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Beware of Advice from Recent Retirees!

Paul - The Wry Eye Guy Leave a comment
Gambling on Retirement!

It’s unfair to tarnish all retirees with that statement, some might be offering great advice. But I’d be a little more circumspect about advice from those retirees advocating for earlier retirement because of their recent success. Some of these well-meaning folk might be suffering from recency bias. What’s that?

Anyone retiring in the past 15 years, with big stock market exposure, has probably been pretty lucky. Or, as they might prefer to see it … they are brilliant investors! This is especially true if their portfolio was biased towards the US markets. S&P500 Index® funds have returned close to 14% annually. The tech heavy Nasdaq 100 Index® has done even better.
I have to admit, some of them do look like investing geniuses!

Over the past decade & a half, it almost didn’t matter what strategy was employed. Just about any broad based American equity funds worked well. The growth investor did well & dividend investors did well. Investors who choose funds delivering huge yields via covered calls & partial leverage did well. They are all still doing well. Some of these retirees are mocking the old 4% Rule. As they sip frozen margaritas on a beach in the Caribbean! They are having a ball. And it’s hard to argue with success. But this might not apply to the next batch of retirees. And those with more limited finances need to be especially careful.

The 4% Rule is not a rule, it’s a rule of thumb. A guide only. But there are good reasons for its existence. Reasons that are at least broadly acknowledged by most. In a “normal” world, the safe withdrawal rate of 4% generally worked. In the “modern” world, it seems like you can haul out 12 or 13% every year & ride that gravy train all the way to the bank. Or the beach! That’s been the story for anyone retiring from 2010 onwards. The few blips we had along the way, like the one earlier this year, another in 2022, the 2020 downdraft for covid. They all repaired so quickly that nobody really noticed these as bad events. In fact, all those rapid blips did was reinforce the “buy the dip” philosophy. And, for those who didn’t panic, that has worked out very well.

But there will almost certainly come a time, where the dips will hurt a little more than these recent examples. There will be more enduring dips. And in such times, the 4% withdrawal rate may be more appropriate for managing retirement income risk. Ask anyone who retired in 2000. I’m not kidding, find an older retiree & ask. You probably won’t find them on social media! The experiences of more recent retirees is not how things always were. And while the good times are still rolling, they may not continue forever.
In case you can’t track down one of those older retirees, read this post on the Safe Withdrawal Rate in Retirement.

If you were planning on saving a million bucks before retiring, but you’ve only made it to half a million so far, pause a minute. Think very, very carefully about taking any advice that suggests you can retire immediately on your half-sized stash. Some recent retirees may think it’s okay to use 10% withdrawals nowadays. Or maybe they suggest that you can buy a bunch of funds yielding 10, 12, or even 15%, & go enjoy life sooner. This might not be good advice. Remember the old investing disclaimer: past performance is not indicative of future returns? In fact, it’s more likely going to be the opposite. After such an amazingly good run of returns, it’s far more likely that future returns will not be as good.

Look, I don’t know what the future holds. Maybe these enthusiastic retirees are right. But for anyone on the threshold of retirement, or for those younger retirees with a longer retirement timeline, caution is warranted. I’m sure I would enjoy spending a little more after a really good year of returns. And I’d probably do that again the following year, if there was another good year in the bank. But I would not start out a full retirement cycle of 20 or 30 years with the expectation that 10% a year is going to be the norm. While it’s not a commandment, I would treat that 4% Rule of Thumb with a little respect. I sure hope that we might still enjoy some good years of 5 or 6% spending. Who knows, maybe even a little more than that from time to time. Actually, let’s be honest here, I’m really hoping that 10% thing holds up for my retirement, from beginning to end! But I’m not taking that optimistic hope to the bank for the long haul. It’s probably not going to work as a good financial planning number!

If you can’t figure this all out on your own, please see a qualified financial planner & step through the process carefully with them. They will help you figure out how much you need to save to retire. And how much you might be able to spend during retirement. I know it’s expensive to work with a financial planner, but it might prove to be money well spent. Rather than finding out that you got it wrong half way through retirement.

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Growth or Yield for Retirement Income?

Paul - The Wry Eye Guy Leave a comment
Growth or Yield?

