If you’re thinking of retiring today on your own savings rather than a guaranteed pension, how do you factor in the possibility of a stock market crash?  If you’re like many people, you just hope that stocks will keep ticking along with at least average returns.  However, this isn’t the way I thought about timing my own retirement. I retired in mid 2017.  At the time, stock prices were high, so I assumed that the day after retiring, the stock market would drop about 25% or so, and then it would produce slightly below average returns thereafter.  By some people’s estimations, I over-saved, but I didn’t want to end up running out of money in my 70s and be forced to find work at a tiny fraction of my former pay. What actually happened in the 4+ years since I retired was the opposite of a stock market crash.  My stocks have risen a total of 60% (11.5% compounded annually when measured in Canadian dollars).  If I had known what was going to happen, I could have ...

Recently, I saw another example of magical beliefs about dividends.  Nick Maggiulli makes the claim that the bulk of investor returns over time come from reinvested dividends .  In one 40-year example, the total return is 791% without reinvested dividends and 2417% with reinvested dividends.  Unsaid is that if you withdrew all price gains periodically (and thereby failed to reinvest them), the total return from just dividends would be far less than 791%.   This isn’t hard to understand when you look at the situation clearly.  Suppose that over several decades dividends are responsible for doubling your investments twice, and capital gains are responsible for doubling your investments three times.  So, dividends alone would have given a 300% return, and capital gains alone would have given a 700% return.  But through the magic of compounding, reinvesting all returns gives five investment doublings, or a 3100% return.   Dividend lovers like to compa...

Here are my posts for the past two weeks: Class Action Settlement with BMO The Deficit Myth - Modern Monetary Theory Here are some short takes and some weekend reading: Jason Heath looks at reasons why it can make sense to withdraw from your RRSP in your 60s.  In my case, my simulations showed that it made sense to start withdrawing from my RRSPs shortly after retiring in my 50s.  This is true even though I have non-registered assets I could be living on right now.  The reason is that I’m best off spreading out the taxable income from RRSP withdrawals over many years. Justin Bender compares the two main global except Canada stock ETFs: VXC and XAW. Big Cajun Man is closing his TD mutual fund accounts after TD’s latest attempt to steer its customers away from its excellent e-series funds and toward their crappy high cost funds. The Blunt Bean Counter explains the implications of getting an inheritance.