My Investment Plan

by Mike Holman

I was asked recently by the Money Gardener about what my overall investment plan was. This was a good question because although I have talked about my various investments and ideas in a number of posts I never did a good summary of what I’m trying accomplish.

Basically my goal is to retire at age 55 or thereabouts (I’m 39 now). According to my estimates and calculations, we can retire on an income of $46,000 in 2007 dollars which will give us about $40,000 net after taxes. With this income we can live the same sort of life we live now using about $30k/year and the remaining $10k will go for vacations, spending, unexpected costs etc.

To achieve this, we are working on several fronts.

  1. Pay off the mortgage. Currently at $181k and dropping. This has to be zero before retirement.
  2. Use up all my rrsp room. Currently I contribute about 75% of my available annual rrsp room. Once the mortgage gets a bit lower then this figure will go up. I have about $40k of unused room so that will get used up as well. I’m a huge fan of rrsps and I think if you are in a higher tax bracket then they represent free money. Current rrsp value is about $230k.
  3. Leveraged investing. We have a modest leveraged investing plan which involves dividend stocks. I don’t expect this to be instrumental in our retirement planning but we’ll see how it goes. Current value of leveraged stocks is approx. $20k.
  4. Planning and monitoring. I’ve done a few basic spreadsheets (and posts) about simple retirement planning. I will continue with this series to get to more realistic scenarios. Obviously I will be doing these exercises using our data and that should tell us when we can retire.
  5. Education. I will continue to read books, blogs, and any other sources that offer information about retirement related financial activities such as investing, retirement taxes etc.

Investing Style:

I generally favour a low-cost passive investing style. Currently our money is mostly in ETFs, low-cost mutual funds, some GICs, and we own a few stocks directly in the leveraged account. I don’t believe that I can pick stocks that will do better than a passive index however for the leveraged plan, buying individual stocks works out better because we need a minimum dividend in order to help pay the interest costs.

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