Life Situation: married, 2 children (grade 3 & 7), a few decades ahead of conventional retirement
Gross Salary/Wages:
Corporate income: $194,747 plus $2207 dividends & $7723 interest=$204,677
Corporate expenses $26,363
Earnings from operations $178,314
Capital gain $4132
Provision for income taxes $22,433
Dividends $36,000
Net earnings for the year $160,013
I leave my earnings in the corporation and only take out $36K of dividends theoretically. My personal income this year was listed as $48,670.16
Spouse income $116,094.55
Individual amounts of Taxes
Paid $970.42 in taxes
Spouse paid $26,840.94 in taxes
Other Ordinary Income: Side hustle is included in my personal income
Qualified Dividends & Long Term Capital Gains: last time I added up dividends, it was $15K, but this is including corporate dividends, so it may or may not be helpful
Rental Income, Actual Expenses, and Depreciation: 0
Adjusted Gross Income: $105,911.94 spouse
$47,164.16 me
Current expenses:
Total for year
Auto-spouse $1,630.75
Auto - parking $40.40
Clothing-spouse $49.06
Clothing - me $42.38
Computer $3,901.55
Dentist $1,253.00
Donations $36.54
Drugstore $263.10
Eye care $1,004.39
Entertainment $1,086.26
Gifts Given $656.98
Groceries $8,212.42
Home Repair $2,894.58
Household $623.08
Interest $60.34
Alcohol $276.25
Spouse Gas $2,491.16
Spouse Music $162.64
Motorcycle $1,893.50
Toys $39.30
Meals-lunch $37.69
Meals-Other $929.07
Meals & Entertainment $73.53
Cell Phone $1,777.24
Gas Me $214.22
Toys for Me $226.36
Pet $604.11
Post office $20.22
Recreation (kids) $173.64
Conference - Limestone $255.17
Travel-family $765.59
Travel again $1,327.48
Trees $4,509.28
Side Hustle Expenses $598.94
Yoga $57.49
Skiing $1,460.52
Train $47.46
Property taxes 2018: $3752.17
Total spending for year on personal credit card $44,144.28
Some items covered by corporation that will need to be covered personally after FIRE:
FOOD PAID BY CORP
921.16
CELL PHONE & COMPUTER
119
Internet
501
Part of my gas, insurance, etc. are paid by the corp also.
Sorry, this is not comprehensive, because I’m not going to tote up some of our direct withdrawals. Just not that interested. We figure we keep it under $60K.
BTW, “trees” meant reforestation of our land. Would not be a repeating expense, but this could be replaced by house repair, cleaning, etc.
Assets:
So this is what interests me more.
ASSET CLASS
Cash 7%
Fixed Income Investments 26%
Canadian Bonds 23%
Vanguard One Fund (Bond portion) 4%
Equity Investments 67%
Canadian 11%
REIT 4%
US 33%
International XEF 3%
Emerging Markets XEC 3
Global (ex Canada) 10%
One fund (VBAL/VGRO/VCNS) (equity portion) 3%
I’ve already been told to take cash out of my portfolio listing, but I like having all the money together because 3% of $2 million=$60,000.
Ideally, I’d like 5 years in cash, straight up, for sequence of returns risk. 5*$60,000=$300,000.
At least 3 years of expenses would be good, and $180K is more doable. Right now it’s more like $136K.
But I’m not willing to work another year for another $200K in cash. Screw that. We’re supposed to be free.
If you take out our $15K in dividends, we’d only need $45K/year*3-5 years, which is again more doable.
Liabilities: 0
House, cars, motorcycles paid off
Would need to repair the house.
Specific Question(s):
People I respect use the 60% equity/40% fixed income breakdown. However, bond funds have given me a negative return. Yes, even with the monthly payouts. It seems to make more sense to leave it in cash right now.
If I switch to fixed income, I don’t know what investment in US and Canadian cash (I have both) that will have reasonable returns as Canadians, with a considerable portion in corporate accounts (which earn lower interest than personal accounts, and are fully taxed).
Other people suggest we need a more aggressive portfolio, say 75/25, for long term survival. I’m not averse to this, but I don’t want the volatility just as we’re retiring. That’s why I was thinking of Pfau & Kitces’s bond tent and rising equity glide path: 60/40 at retirement, live on cash/bonds for a few years, and eventually end up 75/25.
We’re at a 3% withdrawal rate, depending how we slice our portfolio, so we should succeed. But we don’t have 3% SWR plus 3-5 years in expenses in cash. We’re not planning to straight out quit in 2019, but I’m downshifting. Spouse will probably keep on working, although here are some points on spouse:
Spouse:
-worried about FIRE
-concerned that I’ll enforce a life of beans and poverty and would rather work to avoid that
-has a pension that seems to be cashable at about $171K now, or can receive something like $32K/year starting in 10 years with a 9K bridge, or $48K/year if retires in 20 years
I don’t have a good grasp of Canadian benefits and have never gotten much of anything from them.
The main question is, do you think we can retire?
What amount of cash is reasonable to keep for income vs. investing in the market?
What do you use for your fixed income, especially if you’re Canadian with a corporation and have both USD and CAD?
Is anyone interested enough to look at our accounts’ asset allocation? We know we should put bonds in our RRSP and then TFSA, but both are maxed out, which means bonds in corporate and individual accounts.
Thanks in advance for your input.