Since Jack Bogle came up with the idea, it’s been difficult to beat a market index portfolio for total return. This approach can work well over decades of saving & investing for retirement. But we can feel differently about things as we get older. After a lifetime of picking up a regular paycheque, we’d really like a regular paycheque in retirement too, eh? And if there isn’t a nice pension ready to deliver that paycheque, income investing might have appeal.

Interest rates & bond yields have declined over the past couple of decades, so not much income to be had there. Even old-fashioned dividends have declined, particularly in the US equity market, as valuations increased. Some years ago, fund companies realised the boomer retirement market was in search of bigger income streams. In response, they created covered call funds with higher distribution yields. More recently, fund creators are adding some leverage. This not only boosts the distribution yield, but it also boosts the potential to recover the some of the return that covered call writing tends to lop off. Here’s one example of how this might work …

This is a simple comparison between HYLD (Hamilton Enhanced U.S. Covered Call ETF) & VSP (Vanguard S&P 500 Index® ETF). Hamilton describes HYLD as having an “overall sector mix broadly similar to the S&P 500®”. Since it’s hedged back to the Canadian dollar, we are comparing it to VSP, from Vanguard Canada, which is also hedged. The equivalents from iShares (XSP) & BMO (ZUE) would also work for this. HYLD has only been around since February 2022, so it’s far too short a time to say how it will fare over the long-term. For this exercise, I trimmed off the first year’s performance for HYLD. Because it contained some third party funds that might have impacted performance. These were gradually replaced by Hamilton’s own funds & performance improved. Though it shortens the timeline, I think it is a fairer comparison for guesstimating what it could look like going forward.

With all dividends & distributions reinvested from March 2023 up to July 25th, 2025, the result sees VSP compounding at a shade over 21.6% annually & HYLD comes in at 20.9%. Over that time HYLD actually took the lead occasionally but, for the most part, they tracked very closely together. I think it’s fair to call it a tie. For a $100k investment, VSP would have grown to about $160.5k, while HYLD would have turned into about $158.2k. In contrast, the yield from VSP is only about 1%, while HYLD is currently throwing off almost 13%. Despite the huge difference in yield, the total return is virtually identical.

Each investing strategy brings its own unique challenges for a retiree. The “growth” investor has to decide how many shares to sell to augment the income. The “income” investor has to decide how much of the distribution should be reinvested to ensure the success of the portfolio into the future. That’s a bit of a challenge for either one, so we’ll start by paying out $1,000.00 a month. That’s a simple annual withdrawal rate of 12% based on the starting value. And, to keep pace with inflation, we’ll adjust the income stream over time. Since the annualised growth rates were over 20% for both funds, that sounds reasonably conservative, eh? With this arrangement, both funds deliver an identical income stream of just over $29k to the investors over the almost two & a half year period. After all withdrawals, HYLD has an end value of $122.2k, with $124.2k in VSP. Again, little to no difference. This is a great outcome for both investing strategies.

Along with a great monthly cheque, the other important thing here is that the remaining value of both portfolios, after all withdrawals, is well up from the original $100k invested. Using the Bank of Canada’s inflation calculator, a portfolio value of $100k at the start of 2023 would equate to a value of about $107.5k in 2025. Since both funds are well ahead of this number by the end of the comparison, that bodes well. In fact, we could have started with a $1,400.00 dollar monthly withdrawal & the end values of both funds would have been in line with the inflation adjusted portfolio value needed for the future. But my crystal ball was broken back in 2023, so I took a safer path! 😜
That larger withdrawal amount would have been a withdrawal rate closer to 17%. Wow!

Some huge words of caution about this example: 12% is not a typical withdrawal rate over the course of a 30 year retirement. High yield percentages can not automatically be used as a withdrawal rate either. It may be possible for a time, but we also need to keep an eye on the underlying share price. And on the trajectory of the income stream. Is it going up or down? Are we keeping up with inflation? Unfortunately, we have to plan for an uncertain future. We can’t depend on the markets delivering consistently incredible returns over a long retirement timeline. Indeed returns are very uncertain over any future timeline, long or short. Look at the total return profile of your portfolio, not just the yield. In this case, there are older S&P 500 Index® funds that can be back-tested to show how precarious retirement life can be. At times, withdrawal rates much closer to 4% were required. It will be interesting to see if some of the newer funds can do better.

