Reader question: What To Invest After Mortgage Is All Paid Off?
One of my readers, Josh recently sent me an email asking for my advice. Here's what he wrote to me:
So what Josh is looking for is a minimum of 20K a year. For those that are totally risk adverse, I would say one would need to save about 500K to be able to generate 20K a year @ 4%. Given Josh' mix, I would say that his portfolio is well diversified and, assuming a rate of return of 8% a year, I would say that he build up his outside of RRSP portfolio to 250K and he should easily be able to achieve his goal of 20K a year. Note that this number will fluctuate a lot based on different years.
Overall I must say that Josh' finances are in good order. He has no debt, has high income and is well on his way to being financially free.
Keep in mind I am not a financial advisor. This is strictly my opinion only.
Would you guys do anything different with Josh' situation?
I'm a self-employed male in my mid 30's, no kids and no debts. RSP is already maxed out.
Currently, my major assets are as follows:
House is worth $330K
RSP portfolio is $65K
Non-RSP portfolio is $40K
Savings is 35K
Total of RSP and Non-RSP portfolio is $105K, which is composed of 25% bonds, 25% Cnd. Index, 25% S&P 500 Index and 25% International Index.
I gross around $70K a year from my job. However, I don't see myself working in the near future since it is really a dead end job. I don't have a company pension so I'm trying to create a nest egg on my own. What I like is to have some sort of investment that will provide a steady stream of income once I stop working one day. $20k a year would be the minimum. Any ideas?
So what Josh is looking for is a minimum of 20K a year. For those that are totally risk adverse, I would say one would need to save about 500K to be able to generate 20K a year @ 4%. Given Josh' mix, I would say that his portfolio is well diversified and, assuming a rate of return of 8% a year, I would say that he build up his outside of RRSP portfolio to 250K and he should easily be able to achieve his goal of 20K a year. Note that this number will fluctuate a lot based on different years.
Overall I must say that Josh' finances are in good order. He has no debt, has high income and is well on his way to being financially free.
Keep in mind I am not a financial advisor. This is strictly my opinion only.
Would you guys do anything different with Josh' situation?
Comments
Your advice seems sound. If he was really serious about retiring soon he could sell his house and rent. The equity in his house could contribute a great deal to his income stream depending how much he had paid off.