As you can imagine, a lot of planning is required to reach early retirement. Despite all the planning, projections, and running different scenarios, there will always be some level of uncertainty when it comes to early retirement. While everyone’s financial independence retire early (FIRE) journey is slightly different, what’s amazing is that the FIRE community is so supportive, people are always there to provide guidance and help. That is why I try to give back to the community whenever I can.
Recently, a follower (and reader of this blog) reached out to me about his upcoming early retirement on X (formerly Twitter). Turned out he will soon retire early and is ready to explore the world. After some back and forth this reader decided to participate in the early retirement Q&A.
Q1: Welcome to this blog, Reader J. Congrats on your upcoming early retirement. Can you tell us a little bit about yourself and your wife?
A1: I am in my early 50’s, and my wife will be turning 50 in the spring. I worked for a smaller regional airline, and my wife was in the healthcare sector.
Q2: Conceptually, financial independence retire early seems very straightforward – pay yourself first, live below your means, grow the savings gap, and invest as much as you can. Yet FIRE seems to be out of reach for so many people. Why do you think that’s the case?
A2: That is a tough one to answer, as there are a huge number of variables and reasons. However, I truly believe that living below your means is the #1 factor. Small “sacrifices” now can pay big dividends in the future ( pun intended)
Q3: You mentioned that you and your wife have been planning an early exit from the workforce for quite a while now. What was the turning point to finally taking the leap?
A3: I have a job that I do enjoy and I know there will be days that I miss it, but I will definitely not miss the alarm clock going off at 4:30 AM. It’s a goal we have been working on for quite a while now. Financial freedom/independence was always a main focus for us. I guess the turning point was realizing we were at a point where we felt both financially and mentally ready.
We have run several tax and withdrawal scenarios lately, and that was the point where we knew we were ready.
Q4: Tell me about your plans for this new chapter of your life. Any travel plans? Anything to celebrate early retirement?
A4: We plan on spending a fair bit of the summers at the lake, and possibly doing some travelling within Canada.
Travelling has been our one area where we have and will continue to splurge. Last year we visited Belize, Bacalar in Mexico, Colombia, the Philippines and the Maldives.
We are planning a warm vacation, however we have not yet decided on the destination.
Our future plans are to escape the cold Manitoba winters, and be in a warmer climate for a good chunk of the winter!
Q5: Have you considered working part time with your current employer to generate additional income while in early retirement? Why and why not?
A5: There is a possibility to do some very casual work, but I don’t want to tie myself down with any time commitments, so we will see how that plays out.
Q6: Let’s talk about investments. What kind of investments do you hold in your investment accounts?
A6: We currently have a few ETFs and about 25 single stocks. The bulk of our ETFs were purchased through a work RSP, and will be transferred to a self directed account in the future. Many of our individual stocks are a mix of US and Canadian blue chip dividend stocks. We are slowly making some changes to the weighting of our portfolio.
Q7: Why is living below your means so important when it comes to FIRE?
A7: That was definitely the biggest factor that enabled us to be where we are today. As I said earlier, financial freedom was always a priority for us. Even as our incomes increased over the years, paying off debt and investing more was always more important than taking on new debt (i.e. bigger house, fancy vehicles etc).
Q8: Tell me a bit more about your portfolio withdrawal strategy. Are you planning to withdraw from RRSP early? Are you planning to convert RRSPs to RRIFs before age 71?
A8: We are planning on slowly melting down our RRSP, starting this year. We had an accountant/tax specialist run several scenarios for us. This is an exercise we will have to run again in a few years, and see if we need to make any adjustments to our plan/withdrawal strategy.
Q9: Why is it important to “learn” how to spend money and enjoy life a bit more in retirement rather than a “save-save-and-save-some-more” mentality so many FIRE seekers tend to have?
A9: That is the part I will definitely struggle with!
I know we are in a position where we can comfortably maintain ( and even increase) our spending habits, but I think it will take me a year or two to get fully comfortable with that.
Q10: What’s your plan on equities vs. fixed income allocation in semi-retirement and early retirement? Do you plan to shift more towards fixed income as you get older?
A10: As of now, we have a very small fixed income portion. That is definitely something that I have been looking at lately, and will certainly be making some allocation changes in the very near future.
Q11: In retirement, what’s more important, income flow or portfolio value preservation? Or is it both?
A11: A bit of both, I feel. Right now, we are definitely slowly transitioning to more of an income flow.
Q12: How do you deal with cash reserve or an emergency fund in early retirement? Do you set aside a certain amount of money?
A12: We don’t have a certain amount set aside for “emergencies”, but would be comfortable with withdrawing a little more from our savings, if needed. We are currently planning on using a variable withdrawal rate that would be considered on the low/conservative side.
Q13. Looking back on your financial independence journey, are there certain things you would have done differently or changed if you were to start the journey today?
A13: Yes, I think I would have done two things a little differently; more growth stocks in our younger years, and more contributions to our TFSA accounts. We were “lucky” that we were able to buy some of our blue chip stocks during the 2008 and COVID downturns. That definitely helped turn some of blue chips into “pseudo” growth stocks!
Q14. What would you tell someone like me who is trying to achieve financial independence? Do you have any advice for FIRE?
A14: Bob, I don’t think you need any advice from me, you are certainly one of the most prominent minds behind the FIRE movement in Canada. In fact, it is you, Mark and Neslon that definitely helped me along with my journey.
Thank you very much, Reader J, for taking the time to participate in this early retirement Q&A, I really appreciate it. I’m excited for this new chapter of your life. I hope readers have learned a couple of things about early retirement