There are some very good reasons that the 4% Rule (of Thumb!) was used as a baseline for evaluating retirement plans. These days, a financial planner will use some pretty sophisticated software to plot out what’s possible for a given set of circumstances & predictions. In addition, the plan may produce higher or lower income streams based on individual investor choices. Financial plans should be reviewed regularly. Each new year starts with the new return estimates. Along with age revisions (money needed for fewer years with each passing year!), revised needs & wants, etc. And, of course, the current portfolio value is now the new portfolio value for planning the rest of the retirement journey. An investor that is willing & able to tolerate large income swings from one year to another may be able to sail closer to the wind on higher withdrawals. As would a retiree with a large guaranteed income stream from pensions, for example. Without that safety net, it can be far more challenging. The superb performance of the US markets for the past decade or more might have us believing that there are unicorns & leprechauns underneath all the rainbows & sunbeams. Tread very carefully. For most of us, it’s likely worth shelling out for a professional financial planning review to see what’s possible. The good & the bad.

One last thing: regardless of which strategy you favour, it’s usually worth listening to the other point of view. I know both growth & income investors that are killing it with their chosen strategy. Then there are some that aren’t quite sure how well, or how poorly, they are doing. We can all learn something new, eh? There may even be circumstances, both data driven & psychological, that encourage using a combination of strategies to navigate retirement. It’s usually worth taking the time to see a different perspective. And it might help to Benchmark Your DIY Portfolio against one of those recommended by experts & professionals in the field. Knowing how your portfolio behaves may help with engagement during the financial planning conversion.

Happy retirement spending!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Benchmark Your DIY Portfolio

Paul - The Wry Eye Guy 1 Comment
Measuring Portfolio Performance

How does your portfolio stack up against a simple, globally diversified, broad market index portfolio? Does it matter? It might. Most of us, short of placing some lucky bets, are unlikely to beat the markets over the course of our decades-long investing lifetime. But that doesn’t stop us trying. And that can get messy. Do you know what’s in your basket? And how well it’s working? If you find yourself wondering about this every now & then, it might be worth checking. How do we do that?

Plug your portfolio details into one of the online tools that provide portfolio comparison features. I like the Backtest Portfolio feature in Portfolio Visualizer for this. Once your portfolio is loaded, compare its total return performance to one of the all-equity ETFs like ZEQT, VEQT, or XEQT. If the equity side of your portfolio is crushing the returns of these all-equity funds, well done. Do you know why? Is it luck or skill? Can it continue? If you think it can, keep doing what you’re doing & get ready to enjoy your retirement!

If things are not going that well, it might be worth exploring why not. Of course, some investors may deliberately choose a portfolio mix that lags index funds. Not that the goal is to lag, but other attributes (low volatility, increased cash flow, whatever) may be favoured over maximising total return. It also doesn’t matter if you have a growth, dividend, or income investing approach, benchmarking total return performance can still be enlightening. And useful. Sticking with any strategy, even one that lags, is a decision best made when we know the cost.

I’ve left out a bond or cash component. However, that’s easily added. Make sure it’s in the same ratio as in your own portfolio, for an apples-to-apples comparison. Or use one of the asset allocation ETFs, like XGRO, VBAL, ZCON, etc. as your benchmark. These are the all-equity ETFs with bond funds built in. Select one with a built-in bond percentage that matches your own portfolio. I prefer not to use an S&P 500 Index® fund as the benchmark, because it’s less geographically diversified than I prefer for my portfolio. For for those who invest only in the US market, it’s a valid choice.

Most of the comparison & performance tools will require a subscription if you want to take advantage of the full capabilities. But, despite the limits, the free access can still be very useful. For example, Portfolio Visualizer allows 15 holdings & 10 years of back testing under the free tier. While stock pickers will almost certainly be challenged here, most ETF investors are likely to have fewer holdings. But if you’ve got more, choose all the bigger ones & hopefully the top 15 holdings will make up the bulk of your portfolio value.

Another challenge with making comparisons is that the first of the all-equity ETFs only launched in 2019. That limits how far back we can look for direct comparison. But there are some tricks that we can employ. Like breaking down a fund into older constituent (or similar) ETFs. For example, we can use an all-equity ETF proxy made up of VUN (USA 45%), XIC (Canada 25%), XEF (International Developed 25%), & XEC (Emerging 5%). This gets us a comparison all the way back to September 2013. On the flip side, if your portfolio has a bunch of new funds, there won’t be much history to look at. And, in general, the shorter the timeline, the lower the value of the comparison.

