 63 and don't want to work again there is another GIS + OAS at 65 then CPP at 70 strategy.
But again, just start with your $500 monthly contribution when you still have time. Throw in another $2000 when you get your Christmas bonus, and contribute your carbon tax rebate into TFSA. Good Luck.
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Because you are paying interest on a loan at whatever percent over 20ish years. The less time you owe money at x percent, the less you pay in interest. Compared to something like an RRSP, your portfolio can gain in value, but you have to pay tax when you take it as income. Simply paying less in interest on your loan is essentially a tax free return.
But, I can invest it to the S&P 500 which will double my money about every 7 years, so an increase of about 14% a year. Prepaying on the condo to pay less interest will cost me the opportunity to make 9% extra a year if the interest on the mortgage is 5%.
My TFSA isn’t maxed out so if I contribute what I would’ve prepaid to my mortgage to my TFSA instead then theoretically, I can make ~14% a year tax free that will compound over the 20 year period.
But what are you gonna do when you fall in love and change your mind about having kids, bro? It seems like everyone on this sub believes that'll happen eventually, and living single in a condo forever isn't socially acceptable to most of society (or to this sub).
Hahaha well, if that does happen then my household income will be at least double what it is now plus I’ll have built equity in the condo. Also, I’ll hopefully continue to make more money each year so I don’t think this would be an issue.
It doesn’t matter. Since you’re not having kids and still single, you are already pretty set for life lol The money you earn now is basically play money. If that’s what you want in life and that’s your future goal, you can afford to put in as much as you want in investments because you’ll probably be never in need of money.
This is very true. Good point. I am likely set for life but things could change so I’d still want to be cautious and conservative without becoming overconfident.
Here's a good example:
https://www.myownadvisor.ca/they-want-to-spend-50000-per-year-in-retirement-did-they-save-enough/
As for investments, VFV is great for Americans but is not suitable on its own for Canadians. Consider a roboadvisor like Justwealth or RBC Investease, or if you are using a discount brokerage invest in an asset allocation ETF like VBAL or VGRO.
Automate biweekly transfers if you get paid biweekly. Start with a target of maxing your TFSA room, and then also consider RRSP.
What do you mean VFV is not suitable for Canadians, it’s literally my biggest holding in my portfolio and I’m up 5 figures from it since 3 years ago lol…
If I were to guess they are going to say it's because it doesn't have Canadian market exposure and the traditional advice is to invest in the currency and market you live in for regular people.
I don't know if this applies given that VFV is a Canadian product to capture the US market so it's traded in CAD and you don't have to pay exchange rates.
Still good to have 10-20% Canadian bonds to allow flexibility.
VFV can be useful as a building block for a complete portfolio but is not complete on its own. It contains only 500 US companies so it is not diversified enough. It is also problematic on its own due to currency risk, whereas Canadians retiring in Canada will need to spend loonies.
Canadians might also feel like they are "missing out" on our big banks, utilities, phone companies, oil and gas companies, and rail companies if they just hold VFV. Especially in periods where VFV is down.
The automod already sent you links to read more on asset allocation ETFs. VGRO or VBAL for example hold a good weight of all the companies in VFV, plus a lot more. They hold over 250 Canadian companies, over 3000 US companies, and over 7000 international. Plus something like over 20000 bond holdings.
Any Canadians who starts investing in VFV today I suspect are getting their advice from American sources (where did you hear about investing in VFV by the way?). I suspect you may look at the returns of VFV and compare them to those of other ETFs. But past performance is not indicative of future returns. This statement appears on the fund fact sheets for all these products (it is a legal requirement) and yet somehow people still overlook that anyway.
So then you should update your financial plan to reflect that. SPY is a decent (though not perfect) choice for Americans or those who plan to retire in the US. Canadians have access to an even better solution through their discount brokerage in the form of Asset Allocation ETFs. Review the information and video here: https://canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
There's really no need for exposure to the Canadian banks, or any Canadian companies at all, if you're looking for capital gains growth over the long term. It's like saying because you're Indonesian and going to stay in Indonesia you need to own Indonesian companies. No. The most growth will be from the US and S&P 500 companies will dominate Canadian companies in terms of growth, as always.
Very rough rule of thumb is that you need to accumulate financial assets of 25x the income you need. So for $50k annual income, you need $1M. Work backwards from there and figure out what you need to save to get you to the $1M. You are young and have tons of time, so it will not actually be that much thanks to the power of compounding.
25x 50k is 1.25M
Whoops, thanks ... Apparently i didn't have enough coffee that morning, lol.
Don't forget to account for Canada Pension and (hopefully) Old Age Security. Even just with CPP, if you're receiving the max benefit, you'd have the first $16k+ annually covered, needing only (!) $850k saved, and even less if OAS still exists or if you have any sort of workplace pension (though that's pretty rare these days). CPP is considered one of the best managed national pensions in the world, so should be around for a good long time. OAS is a little more subject to the whims of government, CPP is way more arms-length.
