Retiring Soon? Here's What I'd Do

When I left regular employment at the end of 2022, I was filled with doubt.

What if my dividend income suddenly evaporates?

What if the market tanks and it’s worse than the Great Depression?

What if my version of selfish employment stinks and nobody wants to read me?

Let’s face it. Retirement is scary, and it’s especially scary for those of us who live and breathe finance. We’re smart enough to realize there are risks, and we’re constantly thinking of ways to optimize our portfolios. Should I go with a larger bond weighting, or stick with equities? Should I have a big cash cushion or a smaller one? Should I spend all my passive income, or reinvest some?

I’m now on year three of not having a real job, and have been through a few different market meltdowns now. Higher interest rates hit dividend stocks pretty hard in 2023. There was a cool 10% selloff in 2024 that we’ve all forgotten about. And I sailed through the Great Tariff Tantrum of April 2025 without losing a minute’s sleep.

I can assure everyone that these events get easier and easier the more you go though. In fact, afterwards the only thing I really remember is not having enough cash to really buy the dip.

Let’s take a closer look at a few things I did before I retired, and whether or not I would do them again this time around.

Cash cushion

I thought long and hard about retirement before I hung up the proverbial skates, and made a number of moves beforehand to feel a little better about my uncertain future.

The first thing I did was raise cash. Once my dividend income got to the proper level, I wanted to build in additional failsafe measures. Besides, I was going to travel immediately with my newfound freedom, and didn’t want to start scrambling to sell investments while in Germany to raise cash for bills.

I ended up with about a year’s worth of spending in a savings account, which back then was earning almost 5% interest.

This was a terrific move, and it’s something that I’ve maintained through today. I always have between six and twelve months worth of spending as cash, most of which gets moved around to take advantage of high interest savings account promos.

The main benefit isn’t even financial. It’s peace of mind. I know that if an unexpected expense comes up or a chunk of my portfolio suddenly stops paying dividends, I can just dip into my savings and things will be just fine. We won’t starve.

I can then withdraw dividends at my leisure. When I have cash in the brokerage account, I think about whether there are great opportunities to reinvest it, or whether I should withdraw it. I can make a rational decision if the cash isn’t immediately needed.

Make subtle portfolio changes

Retirement isn’t a time to make massive portfolio changes, IMO. You’ll unnecessarily trigger taxes if you sell winning positions. Besides, I still think at least 50% of investor decisions add no value, and that’s when I’m feeling generous.

I did something a little different than most. I slowly moved into more growthier assets and took a small hit to my dividend income. This wasn’t a huge change on my part; only about 5% of the portfolio was impacted.

What I realized is in my zeal to retire early I had taken a few questionable positions. I bought REITs with higher yields. I owned restaurant royalty stocks that paid consistent dividends, but without much growth.

I needed a little more help on the growth end if my income was going to increase faster than inflation each year, and so I made some changes. Not wholesale moves, but small adjustments.

It worked out well, and my passive income is now poised to grow by 4-5% per year without an additional nickel of contributions. I added an additional margin of safety by only spending about 75% of my dividends, which also helps — both on the safety side, and also on the dividend growth side.

Add some bonds (or bond-like assets)

I don’t have a one-size-fits-all portfolio approach for retirees for two reasons.

1. Everybody is different. Some can handle more risk than others

2. One man’s 60/40 portfolio is much different than another man’s

Let’s compare two investors approaching retirement. The first has stuffed his portfolio full of risky tech stocks, looking for companies that can 10x, 50x, or 100x their share price over time. He’s swinging for the fences, and isn’t afraid to strike out.

This guy is happy to sell off chunks of winners to fund his golden years. He figures the more he ends up with, the more he can afford to spend. And he wants to live large.

He realizes he’s taken some pretty big risks, and so he adds a 30% bond component to the portfolio. But he embraces strategies like investing in high yield bonds, covered calls, and buying a bunch of funds with 10%+ yields.

Now let’s compare him to the average Canadian Dividend Investing reader. She recognizes that dividend cuts are the biggest threats to her retirement, and so she embraces a more boring approach. She invests in dull stocks with less risk than the overall market. She’s looking for relatively low payout ratios, earnings growth, and good balance sheets.

In other words, she’s looking to get the defense part of the portfolio right first. She figures that a 100% equity portfolio is just fine in her situation, since historically those types of stocks have outperformed during bear markets.

Despite the 30% "fixed income” allocation, it’s obvious the first investor is taking more risk. But he’s tricked himself into thinking otherwise, lulled into a false sense of security by the monthly income dropping into his account.

I kept my portfolio boring leading up to and into my retirement, and it worked out well. It’s something I’d highly recommend everyone else do, too.

Don’t spend all your dividends

There’s one move I made above all others that really solidified my retirement, something that turned a solid plan into one that is built to survive even the worst storm.

I only spend about 75% of my dividends.

I always get pushback when I suggest this, with most suggesting this will take too much capital. I’m quite aware of this, but the rewards are so good I can’t not mention it.

Say you’re spending $50,000 per year in retirement, which is quite reasonable considering you’ll no longer be heading to work every day. If you wait until you get $60,000 in dividend income and then reinvest that $10,000 each year, you’ll end up with a ridiculously prosperous retirement.

It turns a retirement with a 95% success rate into one with a 99.9% success rate.

Here’s the evidence in spreadsheet form:

After 20 years you’ll be able to increase your spending pretty substantially, add money back into your portfolio, and be in the position to leave a generous nest egg for the next generation — whether that is your children/grandchildren, or some other way to give back.

The bottom line

Retirement is naturally a pretty scary time. The last thing anyone wants is to go back to the workforce with their tail between their legs.

But you needn’t worry. Most people reading this are elite with money. They have high savings rates, and will be able to recover if their well-laid plans don’t exactly work out. Plus, as my experience has taught me, you’ll hardly be idle. Many of you will go back to work in some small capacity, especially those who retire before their 50th birthday.

By making a few small moves today, you can turn a solid retirement strategy into one that will let all your non-sexual dreams come true.

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