I recently had a comment left on another post wondering if I max out my RRSP’s every year. Up to now the answer has always been no. I was focused on debt reduction for a number of years and with what I was putting in to my RRSP’s and my pension adjustment I don’t have much extra room built up. But now I’m not sure if I should max the RRSP’s or have my wife invest in dividend paying stocks and hold them for the long term.
Option 1: I buy spousal RRSP’s and max out each year for the next 16 years or so. I would get back about $35 per $100 invested and then I would get tax free growth for a number of years. The problem would be I would get taxed at my new lower marginal rate when I pull them out in retirement.
Option 2: I have my wife buy quality dividend paying stocks and hold them for the next 15 years. She would have a negative tax rate on her dividends, so no tax on that growth. If I don’t sell for that long I would only trigger capital gains at the end, which would be a lower tax rate than my marginal rate at that time.
Has anyone seen a good calculator that is updated with the latest tax rates? I have yet to find one during the weekend and I’m still working out how to simulate the buying stock option well. Once I get some good results I will be sure to post them.
I have a confession to make. I’m a recovering money control freak. My wife laughed at me for years as I tracked ever little penny of expenses. The reality was it was a good thing to know about my spending, but now with the kid I just don’t have the time to bother with the same level of detail.
So how do you get over being a money control freak? Start automatic bill payments and fund transfers for your savings, then comes the hard part. Don’t track them as every tranfer leaves the account each month (Alright, you can make sure they leave on the first month). Just limit yourself to doing the end of month summary check to see if you have any extra money in your chequing account that can go over the high interest savings account.
I’ve now go it all set up so I have to pay just two bills in online banking and do one account transfer of money. Every other bill and account transfer is now automatic.
It’s been several months now and it is working. I’m spending less time checking my bank balances and more time reading and playing with the kid. So if you are a fellow money control freak, don’t worry there is hope. All you have to do is give up just a bit of control and get a life beyond your money. After all isn’t all this saving for early retirement about having time to do the things you love. Why wait until your retired to start?
Well in my search for retirement data I have done many Google searches and read many books. Below is a sampling of information I found useful.
Canadian Early Retirement Books
Stop Working – Start Living by Dianne Nahirny: A good book on control spending and about being creative on how to save money and make a little more cash.
Stop Working by Derek Foster: Derek’s a bit new to this entire early retirement thing, but his book does offer some ideas for investing for a very long time frame.
Free Parking & Advance to Go by Alan Dickson: Two books by Alan that provide a good reality shift for most people. It challenges your belief on how you define wealth and an excellent basic description of index investing and why it works can be found in Advance to Go.
US Early Retirement Book
Work Less Live More by Bob Clyatt: This is an excellent resource on some of the finer points of cost prediction for retirement and dealing with the lifestyle of being semi-early retired. Well worth the read for any Canadian or US retirement planner.
General Personal Finance Book
The Wealthy Barber by David Chilton: A classic read for anyone who is just starting out. It covers the basics of insurance and saving, but you might want to take some of his advice with a grain or two of salt.
The Intelligent Investor by Benjamin Graham: A classic read on investing. I personally enjoyed the edition with commentary by Jason Zweig on each chapter. He points of many little facts that provide some reference to investing today versus investing in Graham’s time.
The Retire Early Homepage – A great site with many useful articles. It is written mainly for the US, but it has lots of useful information including a great article on the 4% rule.
Dory’s Early Retirement Forum – With over 3000 members of early retirees or people planning early retirement this page is a gold mine of advice from people who are living the dream of early retirement. On last count there were around 11,000 topics and almost 200,000 posts. The board is mostly US based, but there are a few regular Canadian posters as well. If you can’t find what you need in the search function, join up and put in a post. The same topics tend to come up and those with good memories will often post links to previous topics.
Enjoy reading everyone. I’ll post more links as I get some more time to dig in my bookmarks.