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Early Retirement Update: Travels, Portfolio, Random Thoughts
Some uncomfortable truths about early retirement from a guy currently trying it
Let’s take a little break from the stock analysis — for at least half this post — and talk a little bit about my early retirement. What’s working? What isn’t? Is it pretty much all I expected, or have I been surprised by a few things?
Your regular stock analysis will be back on Friday with a closer look at the various Morguard entities.
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There are certain things in life you can’t really describe until they’ve happened to you. Falling in love. Losing your virginity. Feeling real betrayal from someone you trusted implicitly. That burning when you eat hot sauce spicier than you can handle. Or that helpless feeling when you get dumped and there’s nothing you can do to change their mind.
I have another one. It’s switching from an accumulation mindset to a drawdown mentality.
I thought about this extensively before hanging up the proverbial skates. It would be hard, I figured, but easily doable. I’ve crunched and recrunched the numbers. They all made sense. I even went as far as making spending goals in retirement, rather than savings goals. It was the first time in my life I’d ever done something like that.
I’m barely two months into retirement and let me tell y’all. Making that switch is much harder than I anticipated.
It started when I sold my rental properties. That money was immediately earmarked for stocks. I then started crunching the numbers and decided I could afford to reinvest some dividends for a few months. Combine the two and I was looking at an extra few thousand bucks per year in annual dividend income. Not just for 2023, but forever.
So I’m in the process of doing it. I’ve been putting cash to work in various names (more on that later) and I’ve been accumulating dividends to continue to put to work over the next few months. We have a decent cash cushion, so I’m not worried about running out there. I’ll let dividends accumulate and then start withdrawing them during the second half of the year.
But even though I think the decision makes loads of sense, I can’t help but wonder if I’m just putting off the inevitable and continuing to find reasons to not withdraw anything from the investment accounts. I’ll just happen to stumble upon enough income to ensure I keep adding to the pile instead of subtracting.
For me, early retirement was more about taking control of my time, and I’ve checked off that box. I now do whatever I want, whenever I please. But until I start withdrawing capital I’m not sure I can really call myself retired. And I just haven’t been able to do that.
I did put a little cash aside from the rental property sale, and I have been spending my last bonus from my old job, so I’ve been successful on that front at least. But let me tell you, kids. It’s much harder than I thought it was going to be. Seeing the ol’ PADI (projected annual dividend income) number tick up is addictive as hell. It’s basically my nicotine habit. I’m gonna need some gum or something.
I think one reason why I’m having problems withdrawing capital is at the rate I’m spending I’m going to be out of money in about a month and a half.
That’s a bit of an exaggeration, but not much. By the end of March I’ll have spent six weeks — or about half — of my early retirement away from home. That’s a lot, and it’s not cheap.
The first trip was to continental Europe. We flew into Amsterdam and then toured around Germany, hitting Cologne, Stuttgart, and Munich. These cities are not cheap, and the crummy exchange rate when converting Canadian Dollars to Euros didn’t help. We saved a little bit of money by going in the offseason, and at least many of the museums are free.
And that’s okay, because Germany really was a bucket list item. I’m not supposed to say this because it makes me sound like a Nazi, but it’s super cool to see all the World War II stuff up close. I walked the path taken in the Beer Hall Putsch, for example. I got to walk around Dachau and see the crematoriums up close. There’s no substitution for being there.
I got to see some other cool stuff too. The history of Amsterdam was fascinating, and I could easily spend days just walking up and down the canals. The Mercedes Benz museum in Stuttgart was easily a top-five museum of all time for me, and I’m only a casual fan of cars. The train ride between Cologne and Stuttgart was beautiful as it followed the Rhine through the river valley. The chocolate museum in Cologne was a lot of fun, too.
Aside: I’ve noticed when young people go to museums all they care about is getting pictures of what they see. They’ll come up to something and not even appreciate what it is. They're just in a hurry to get their picture and move on. It’s a little bit sad.
