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Tuesday, September 2, 2014

Investment Update – Jan 2013

Posted by Tim Stobbs on January 31, 2013

Welcome to my first update in 2013 which now involves a shift in format since with my house paid for it really doesn’t makes sense to use my net worth to track my progress to early retirement.

To track my progress I’ve decided to track both my expenses and my investment gains.  So once the investments gains are consistently beating my expenses I’m financially independent and can stop working.  I think my ideal tracking of this would be one full year of investment and spending data, but I don’t have that yet.  So for now I’ll do a trailing six month average on spending and investments for the calendar year.

Investments

Account (Contribution), [+/- Gain or Loss less contributions]

RRSP $31,950 ($100), [+$950]
LIRA $12,160 ($0), [+360]
TFSA $17,460 ($0), [+$860]
Pension $67,310 ($4430), [+$4180]
Wife’s RRSP $35,560 ($2500), [+$660]
Wife’s Investment Account $13,550 ($0), [$450]
Wife’s TFSA $11,810 ($0), [+$510]
My Investment Account $7,110 ($0), [+$410]
High Interest Savings Account $1,200 ($0),[$0]

Investment Net Worth $198,110 ($7030 ), [+8380 or 4.2%]

Spending Averages

Last Month $2427

Trailing Last Six Months (less mortgage payments) $2657

Results

Number of months spending covered by investment gains: 3.2 {Target 1.0 or higher}

Commentary:

Oh wow!  So that is what financial independence feels like!  I didn’t notice anything different until I ran the numbers to realize my investments gains exceeded my spending by a large margin for the last month.  Of course that is only a one month snap shot, so that doesn’t mean much.  I need that to be occurring on a 12 month trailing average for both investments gains and spending before I declare my retirement plan a success.

Of course I’m still thrilled with the results as I managed to contribute just over $7000 to my accounts which is a nice start to my $48,000 goal for the year.  That was helped significantly by a lump sum payment I get to my pension of $3000 that I got in January and then another $2500 we contributed to my wife’s spousal RRSP.  I suspect the other event that is helping this month to look good is a number of the stocks I own paid a dividend in January.  Yet that should start to smooth out as I get more investment data over the course of this year.  Also yes I did notice I’m in spitting distance of $200,000 in investments, so I’ll get there next month.

Also please note this new format is still under development.  I will likely add or modify things a bit for the first few months, so any suggestions would be welcome.  For example, I’m still working out what I want to display on the graph.

Any questions?

Comments

11 Responses to “Investment Update – Jan 2013”
  1. Jon_snow says:

    I generally don’t include my LIRA in my ER calculations because I can’t access these funds until I’m… well, old. ;)

    Looks good Tim!

  2. Elizabeth says:

    How do you assign a dollar worth to your pension? Doesn’t that usually get paid out in monthly increments? Or do you get a lump sum?

  3. John the Contractor says:

    What percentage of your gains are capital gains versus dividend/interest income? I’m surprised to see you indicated that you choose individual dividend paying stocks as opposed to ETFs or Index Investing, given the relatively small amount held outside of your company pension. Is there a particular reasoning behind this? Can you give some sort of indication as to your asset allocation or your diversification plan? (Bonds/Equities/REITs/commodities, and so on)

    Assuming that your work pension is locked in, I’m wondering how that would figure into your early retirement if it is unaccessable until a particular age?

    Thanks!

  4. Jacq says:

    One thing to remember is that a good year or few in the market can give you a (somewhat) false sense of security. So can a good month. :-) That’s what happened to me in 2009 (mind you my gains were freakishly high in ’08 and ’09 – good reminder not to DCA and wait to swing at the fat pitches) and hence my switch to primarily dividend stocks, so it was pretty much guaranteed that I would know what I would be having coming in. I, for one, need that mental stability. I would imagine that people with higher 7 figure portfolios have “the big-ass number” as their stability. Most of the people on the ER forum seem to have pensions or a still working spouse to fall back on. Oh well, you play the cards you’re dealt.

    In Alberta at least, you can access up to 50% of your LIRA when you turn 50 and the remainder at 55. Not sure about the rules in SK, but that’s a big plus for ER-ers to have that pre-65 bridge.

    Are you value averaging or dollar cost averaging? I far prefer value averaging because it forces me to sell sometimes. ;-)

  5. Tim Stobbs says:

    @Jon_snow – Good point, but given how little my LIRA is I’m not worrying about the fact I can’t access it until 55.

    @Elizabeth – My pension is a defined contribution, not a defined benefit so I do actually know its total value. They don’t guarantee my payments at all, so it is up to me to invest well.

    @John The Contractor – I actually haven’t broken down the gains in my data by dividend vs capital gain/interest. But that is a good point. I’ll have to consider tracking that. RRSP accounts are index investing, while TFSA and taxable are individual stocks. The reason the other accounts are small is I haven’t been putting much in while paying off the mortgage for the last three years. The spread of the accounts should shift significantly by the end of 2013 as the TFSA accounts will get the majority of the money this year.

    The pension is locked until 50, but I can take out about 1/3 as an RRSP transfer when I quit. Again the numbers look odd now since for the last three years the pension has got most of the cash. Over the next 7 years the balance will shift dramatically as I add over $200K to the other accounts.

    @Jacq,

    Yes I’m familiar with the problem. Yet it was a nice way to start off this change of format. I personally won’t pull the plug until I can do a 4% draw down rate to cover expenses. So in reality this month should be compared to my entire year. *grin*

    I don’t think I can do that with my LIRA, but then again it unlocked entirely at 55. I’m likely going to dollar cost, but that is something to consider.

    Good questions everyone,
    Tim

  6. George says:

    > I personally won’t pull the plug until I can
    > do a 4% draw down rate to cover expenses.

    So, using your 6 month avg expense rate, that means a net worth of $797,100 (12*avg*25). Rather than compare the change in investment income, you might as well use this easily calculated number that will automatically adjust with your spending level?

  7. Tim Stobbs says:

    @George – Not a bad idea. I will have to think about it.

  8. That’s basically what I track: last 12 months of spending, potential investment income based on a fixed withdrawal formula, and the percentage of spending covered by the investment income. It makes a nice chart :)

    Another chart I made shows one stacked bar of categorized expenses (smallest ones at the bottom) with the total investment income overlaid on top. It’s a fun way to look at it and if you’re working through a particularly large expense it can be a motivation to reduce that spending.

  9. Is the goal to make the passive income and the expenses equal? Or, is the goal to have the income always be greater than the expenses so that the investment pool is always growing and there will be a healthy cash reserve developed for new roofs and replacement cars?

  10. Tim Stobbs says:

    @Jane The goal is to make the passive income higher than average annual expenses. So that we way any income can be saved for unusual expenses or fun things.

  11. deegee says:

    Jane, I agree with Tim. I always build a cushion, or surplus, into my ER budget in case I have any unforeseen expenses. Any unused surplus gets reinvested, of course.

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