A popular blogger might be behind on early retirement plans. Asset managers continue to rethink retirement funding models with the modern tontine. I look at not so affordable real estate for MoneySense. Everybody’s quitting, or quietly quitting. Fritz goes for a swim, and the bulls and bears duke it out in an eclectic Sunday Reads.
Here’s the Cut The Crap Investing post that sets up my recent MoneySense article that examines the real estate affordability battle in Canada. Falling home prices are not offering better affordability thanks to increased borrowing costs. And as real estate expert Gina Athanasious offers …
“Optimal affordability will arrive when the government focuses on a way to increase supply in a meaningful way. It all depends what your definition of affordability is at the end of the day. What is a reasonable and sensible amount to spend on housing compared to income? As you can see, affordability has not really improved. Rate hikes haven’t changed that. For me, the gap between salary and prices is too big to have anything considered affordable.”
Buyers who are waiting on the sidelines might hope for a significant recession, one that does not lead to the loss of employment. The Canadian real estate market needs a sensible and meaningful reset.
The Fed did it
On A Wealth of Common Sense, and looking south of the border – How the Fed screwed up the housing market.
On MoneySense, Kyle made sense of the markets for the week, looking at the seasonality of U.S. stock market returns, rate hikes, meme stocks and good news/bad news in labour markets.
Unemployment has continued to tick up in Canada. That’s obviously bad news for those who lose their jobs, but the ‘good news’ is that the economy is cooling. The series of ongoing rate hikes will further put the brakes on an overheated economy and (hopefully) inflation.
Canada’s unemployment rate was 5.4% in August, ticking up for the first time in seven months. The economy lost 40,000 jobs last month, Statistics Canada reported in its latest labour force survey, with the losses concentrated in the public sector.
The rush to retire
Statistics Canada warns employers are likely to continue facing recruitment challenges as many Canadians reach retirement age. 307,000 Canadians had left their job to retire in the last year, that’s up considerably compared to the previous one year period. And younger workers are also looking to quit.
From this Reuter’s post …
During the pandemic, retirements fell as many Canadians decided to stay in their jobs longer. With restrictions now lifted, many are rushing to make up for lost time, choosing to travel and spend more time with family.
A report found the percentage of workers looking to leave their job is on the rise. According to the federal agency, 11.9% of permanent employees are planning to leave their jobs within the next twelve months, almost double the rate in January. They call it the great resignation.
In timely fashion, On My Own Advisor, Mark offered the Weekend Reads with the Quiet Quitting edition. From the post …
Deloitte Global’s “2022 Gen Z and Millennial” survey found that these generations are striving for balance and advocating for change like never before. This report link above revealed that good work-life balance and learning and development opportunities were the top priorities for respondents when choosing an employer.
The study also revealed that:
- Almost half of Gen Zs (46%) and millennials (47%) live paycheck to paycheck (and worry they won’t be able to cover their expenses.)
- More than a quarter of Gen Zs (26%) and millennials (31%) are not confident they will be able to retire comfortably
You’ll find many of the U.S. recession signals in this post from Lance Roberts at RIA.
Lance offers some ideas on how you might prepare for the potential of an ongoing and meaningful recession.
And of course, we don’t know what happens next. On The Irrelevant Investor, Michael Batnick lays out The Bullish Case for stocks.
Be prepared is all. Awareness is preparedness. Be prepared to buy during market corrections and recessions. For retirees and near-retirees, make sure your portfolio (and mindset) is recession-ready, just in case.
The retirement file
On Findependence Hub Jonathan Chevreau looks at another interesting development in the pension and longevity file, from Guardian Capital. A modern tontine as a retirement solution, created in partnership between Guardian and Schulich School of Business finance professor Miles Milevsky.
Announced in Toronto on September 7, a press release declares that the “ground-breaking step” aims to “solve the misalignment between human and portfolio longevity.”
That’s a continuation of the pension-like asset theme offered in this post … Canadian investors get a nice raise thanks to the Purpose Longevity Pension Fund.
These modern tontines are worth a look, and might perform a useful rule as part of the retirement funding mix. We can pensionize more of our income.
At the Retirement Manifesto, Fritz was willing to accept the challenge.
When she told me it was 3 miles (5 km), my initial thought was “no way!” As an experienced swimmer, I knew the significance of that statement. A 3-mile swim would mean I’d be swimming non-stop for 2.5 hours, a feat well beyond my capability.
Congrats to Fritz, you might be able to guess how things turned out.
Equity ETFs for retirement
On Seeking Alpha, I offered up the all-weather ETF portfolio for retirement – equity edition. The model builds around three defensive sectors that are 30-35% better than the market for retirement funding due to lower drawdowns in corrections.
Here is the week in review from Dividend Hawk. You’ll find the dividend distributions for the week (I enjoyed a few of those), plus the headlines and blog posts worth a click.
Included in the Hawk mix is – How inflation and Fed rate hikes impact dividend stocks from Simply Safe Dividends. SSD is a very good follow.
Reexaming the financial independence plan
At Tawcan, Bob is having another look at his early retirement plans. Bob is a prolific saver and he invests on a regular schedule – a wonderful wealth building combination.
One thing I’ve realized is that life is never static. It’s always dynamic. Although we can do as many projections and make as many plans as we possibly can, projections and plans do and will change. Therefore, with three years to go before 2025, I thought it would be a good time to re-examine our financial independence plans and see if we need to make any adjustments.
Bob also offers a back of the napkin projection, on the portfolio value required to reach those early retirement goals.
For $60,000 dividend income per year, at 3% dividend yield, we’d need a dividend portfolio worth $2 million; at 4% dividend yield, we’d need a dividend portfolio worth $1.5 million. In other words, we need a portfolio valued between $1.5 million to $2 million. That’s certainly not a small chunk of change.
Now, if we take a middle-of-the-road approach and use a portfolio dividend yield of 3.5%, that means a portfolio value of around $1.714 million.
There are a few moving parts and many considerations for Bob and his wife’s early retirement plans. Most (almost all) self-directed investors can benefit from a financial plan. Bob is no different. They might look to a fee-for-service financial planner, who is a retirement specialist. With an optimized retirement plan, very few retirees would live off of the dividends for an extended period.
Here is another good post on Banker on Fire – How to build wealth in your 20’s.
Sticking with $100 oil
Via Scott Barlow at the Globe & Mail, Bank of America is sticking with their call for $100 crude in 2023.
It was in October of 2020 that I suggested you look at oil and gas stocks for your portfolio. A few months ago I moved to the energy dividend approach. I am enjoying some wonderful income and a needed inflation hedge.
In the sadness file
This half-Brit was saddened by the passing of the Queen. May she rest in peace and rise in glory.
Today is also 9/11. That day and the events are in our thoughts.
Thanks for reading.
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