I am glad I came across the retirehappy.ca blog and learned how much retirement income one can expect from the Canadian government. It is clear to me now that relying on government income is a bad idea.
Now, let’s assume that you will receive an above-average Old Age Security (OAS) of $578.53 and a Canada Pension Plan (CPP) of $512 per month. These amounts have been calculated for 2017 and will be slightly adjusted in the future. In total, that would leave you with $1,090, or roughly $2,000 for a couple. If you do not take care of your retirement situation, you will only receive about $1,000 a month. It scares me to imagine going into retirement with an income of only $1,000. Our family of five already spends around $7,000 per month, which is three-and-a-half times more than the $2,000 we would receive if we didn’t have any additional streams of income.
I doubt we will need less money than we spend now. Yes, the kids will grow up and go their separate ways, hopefully supporting themselves financially, but when we retire, we would like to travel more, go skiing or hiking, and go out to more shows and sports games. To do that, we would need more than our predicted retirement income.
So, to comfortably face retirement, we would need a monthly income of at least $7,000.
Living Abroad in a Cheaper Place
I see this as a temporary option. We like where we live now and would like to maintain our current lifestyle. For me, Vancouver is the best place in the world with nice people and beautiful nature that provides fun activities all year around: skiing in winter, hiking in spring, fishing in fall, and swimming in summer. Why should I have to live in another place? Only because of money? We would prefer to live here and periodically visit other sunny countries for vacation—which may be longer after our retirement.
House as a Retirement Nest
From an investment perspective, this looks less risky, but is it the best option? It’s certainly the easier one due to the psychological factor of owning a home. Still, owning a house is not the cheapest option. At least not in Vancouver.
Although it is a popular approach to own a house and sell it after retirement, $2,000 for a couple would still not be enough to live, even with a fully paid mortgage.
I have so many no-no’s to this approach. First of all, why would I sell the house if I liked living in it? Most likely, the house has been renovated and adjusted to my needs, so why should I sell it? Of course, I get used to things—especially places I live in—and selling them off only because I have to makes it sad. And what happens when you sell your house? You get a sum of money that would soon be eaten up by your expenses.
To be honest, it’s nice to live in your own house, especially if its size and floor plan is what you need. However, buying a house and having it as our solitary investment is simply not an option for us.
Another disadvantage of owning a house is that it does not generate any cash flow. Yes, you can refinance if the house price appreciates, but it is still not the same as receiving dividends or rental checks every month. When you own your own house, you pay the debt. When you own a rental property, your tenants pay your debt.
What Are We doing?
1. We save money for investing. Every month that passes should have positive cash flow, which allows investing money saved. As it has been said many times, pay yourself first.
2. We take risks and invest our money with a long-term vision to maximize and diversify our passive income streams. Now, it is clear to us that starting as early as possible will result in earning more passive income.
3. Trying to fish where the fish are. Here in Vancouver, real estate is the biggest money industry. So, if we cannot buy a house for us to live in, we will buy condos and rent them out. We like investing where the money is.
4. We diversify our investments and have additional to real estate income streams: dividends paying companies, lending to small businesses, and private mortgage.
5. We will continue looking for more income streams to be added to our portfolio and would appreciate any ideas from readers.
“The biggest risk is not taking any risk …
In a world that changing really quickly,
the only strategy that is guaranteed to fail is not taking risks.” Mark Zukenberg.
PS: Our current passive monthly income above 1,000 CAD.