This next proxy drifts further away from using a single all-equity ETF. A comparison portfolio of SPY (USA 45%), XIU (Canada 25%), & EFA (International 30%) is a rough approximation that allows benchmarking all the way back to September 2001. It would have been interesting to see the impact of the dot-com implosion in 2000, but EFA wasn’t old enough to catch that event. I guess we could use a 50:50 portfolio of SPY & XIU to get back to 2000. The problem with both these “created” benchmarks is that the funds are in different currencies. This further muddies the waters. Pretty significantly. That said, for rough comparisons, they look back about 25 years. But why are we bothering with all this history stuff anyway?

We all know that past performance does not predict what the future holds. But benchmarking against one of these all-equity ETFs, or against a proxy for longer timeline comparisons, can throw up some interesting insights. It’s good to know how an asset mix survives things like the dot-com meltdown & the great financial crisis. There is tremendous value in seeing how things worked while accumulating. And then how things can change, sometimes seriously, while decumulating in retirement. I know some people are shocked by the outcomes from these comparisons. If that’s you, I hope you are positively shocked. Because of how well your portfolio has performed. And if so, congratulations!

If you are negatively shocked, you might want to reconsider what you are invested in & why. If the equity portion of your portfolio is way behind the returns of the globally diversified fund, is that acceptable to you? Is your original investing hypothesis intact? Ah look, I’m trying to tiptoe around asking you if you know what you’re at here! And if you don’t, consider this …

Should an investor seriously trailing an ETF filled with globally diversified, total market index funds think about the potential for buying that ETF instead? Or maybe this investor should consider talking to an advisor. I know that is a heretical thing to say out loud amongst DIY investors. But if the results are likely to be better, after paying an advisor 1% to just buy the all-equity ETF for you, why would you not think about this? And if this advisor throws in some fancy financial planning, that’s an added bonus. Look, DIY investing is not a religion. And we didn’t take a vow. We don’t have to remain committed to underperformance. Particularly if we can’t figure out how to fix it on our own. Of course, it can be as challenging to choose a good advisor, as it is to build a good portfolio! Seems like there is no escaping the need to invest in learning when it comes to making enlightened decisions about our money.

I guess this is all a bit simplistic, eh? But if you’ve been doing your own thing for a bit, it can be insightful to benchmark your performance against a simple off-the-shelf portfolio, like the all-equity ETF we used for benchmarking. And it’s an EFT that some academics & professionals argue might be the best long term investment choice for many DIY investors anyway. Only you can decide what to do once you see the results of a benchmarking exercise. Just don’t jump from the frying pan into the fire!

There are other considerations, of course. Some favour lower volatility portfolios. Others treat & handle risk differently. Retirement cashflow or income can be a big influence on portfolio choices for those nearing retirement. Worries about sequence risk in early retirement can factor into portfolio selection. And on & on it goes. But, regardless of these many influences, measuring & comparing performance can provide insight. And the insight may help guide us towards better solutions going forward. And if you do decide to have a discovery chat with an advisor, why not benchmark the advisor’s proposed portfolio against one of the all-equity ETFs as part of that process. After going through all this, I’m now questioning my own portfolio. Think I’ll head off & do a little benchmarking of my own. Catch up with you later! 😜

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

US or Canadian – VOO or VFV?

Paul - The Wry Eye Guy Leave a comment
The Currency Balance

Which currency should we invest in, Canadian or US dollars?

In this example, we’ll compare Vanguard’s US listed & US dollar denominated ETF (VOO), against the Canadian listed & Canadian dollar denominated equivalent (VFV) from Vanguard Canada. Imagine investing $10k back in 2012 in each of these ETFs. Conveniently, the Loonie & the greenback were approximately equal back then. One Canadian dollar was worth one US dollar. That means the $10k investment was of equal value, regardless of the currency.

With all dividends reinvested, here’s what the performance has looked like since then …

VOO vs VFV 2012 to 2025

By March 2025, VOO grew from $10k to $52k, in American dollars. While VFV soared to about $73k, in Canadian dollars. VFV looks like the big winner. But it’s not.
Back then the currencies were at par. By the end of this chart, it costs $1.44 Canadian to buy one US dollar. If we sold off VFV at the end & converted the proceeds to US dollars, we’d have a bit less than $51k American. pretty close to the US dollar value of VOO. Similarly, if we sold all our VOO holdings & converted those US dollars to loonies, we’d have almost $75k Canadian. Bottom line is that they’re about the same. We’re only looking at about a fifteen hundred dollar (Canadian) difference in total return, with the American listed VOO coming out slightly ahead.

