Do you have a pension number? I have mine and it is $ 1,777,777. You can also easily calculate your pension insurance number. Just put in a few numbers to figure out your goal.

A large number, but not that scary if you plan it systematically. You may be wondering how I got this number and it’s pretty simple. You work backwards how much you want a year and you do a little math.

Calculation of your pension number

It’s based on the pre-tax retirement income I want to get and the dividend yield I expect.

  • $ 70,000 is the retirement income I want for our family and enable us to travel. $ 60,000 could have worked, but I wanted some security for luxuries like eating out and traveling.
  • 4.0% is the dividend yield that I expect to reach $ 70,000 and 3.5% will cover $ 60,000. It can be achieved with the stocks from the pension model portfolio.

Divide the income by the return and you will get the total amount you need in your portfolio.

Before asking about inflation, dividend growth from the portfolio will add income each year and that’s enough to keep up with inflation. This is a proven concept from my current portfolio and inflation is nothing to worry about.

The above excludes all Canadian Government income from Old Age Insurance (OAS) or Canada Pension Plan (CPP). I will receive CPP payments but the amount is unknown for now and the same goes for OAS payments.

Reaching the magic number

I’m not starting from scratch as you can imagine, and judging if the number is within reach is about using the historical rate of growth based on savings and returns.

I use the rule of 72 to evaluate my trajectory with a few price or return numbers. The rule of 72 tells you how many years it will take to double your money based on a return.

My portfolio return is above 11.00% and fluctuated between 10.00% and 14.00% and has rarely fallen below 10.00% since 2009. With a ROR of 10%, I would double my money in 7.2 years.

To pick solid blue chip stocks with strong dividend growth, I use the chowder score to help me make my selections.

The 3 components of asset accumulation are listed below. Easy isn’t it? The return is the hardest to control but I can tell you that I have beaten the index since 2009.

Wealth triangle - column funnel

The road to retirement

I’m starting with $ 1,066,000 in 2019 ($ 1,350,000 in 2021) and into 2021 7th I would hit the $ 2 million mark for 5 years without adding any more money. I don’t intend to blindly trust that and stop investing. Instead, I’ll keep investing and see if I can reach our goal sooner.

Once my magic number is reached, my portfolio needs to transform from a 2.5% dividend yield to a 4.0% dividend yield.

The strategy is for all of the new money to go into the bond stocks I have selected in the bond model portfolio and reduce my positions from the high dividend growth stocks like VISA or Canadian National Railway in favor of stocks with higher dividend yields.

Even at the current price, my dividend income forecast is as follows, with a dividend yield of 2.5% on stocks with high dividend growth.

If I trade stocks to get a higher dividend yield on retirement income, I should be able to accelerate dividend income, but it will slow dividend growth. It is an inverse relationship (high growth is low yield and vice versa).

Annual dividend income 2020



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