Posted by Robert on August 30, 2010
A few weeks ago, a journalist contacted me through this blog, requesting an interview about early retirement. I shared my story and some of my ideas and experiences regarding starting early and enjoying success at a relatively young age. I enjoyed my conversation with Jacqueline Nelson from Canadian Business magazine and looked forward to seeing the article in print. As many people who have been interviewed for an article before can probably guess, the article ended up being very different from what I expected.
The current issue of the magazine contains an article called: Top 10 Retirement Mistakes and How to Avoid Them. The link opens in a new window, so feel free to click on it and read it at your leisure. I contributed to ideas number 8 and 9: plan for a long life and don’t plan to inherit your retirement fund. Those ideas could both be related to early retirement planning, but I know it’s a bit of a stretch.
First, if I were planning to retire at age 45, how would I inherit money? My parents will be in their late 60s, not likely to be leaving an inheritance. And I have many brothers and sisters and cousins. I don’t expect to receive anything from my grandparents, but even if they leave money, it’ll be split many ways.
Second, how many years will I need my investments to provide income for me? As I mentioned to Jacqueline, there’s not much difference between planning to spend down the capital over 35 years (age 65 to age 100) and planning to never touch the capital. Retiring at age 45 leaves 55 years during which investment income will be required. This can only safely be accomplished by never spending capital. As the authors pointed out in the article, a 4% withdrawal rate is likely to achieve this. Coincidentally, 4% income can be produced by dividend paying common and preferred shares, as a way of producing income and protecting capital.
I was lucky to get to share some of my expertise with a wider audience, pointing out two dangerous assumptions people might make when approaching their retirement. Many of us readers of Canadian Dream are already aware of many of the others. We understand the costs associated with our children, if we decided to have kids. We don’t plan to work into old age, but are young and able enough to work if we need to. We are careful with our spending and likely won’t need a million bucks.
What did you think of the article? Is the financial press helpful, or merely distracting? Where have you found the information that has been most helpful to you?