August 2, 2007, 6:30 am

My Big Plan for Retirement Part 2: What Am I doing right now?

by: The Financial Blogger    Category: My Plan to Retirement
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In the first post of this series about My Big Plan for Retirement, I established my financial situation. As it is the case for the rest of the plan as well, this situation might change any time. In order to get my plan started and improve my financial situation, I already took some actions.


The first thing I did was to buy a property where I can live with my family. My house will be very comfortable for my two kids, my wife and myself. Why is that so important? Because moving incurs several costs and if I can avoid them for 5 to 10 years, I will be able to concentrate on other things. We bought a property in a very nice area in a growing city. Therefore, our house has better chance of increasing in value. I plan on using the equity on my house to the maximum. Instead of selling and making a profit, I rather re-mortgage my house once in a while to create assets instead.


Speaking of which, many of you probably know by now that I am doing a Smith Manoeuvre. I setup an HELOC when I first bought my house last November and I started the manoeuvre in February. Therefore, my mortgage is slowly becoming tax deductible and the investment should grow enough to cover for the amount of my mortgage much faster. I will write more about my whole Smith Manoeuvre plan in another post. For now, let just say that I started investing now so I can have a good 600K from the Smith Manoeuvre strategy (or even more!) at the age of 55.


I am also doing minor changes to my property in order to increase its value. I planted some trees and a cedar edge to make my backyard more intimate. We also add a lot of flowers to add up in colors. I am looking at renovating my basement. I would like to get rid of the carpet and put wooden floor. I also have the possibility to make a third bathroom. However, these projects are not scheduled this year as my wife will be on maternity leaves and we will see our cash flow decreasing for a while.


My employer is helping me with my retirement plan by offering a generous pension plan. If I manage to work 30 years for them, I will get a really nice pension for the rest of my life. Also, I have the opportunity to buy the company stocks from my pay cheque. The employer is adding 25% of my contribution in my account. I contribute to this plan to the maximum of my capacity. Chances of having bank stock crashes by 25% are minimal these days. This is why I do not mind concentrating my investment in the financial industry for the time being.


As my pension plan is grabbing all my RRSP (IRA) contribution, I don’t have much left to invest in my RRSP account. However, I use my year end bonus to contribute to my RRSP’s. This year, I am planning to put only 1K in my RRSP and keep the rest to cover our new baby’s expenses. That amount will cover the minimum payment from my HBP (Home Buying Plan).For the years after, I should be able to put around 3K. I do not think I will be allowed to invest more money into my RRSP as the equivalence factor from my pension plan will reduce my contribution limit. Still, 2-3K a year can get me close to another 300K in RRSP at the age of 55. Not so bad considering that I’ll have a pension plan on top of that!


So this part resumes where I am and what I am doing to become a wealthy retired guy on the beach. Next time, I’ll write about my other projects I have in mind. I strongly believe in getting multiple sources of income to achieve my goal. What about you? Do you have any plan, do you have anything put in place? I am curious to get your ideas and strategies about this topic.

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I strongly believe that pensions are not going to be able to live up to the expectations that people have for them and the further from retirement, the more the expectation will be wrong.

I figure my own pension plan can only afford about 40% of what it has promised.

by: The Financial Blogger | August 3rd, 2007 (3:31 pm)

Deborah, I guess it depends where you work. I think you are right for most companies. However, I hope that banks will still have enough money to pay me well…