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Old 11-02-2020, 10:48 AM   #201
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For retirement preparedness, I use a country cost-of-living scale.

Ideally I could retire at level comfortable in Norway, Switzerland, or Canada. I am shooting for nothing less than a Costa Rica, Portugal or Estonia. Currently I'm sitting at about a Kazakhstan/Moldova/Sri Lanka level of readiness.

So in other words, I have a ways to go
I talked to a guy who was retired in Estonia and it seems amazing. I've never been, so I can't say that I would retire there personally, but I'd like to go and maybe that would change my mind. It just sounds like a beautiful country in general.
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Old 11-02-2020, 10:58 AM   #202
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The best digital government in the world, hands down.

We can learn a lot from Estonia.
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Old 11-02-2020, 12:29 PM   #203
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Costa Rica is a good place to retire. Pura vida
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Old 11-02-2020, 02:40 PM   #204
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Costa Rica is a good place to retire. Pura vida
Your money goes even farther in the Ivory Coast.
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Old 11-02-2020, 02:43 PM   #205
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I talked to a guy who was retired in Estonia and it seems amazing. I've never been, so I can't say that I would retire there personally, but I'd like to go and maybe that would change my mind. It just sounds like a beautiful country in general.
a little too close to Mother Russia for my liking.

But I think there are lots of opportunity in Europe to retire cheaper than people think.

Might need to get a new UK passport.
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Old 11-02-2020, 02:45 PM   #206
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No, next question.
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Old 11-02-2020, 05:39 PM   #207
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Am trying to understand why such a large reliance upon the bond market? 50% is huge for something that according to many pundits (and FIRE blogs) probably doesnít have a lot of upside. Instead itís considered way less risky but also return averse.
Because:

I donít want the higher volatility that comes with more equities;

I care more about preserving my portfolio than trying to maximize its return;

A 60/40 portfolio is often used for endowmentsóI donít have that long of a timeline, and so slightly less equities doesnít really affect my long-range projection returns that much;

With a 50/50 split, if bonds do great Iíll do okay and if stocks go great Iíll do okay, if that makes sense; and

Iím projecting a 2.5% withdrawal rate from my portfolio (essentially, dividends and interest), and with a withdrawal rate that low, it really probably doesnít matter what the asset allocation is (give or take 30% with either asset class), and since I really value a sleep-well-at-night portfolio, 50/50 it is.
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Old 11-02-2020, 07:06 PM   #208
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With a 2.5% withdrawal rate your spilt of investment doesn’t really matter at all. I’m pretty sure you would have wealth growing for ever even if you started the withdrawing the day before the eighties crash and inflation or the day before the Great Depression. A 5% withdrawal rate handles all but those two cases.

Congrats on winning the rat race.
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Old 11-02-2020, 08:02 PM   #209
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For the financial planners among us, what are your typical assumptions about investment rate of return and inflation for a thirty year retirement? I donít need the certainty of an annuity, just a lower risk mix of securities. Iím not looking for financial advice, just curious what peopleís assumptions are at the high-level planning stage.
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Old 11-02-2020, 08:15 PM   #210
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For the financial planners among us, what are your typical assumptions about investment rate of return and inflation for a thirty year retirement? I donít need the certainty of an annuity, just a lower risk mix of securities. Iím not looking for financial advice, just curious what peopleís assumptions are at the high-level planning stage.
Rate of return is a function of your asset mix, but most people over-estimate their return.