VOO should come out slightly ahead. There a few reasons for that, including the following …

1. It has the lower fund fee of 0.03%, compared to the 0.09% fee of VFV in Canada.
2. While it all happens inside the ETF, VFV loses a little of the dividend payout due to the 15% dividend withholding tax that the IRS (the US equivalent to the CRA) collects. This happens regardless of the account the Canadian listed ETF is held inside.
3. Though ETFs can do currency exchange at better rates than the typical DIY investor, there might be some additional currency exchange drag on VFV too.

If the fund fees were the same, if currency exchange didn’t have any fees, & if there were no dividend withholding taxes, the performance of the two ETFs would be practically identical. The apparent outperformance of VFV in the chart above is mainly due to the declining value of the Canadian dollar against the US dollar over that 12 year period. Both funds grew similarly in real value (as they should, since they both hold the same stocks). But VFV grew “extra” Canadian dollars over that time, in line with the increasing real value of the stocks inside the EFT. This compensated for the Canadian dollar falling in value against the US dollar. If the reverse had happened, & the Canadian dollar had gained strength against the US dollar over this time, VFV’s numbers would have lagged VOO on the chart. It would have “looked” worse. But, once you convert the currency in either direction, both would have looked pretty much the same again.
That said, there are some pros & cons with either choice.

If you have a bunch of US dollars already & you want to invest these greenbacks inside an RRSP account, VOO would be the better choice. It may not always be this way going forward but, under the current agreement between Canada & the US (& as it was over this timeline), the RRSP account shelters the investor from the dividend withholding tax that would otherwise apply to US based ETFs. On the flip side, if you don’t already have US dollars, you’ll have to pay currency conversion fees. Or learn the Norbert’s Gambit technique to minimise the currency conversion costs. If you want to avoid that currency conversion work, the outcome resulting from sticking with VFV is still pretty good. Particularly when investing outside a registered retirement account, where neither fund can avoid the withholding tax. That would bring the results a little closer together. It is worth noting that the bigger the investment, & the longer the time invested, the greater the potential impact. The $1,500 difference on this $10k investment example, would have been $15,000 on a 100k investment. You can do the math for a million dollar investment as your portfolio grows! And, for a more precise comparison, you’ll need to figure out the impact of currency exchange costs, back & forth, on the end result too.

I’ve ignored some other critically important tax wrinkles (there are some potentially significant exposures here) that come with foreign investing during the course of this comparison, so be sure to consult a tax specialist if you want to invest on exchanges outside of Canada. There are tax reporting requirements with the CRA above a certain value of foreign owned investments, for example. There are also potential IRS tax reporting requirements. And perhaps even US tax liabilities along the way. There’s a lot to learn. And if you don’t know, you’d be well advised to check with a professional advisor to help you figure out your US & foreign investing strategy. In addition, the outcomes may require the inclusion of more than just stocks, bonds, & ETFs. Any additional foreign property, like a holiday home outside Canada, for example, will impact your tax situation. Talk to an expert!

On the other hand, there is nothing wrong with investing in Canadian listed ETFs while you learn more about investing on foreign exchanges & in other currencies. It is a little less work to stick with the loonie. And the end result here was not too far behind the American equivalent. Many investors stick with Canadian listed ETFs, while still getting the necessary foreign exposure. There are also currency hedged ETFs that can help offset those currency fluctuations. But that’s a conversation for a another day.

Just remember that things would begin to reverse in the above chart, if the loonie were to gain in value against the US dollar going forward. In other words, VOO would then start looking better when charted against VFV. In the first 6 months of 2025, for example, VOO is up about 5%. While VFV is essentially flat. The real value of both is still close to the same. But the numbers are different due to a weakening US dollar this year, making VOO look better over this different timeline. This is more about how the numbers look, it’s not that the value is substantially different. Looks can be deceiving, eh!

If you want to learn more about saving & investing from the ground up, I’d like to suggest that you check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Safe Withdrawal Rate in Retirement

Paul - The Wry Eye Guy 2 Comments
Take Care of those Pennies!