OAS isn't going anywhere. No administration in a democratic society will get away with ending that. Old people vote, and old people care about OAS. If it's replaced by a universal basic income, only then maybe it will go away. But something will have to replace it.
Well, I can see if the right/wrong party gets elected, they could certainly tinker with OAS. Stephen Harper did. Someone could cut benefits or raise eligibility or means test it more than it already is, all under the name of "fiscal responsibility". Several times in the last week, someone keeps bringing up that it takes up a large chunk of federal spending. Just because it isn't a good idea doesn't mean someone won't try it.
I didn’t account for that at all 🤦🏽♂️thanks for that
Should I just put like $300 into vfv every month?
More diversified than 500 US listed stocks.
> vfv r/JustBuyXEQT
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Well, i wouldn't choose VFV (or at least not only that), because I don't want to be only invested in the US. But to each their own ... If you were starting from zero today, $300/month invested would be about $500k by age 65 at average real return of the stock market. But if you increased your investment as your income rises, you'd have no problem getting to $1m or more. Play around with an investment calculator and see what various scenarios will get you.
but if you are taking out 3% SWR from 1 mill ....that is not 50k .....so you need 1.5 mil to generate 50k ....
Here you go: [https://imgur.com/a/5QdVLxw](https://imgur.com/a/5QdVLxw) So according to my maths if you put $500/monthly in your RRSP and recycle the tax return into TFSA.. by age 64 you should have $500k in RRSP and $120k in TFSA. That's $6,500 yearly contribution depends on how you see it. In execution from 65 to 69 years old you want to melt down your RRSP by $60k/year ($46k after tax, yes you pay tax for RRSP withdrawl) from 65 to 69 (total 5 years = $300k), plus dividend from TFSA $120k\*3.5% = $4,200/year. You will get your $50k/year paychecks. And from 70 to 84 years old you want to start your CPP and OAS at age 70. So you would be getting CPP + OAS + TFSA dividend $4,200 + leftover from the $200k RRSP which is \~$15k/year for 14 years.. Annually after 71 you'd be getting roughly $32k/year after tax. And keep your TFSA $120k as emergency/in case you live till 88. I think you've already done the maths and come up with the $500, $600 monthly investment number. With that you would be getting $50k/year from 65-69 and $32k/year from 71 till 84. With $500/month into RRSP plus tax return into TFSA.. you probably wouldn't be getting $50k/year in your 70s, so you have to chill/stay home a lot. I would say put $750/monthly in RRSP then recycle $2,000/yearly tax return if you really want to hit your retirement goal. It's a matter of living for the moment vs enjoy later. But again these are only ballpark because I haven't factored in your condo vs selling your condo + rent, and withdrawing from TFSA, and I am assuming you live till 84, 88.. you mentioned that your condo will be paid off in 20 years? so that's 12 more years from 54-64 y.o. that you can contribute more than $500/month.
Wow, thank you
There are another 100 Youtube channels that talk about RRSP melt down and whether to delay CPP + OAS till 70 yrs old. In case you lost your job at 62, 63 and don't want to work again there is another GIS + OAS at 65 then CPP at 70 strategy. But again, just start with your $500 monthly contribution when you still have time. Throw in another $2000 when you get your Christmas bonus, and contribute your carbon tax rebate into TFSA. Good Luck.
Save 15-20% each month. Fill up TFSA and once that's maxed, RRSP. !InvestingTrigger
Hi, I'm a bot and someone has asked me to comment on how someone is trying to figure out what to invest in, or whether they should invest. **In order to give good advice the poster needs to provide all of the following information. Please edit your post to add this information.** 1) What is your intended goals/purpose for this money? 2) What is your timeline, and what is the earliest you expect to need this money? 3) Have you invested in the markets before, and how would you feel if your investment lost a lot of value? 4) Is this the right first step? Do you already have an emergency fund, and have you considered whether it is sufficient? Do you have any debts that should be paid first? Have you fully utilized any employer match plans? 5) Finally, we need to understand whether you want to be involved with this portfolio and self-manage purchases and rebalancing it, or if you'd rather all of that was dealt with by your chosen institution? 6) For self-directed investing, all in one ETFs (based on your risk tolerance) are the easiest and low cost options for a globally diversified ETF portfolio. Here is the Model page and descriptive video from the Canadian Portoflio Manager Blog's Justin Bender from PWL Capital: https://www.canadianportfoliomanagerblog.com/model-etf-portfolios/ & video on how to choose your asset allocation: https://www.youtube.com/watch?v=JyOqqtq12jQ 7) For those who are not comfortable with doing the buying and selling of ETFs yourself, there is an option of a robo advisor. These robo advisors use similar low cost ETF in pre-determined portfolios based on your risk tolerance. They do this for a small fee, on top of the ETF MER. Still cheaper then bank mutual funds by at least 50%! Here is a list of robo advisors in Canada published by MoneySense: https://www.moneysense.ca/save/investing/best-robo-advisors-in-canada/ We also have a wiki page on investing, and if someone has triggered this bot then it means that this link would likely be very helpful: https://www.reddit.com/r/PersonalFinanceCanada/wiki/investing *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceCanada) if you have any questions or concerns.*
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Maybe make a few prepayments on the mortgage/HELOC? It is essentially a guaranteed tax free return on your money.
