Comments on: The Semi-Retired Calculations – Part II http://blog.canadian-dream-free-at-45.com/2010/02/24/the-semi-retired-calculations-part-ii/ Wed, 08 Feb 2012 17:31:40 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Fill Tax with QuickTax: TFB is Giving 2 Copies! http://blog.canadian-dream-free-at-45.com/2010/02/24/the-semi-retired-calculations-part-ii/comment-page-1/#comment-40585 Fill Tax with QuickTax: TFB is Giving 2 Copies! Fri, 26 Feb 2010 09:56:04 +0000 http://blog.canadian-dream-free-at-45.com/?p=1410#comment-40585 [...] Semi-retired calculations @ Canadian Dream [...] [...] Semi-retired calculations @ Canadian Dream [...]

]]> By: Robert http://blog.canadian-dream-free-at-45.com/2010/02/24/the-semi-retired-calculations-part-ii/comment-page-1/#comment-40564 Robert Thu, 25 Feb 2010 23:26:48 +0000 http://blog.canadian-dream-free-at-45.com/?p=1410#comment-40564 Tim, Thanks for sharing how you think about these things. I don't think there is a right or wrong answer, only what's most appropriate for you. I'm not sure about bonds being conservative. The risk I see is reinvestment risk: what happens if interest rates are low and you have no choice but to reinvest at 2%-3%? (My answer is that hopefully your stocks have grown, so that you can either shifts assets from stocks to bonds, or take income from your stocks.) I think it's a really good idea to adjust your investments for retirement two years (or more) early. Then you can understand how it works and maybe even become aware of pitfalls, before you depend on the results. Start owning a mix of stocks and bonds, to understand the characteristics and behaviour of each. Tim,

Thanks for sharing how you think about these things. I don’t think there is a right or wrong answer, only what’s most appropriate for you.

I’m not sure about bonds being conservative. The risk I see is reinvestment risk: what happens if interest rates are low and you have no choice but to reinvest at 2%-3%? (My answer is that hopefully your stocks have grown, so that you can either shifts assets from stocks to bonds, or take income from your stocks.)

I think it’s a really good idea to adjust your investments for retirement two years (or more) early. Then you can understand how it works and maybe even become aware of pitfalls, before you depend on the results. Start owning a mix of stocks and bonds, to understand the characteristics and behaviour of each.

]]> By: Canadian Dream http://blog.canadian-dream-free-at-45.com/2010/02/24/the-semi-retired-calculations-part-ii/comment-page-1/#comment-40542 Canadian Dream Thu, 25 Feb 2010 11:59:34 +0000 http://blog.canadian-dream-free-at-45.com/?p=1410#comment-40542 Robert, 1) The overall mix would approximately be $50,000 set aside for income stabilization. So any income we earn would go in there to help smooth out higher year with lower ones. It would also give me a two year full $27,000 expense float to cover any sudden stock or health issue. The remaining $400,000 I was thinking about $100,000 in equities and the $300,000 as fixed income. Why? Basically habit of thinking in terms of full retirement where you can't recover from those down years and you plan on using that principle. Yet with some kind of income I could potentially expand that risk slightly. I still think I would have a large % in fixed income. I tend to think on the conservative side for risk management. 2)I know borrowing is technically possible, but you can hang yourself with that rope. I'm not a big fan of leveraging and in this case I'm running such a short time frame I don't think it will gain my much for the risk. Tim Robert,

1) The overall mix would approximately be $50,000 set aside for income stabilization. So any income we earn would go in there to help smooth out higher year with lower ones. It would also give me a two year full $27,000 expense float to cover any sudden stock or health issue. The remaining $400,000 I was thinking about $100,000 in equities and the $300,000 as fixed income. Why? Basically habit of thinking in terms of full retirement where you can’t recover from those down years and you plan on using that principle. Yet with some kind of income I could potentially expand that risk slightly. I still think I would have a large % in fixed income. I tend to think on the conservative side for risk management.

2)I know borrowing is technically possible, but you can hang yourself with that rope. I’m not a big fan of leveraging and in this case I’m running such a short time frame I don’t think it will gain my much for the risk.

Tim

]]> By: Robert http://blog.canadian-dream-free-at-45.com/2010/02/24/the-semi-retired-calculations-part-ii/comment-page-1/#comment-40505 Robert Wed, 24 Feb 2010 15:43:35 +0000 http://blog.canadian-dream-free-at-45.com/?p=1410#comment-40505 I have two questions: 1) Why fixed income? If you assume a 4% withdrawal rate (quite safe), wouldn't you want to get the highest return or yield possible? You could create/buy a portfolio of fixed income, preferred shares, dividend-paying common shares and income trusts/REITs that would yield 6%-7% and the equity would still allow some capital growth. 2) Have you considered borrowing money? Because you are assuming 4%-5% return, but banks' prime rate is below 4%, you would come out ahead by borrowing money. In addition, it would offer a tax deduction (for the interest paid). What are your thoughts? I have two questions:
1) Why fixed income? If you assume a 4% withdrawal rate (quite safe), wouldn’t you want to get the highest return or yield possible? You could create/buy a portfolio of fixed income, preferred shares, dividend-paying common shares and income trusts/REITs that would yield 6%-7% and the equity would still allow some capital growth.
2) Have you considered borrowing money? Because you are assuming 4%-5% return, but banks’ prime rate is below 4%, you would come out ahead by borrowing money. In addition, it would offer a tax deduction (for the interest paid).
What are your thoughts?

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