After a lifetime of saving for retirement, spending what we’ve saved can get pretty messy. Even a flock of pros would all come up with a different, at least slightly, spending plan for each of us. We don’t want to go broke too early. But we don’t want to make our retirement miserable by not spending enough either!

While it’s not actually a rule, the so-called “4% Rule” is often used as a guideline for determining a safe withdrawal rate over a 30 year retirement timeline. The rule suggests we can take out 4% the first year of retirement & take out inflation adjusted amounts (i.e. 4% + inflation adjustment) every year thereafter. And we can do that for 30 years, with a high degree of probability that the portfolio will make it all the way to the end. Bill Bengen originally used a portfolio of US stocks & bonds to develop this strategy. In recent years, he created a more diversified portfolio that he calculates allows a higher withdrawal rate of around 5%. Other experts point to the greater capability of an all-equity portfolio to deliver improved lifelong results. And still other experts in the space present models that suggested we might have to drop down closer to a 3% withdrawal rate to ensure portfolio survival. What gives?

There are a few things to consider here. The markets, particularly the US market, have produced great returns over the past decade & a half. An investor, convinced of the strength of the US market, who retired in 2010, might be looking like an investing genius today! Since 2010, a million dollar portfolio, all invested in the SPDR S&P 500 ETF Trust (SPY), being drawn down at an inflation-adjusted rate of 4%, would have a portfolio value of over $5m today. Not a typo. Using the 4% withdrawal methodology for more than 15 years, the portfolio would still have grown to a value of over five million dollars today. This retiree could have withdrawn a whopping 12% for year one. And, even after increasing that far bigger income by inflation every year, the portfolio would still be worth almost a million bucks today. That is an amazing outcome, eh?

Yeah, it is. But we can’t always take big withdrawal rates to the bank!

Let’s jump back another 10 years & look at a retiree who quit working in 2000. Exactly the same scenario as above. This retiree also has a million dollar portfolio & starts out with a $40k withdrawal the first year, or 4%. By today, the portfolio is only worth just under $340k. Even less in inflation adjusted value. What happened to the five million bucks from the previous scenario? The lost decade, including the dot-com crash & the great financial crisis, is what happened! Early poor returns damaged the future value of the portfolio.

If this “Year 2000 retiree” had used the 12% withdrawal rate from the other example, the Year 2000 portfolio would have gone to zero by 2006. Yes … zero. Nothing left after only 6 years. This is not a good outcome. In fact, just blindly following the 4% guideline in this example would have been a cause for worry by today. And withdrawing much more than an inflation-indexed 4% would almost certainly have resulted in a portfolio that died before the investor did!

Those examples are from the past. But the big lesson is that there is no guarantee that the future will be all rainbows & sunshine. We need a plan that handles grey skies & storms too. As we progress through retirement, financial plans must be reviewed & revised on a regular basis. To account for changes in the markets & in our lives. There may be the potential to increase our income for greater enjoyment during some years. Or there may be a requirement to reduce spending, to ensure we have income to the end of our days. Flexibility may be required en route.

And that’s what makes retirement planning so challenging. Financial planning is not a set it & forget it deal. As we saw above, we can’t depend on a financial plan that was created in 2000 or 2010 delivering the same results all the way to today. Modifications along the way are warranted. Similarly, if we were to start retirement this year, it is very unlikely that a financial plan created in 2025 will see us, cleanly & smoothly, all the way to the end. Will our asset allocation selections & portfolio choices allow us to spend way more than 4% every year? Or will we get trapped in a scenario where even 4% might be too aggressive? If we don’t use the 4% Rule, how do we handle the added burden of inflation through the years? There are a few challenges there, eh!

Some investors put their trust in dividend growth portfolios to sustain a growing income stream for a lifetime. And a plethora of new high income funds are proving very popular with investors who see early retirement calling via funds with huge distributions. Can these alternatives work? Some of these new funds offer distributions of 10 or 15%, some even more than that. Imagine you need a million dollar portfolio to produce 4%, or $40k, of annual income to retire on. If you’ve only got $400k saved, how about building an ETF portfolio yielding 10% & calling it quits? This might work. Or it might not. We’ll have to look at how we might compare, & perhaps even combine, these different strategies. However, that’s a whole other bunch of numbers & I’m getting grumpy now, so we’ll leave those questions for another day.

Meantime, take care out there & make sure you have an up-to-date financial plan.

If you want to learn more about saving & investing from the ground up, I’d like to suggest that you check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.