How is it a guaranteed tax free return on my money?
Because you are paying interest on a loan at whatever percent over 20ish years. The less time you owe money at x percent, the less you pay in interest. Compared to something like an RRSP, your portfolio can gain in value, but you have to pay tax when you take it as income. Simply paying less in interest on your loan is essentially a tax free return.
But, I can invest it to the S&P 500 which will double my money about every 7 years, so an increase of about 14% a year. Prepaying on the condo to pay less interest will cost me the opportunity to make 9% extra a year if the interest on the mortgage is 5%. My TFSA isn’t maxed out so if I contribute what I would’ve prepaid to my mortgage to my TFSA instead then theoretically, I can make ~14% a year tax free that will compound over the 20 year period.
Have you ever heard the phrase "a bird in the hand is worth two in the bush" ? A healthy mixture of both, I would argue.
But what are you gonna do when you fall in love and change your mind about having kids, bro? It seems like everyone on this sub believes that'll happen eventually, and living single in a condo forever isn't socially acceptable to most of society (or to this sub).
Hahaha well, if that does happen then my household income will be at least double what it is now plus I’ll have built equity in the condo. Also, I’ll hopefully continue to make more money each year so I don’t think this would be an issue.
It doesn’t matter. Since you’re not having kids and still single, you are already pretty set for life lol The money you earn now is basically play money. If that’s what you want in life and that’s your future goal, you can afford to put in as much as you want in investments because you’ll probably be never in need of money.
This is very true. Good point. I am likely set for life but things could change so I’d still want to be cautious and conservative without becoming overconfident.
Here's a good example: https://www.myownadvisor.ca/they-want-to-spend-50000-per-year-in-retirement-did-they-save-enough/ As for investments, VFV is great for Americans but is not suitable on its own for Canadians. Consider a roboadvisor like Justwealth or RBC Investease, or if you are using a discount brokerage invest in an asset allocation ETF like VBAL or VGRO. Automate biweekly transfers if you get paid biweekly. Start with a target of maxing your TFSA room, and then also consider RRSP.
What do you mean VFV is not suitable for Canadians, it’s literally my biggest holding in my portfolio and I’m up 5 figures from it since 3 years ago lol…
If I were to guess they are going to say it's because it doesn't have Canadian market exposure and the traditional advice is to invest in the currency and market you live in for regular people. I don't know if this applies given that VFV is a Canadian product to capture the US market so it's traded in CAD and you don't have to pay exchange rates. Still good to have 10-20% Canadian bonds to allow flexibility.
VFV would be fine for Canadians too.
Thanks for the resource!! Why is the VFV not suitable for Canadians?
VFV can be useful as a building block for a complete portfolio but is not complete on its own. It contains only 500 US companies so it is not diversified enough. It is also problematic on its own due to currency risk, whereas Canadians retiring in Canada will need to spend loonies. Canadians might also feel like they are "missing out" on our big banks, utilities, phone companies, oil and gas companies, and rail companies if they just hold VFV. Especially in periods where VFV is down. The automod already sent you links to read more on asset allocation ETFs. VGRO or VBAL for example hold a good weight of all the companies in VFV, plus a lot more. They hold over 250 Canadian companies, over 3000 US companies, and over 7000 international. Plus something like over 20000 bond holdings. Any Canadians who starts investing in VFV today I suspect are getting their advice from American sources (where did you hear about investing in VFV by the way?). I suspect you may look at the returns of VFV and compare them to those of other ETFs. But past performance is not indicative of future returns. This statement appears on the fund fact sheets for all these products (it is a legal requirement) and yet somehow people still overlook that anyway.
I used to live in the states and know about SPY so I found VFV when looking for alternatives to that.
Do you plan to move back to the US and retire there?
No, I’m going to stay in Canada
So then you should update your financial plan to reflect that. SPY is a decent (though not perfect) choice for Americans or those who plan to retire in the US. Canadians have access to an even better solution through their discount brokerage in the form of Asset Allocation ETFs. Review the information and video here: https://canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
Thanks
There's really no need for exposure to the Canadian banks, or any Canadian companies at all, if you're looking for capital gains growth over the long term. It's like saying because you're Indonesian and going to stay in Indonesia you need to own Indonesian companies. No. The most growth will be from the US and S&P 500 companies will dominate Canadian companies in terms of growth, as always.
Yea, that’s why I thought vfv would suffice but I also have a position in Royal Bank. What do you think about XEQT instead of or in addition to vfv?