And now I’m in London, which could be the most expensive city on the planet — except when it’s not. The Victoria and Albert Museum is wonderful. It took me almost a full day to go through it, and that was including skimming the boring parts. It didn’t cost me a dime. Neither did the British Museum, the Imperial War Museum, or the Natural History Museum. These are all fantastic experiences. The Brits know how to do a museum right.
Thank God for the free stuff, or else I’d be somewhat annoyed. Each meal easily costs me $20, and those are the cheap ones. A proper sit down dinner — like the roast beef I ate the other night — is $30-$40. Those are the kind of prices that make cry. Or at least shake my head a little.
I’m staying in the Kensington/Chelsea area and the amount of wealth here is amazing. In two hours of walking around I saw more luxury cars than I would in a week back home. I’m told a lot of Russian money ended up invested in property in the area. Which makes a lot of sense. Get your money out before you “fall” out a window. I’d do the same thing.
I’m leaving London in a few days to visit some other cities and I’m hoping prices are a little more reasonable as I head north. If not, oh well. Still having a good time.
I worried about two things before I retired. The first was switching from save mode to withdraw mode, which is still a work in progress. The other was the isolation of spending all day alone.
I’m happy to say I’ve been a lot more successful at this one. I’ve put in an effort to stay in touch with various folks from work, and I’ve been doing well with that so far. I’m constantly inviting people over or making an effort to meet them somewhere, and it’s working out really well. Twitter also helps here. My DMs haven’t been this active since I was chatting up my current wife back in about 2013.
I also plan to join a local golf club this year, with the goal to find a group of retired guys who will let me golf with them a couple times a week. That’s the beauty of golf. It’s easy to show up and get paired up with a group. Plus I get to golf. That’s a solid win-win there.
As mentioned, I have a little bit of cash to put to work. We took the proceeds from my rental property sale and immediately plunked most of that cash into various accounts. I’ve been slowly investing it as I research stocks.
I topped up positions in Polaris Renewable Energy and Capital Power. Polaris is still a small position, and always will be. It’s more of a value play, with pretty serious warts. Capital Power has been increased from a medium-sized position to a top-10 position. I’m a big fan. It’s very hard to find a stock that offers a 5%+ yield today and solid dividend growth going forward, but Capital Power checks off both boxes.
I also nibbled on a little more Canadian Tire (TSX:CTC.A). Might do a whole post on that one, or I might not. I think it’s a classic misunderstood business. The same criticisms keep coming up. The stores are too crowded. They’re losing versus Amazon online. And the finance arm is going to blow up. These have been criticisms for years now, and CTC has more than doubled its earnings per share over the last decade. Plus management keeps buying back shares.
I also bought some TMX Group and I’m looking seriously at Minto Apartment REIT. TC Energy is interesting as well. Alaris Royalty Trust is clearly pricing in a recession and can be had for about 8x FCF. Another REIT I like under $15 is Choice Properties. I think it has loads of development potential.
On the U.S. side I sold Intel after the dividend cut and allocated that capital into more Johnson and Johnson shares.
You’ll notice I’m not looking to lock in cash at a 5% risk free rate, although I have encouraged the wife to chase the highest interest rate we can get on emergency fund cash. My hurdle rate is 10%. If I can get that much risk free, I’ll put every spare nickel into it. Until then, I’m going to buy more stocks.
One thing I’ve noticed during my travels is how much Europeans love to smoke. It seems like every third or fourth person I pass on the street is either smoking or vaping. It was true in continental Europe and the trend is continuing here in Britain. I currently own both Altria and Philip Morris. I think I may sell Altria and put it all into Philip Morris.
I’ve often wondered what certain people think about my early retirement. Does my old boss approve? How about my former co-workers? These thoughts don’t dominate my day or anything, but they do cross my mind. Especially when I play video games or read a book instead of doing anything productive.
Overall I’d say it’s pretty much what I expected. I didn’t think it would be easy to switch to spend mode, and I was right. That’s still a work in progress. But I’m enjoying the rest of it, and I think I’m on the right track with spending money on golf this summer.
That’s about it, guys. Back to your regularly scheduled programming on Friday.