For inflation, 2% is a reasonable assumption, 2.5% or 3% if you want to build more safety into your projections.
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Old 11-02-2020, 09:12 PM   #211
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I recently retired as a financial planner and doing some consulting and at another job. My asset allocation is far higher than 60% equities.
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Old 11-02-2020, 09:15 PM   #212
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How much cash as a percentage of a portfolio (excluding real estate) is appropriate for a person five years from retirement? I am quite risk adverse and am looking at committing more funds to the market but extremely nervous.
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Old 11-02-2020, 09:18 PM   #213
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It’s different for every person.
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Old 11-02-2020, 09:19 PM   #214
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Yes for sure.
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Old 11-02-2020, 09:20 PM   #215
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If investing new money would you average in weekly over say two months?
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Old 11-02-2020, 10:04 PM   #216
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Sorry if this has already been posted, but does anyone use the 4% method? Itís the simplest method for people like me (not a financial planner, and not really good with this type of stuff).
So basically you take what your expected expenses are for your first year of retirement. Subtract your income (pension, CPP) and whatever the number is, that should be 4% of your total retirement savings.
At least I think thatís how it goes.

So if I expect to spend $60,000 per year and have $10,000 pension my expenses are $50,000

I would need $1,250,000 to retire.

Seems like a simple formula, like retirement for dummies like me.

The hard part is saving enough. Especially with kids and a mortgage.
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Old 11-02-2020, 10:07 PM   #217
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yes, the 4% rule is useful as a quick guesstimator

the idea is that you don't want to erode your principal because you don't know how long you will live. So if you only spend what your portfolio earns, you'll be good. And 4% is a good conservative estimate that should be achievable
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Old 11-02-2020, 10:15 PM   #218
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Sorry if this has already been posted, but does anyone use the 4% method? Itís the simplest method for people like me (not a financial planner, and not really good with this type of stuff).
So basically you take what your expected expenses are for your first year of retirement. Subtract your income (pension, CPP) and whatever the number is, that should be 4% of your total retirement savings.
At least I think thatís how it goes.

So if I expect to spend $60,000 per year and have $10,000 pension my expenses are $50,000

I would need $1,250,000 to retire.

Seems like a simple formula, like retirement for dummies like me.

The hard part is saving enough. Especially with kids and a mortgage.
I use this for rough planning.

A few notes to be careful with.

Inflation - you need 1.25 million in todayís dollars not in future dollars so when plotting savings rates to get to the 1.25 million you need to discount your return by 2-3%

The study behind the 4% SWR is based on a 35 year retirement in the US if you retired at any point in roughly the last 120 years. As your retirement lengthens the risk of this method is greater.

Consider the impact on taxes and where that 1.25 million is held. In RRSPs you might pay around 20% in tax at 50k income plus pension. So if your after tax income needs to be 50k and most of your holding are in RRSPs you need to be careful.

OAS / CPP / GIS may or may not be around to the same degree as today.

It may also be conservative as in most cases a 4% withdrawal rate will grow in the first 5-10 years and never be deprecated. So if you count on dying some time you can deplete your capital.

And finally the biggest variable is your spending and that at least early in retirement is generally in your control. Change 50k to 40k and you just reduced the amount you need by 20%.
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Old 11-02-2020, 10:51 PM   #219
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How much cash as a percentage of a portfolio (excluding real estate) is appropriate for a person five years from retirement? I am quite risk adverse and am looking at committing more funds to the market but extremely nervous.
There is one view that you should have around at least 3 years of expenses in cash and 10 to 15 years of expenses in fixed income.

The idea is that in the event of a downturn, your cash and fixed income can be used while your equities remain untouched and hopefully recover, but one often overlooked issue is how you (or whether you) replenish the cash and fixed income and when you do it. And, of course, if you are drawing off your cash and fixed income, your overall allocation may drift.

Which is to say, your portfolio is your portfolio and you own what you own, so if you want to hold cash, maybe determine the reason why and then think if the rationale is truly accurate.

You might find this website to be of interest: https://earlyretirementnow.com/

It is a ton of information and can be overwhelming, but it worth a read.

As is this Canadian-centric forum: https://www.financialwisdomforum.org/
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Old 11-03-2020, 11:49 AM   #220
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My grandfather had nothing but OAS and CPP in his retirement. A single parent trying to raise 6 kids on a painter's salary wasn't going to allow him to do any better. He lived a happy retired life until he died at 82.

I'm not sure you need to hoard your money to retire happy. I think happiness is a lot cheaper if you know how to find it.
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