It’s ambitious, I know, but if you don’t have a goal in mind, how are you ever to reach it?

It might seem mad in this particular investing environment to be planning on retiring early, but I think it’s a completely achievable goal. I sat down and figured out what I need to do, now I just need to do it. And everyone reading this gets to follow along.

THE GOAL

Full retirement at 55. By full retirement, I mean having the means to support myself independently and comfortably without relying on the Canada Pension Plan or Old Age Security until age 65. I am currently 35, so I have a 20 year time horizon, something I feel is perfectly achievable.

THE BACKGROUND

I’m a single father with 2 boys and a good job. I have little debt to speak of, after a separation that caused a huge hit to my retirement savings and also to my personal finances. The boys spend most of their time with me, except when I’m at work when they are with their mother, so while I have some hefty financial obligations with raising children, there’s no alimony (we were common law) and costs for raising the kids are shared fairly. I’m average in that respect. I’m solid middle class on my own, and have no shame in admitting that if I had a working partner, we’d be upper class.

THE PLAN

I have several current investments through work and my old job, which grandfathered a rather generous RRSP plan (no annual fees for maintenance, no cost whatsoever for transactions). This has given me a solid foundation on which to build my plans. I am by no means close to where I had wanted to be at Age 35 with my savings due to my separation, but I think this is an excellent way for me to demonstrate how even starting late, you can still retire early. They will be detailed below, but here is the ‘Four Point Plan’

1)      Dividend Base. I plan on investing heavily in the next few years in boring but solid companies that pay regular dividends. Some people refer to these types of stocks as ‘Widow & Orphan’ stocks. They don’t have massive price swings, but they steady income they provide is relatively reliable as a source of income. Why now? Historically speaking, good, solid, dividend paying companies are getting beaten up along with companies that aren’t so solid. Over the next two years, these stocks are going to be cheaper than they have been in the past, and most are still paying out the same dividends as before with the same annual increases.

2)      Early Pension. I have a job with a defined pension plan. It’s a relative rarity in this day and age, but I’m glad to have it and plan to take full advantage of it. I could even retire under it today, although I don’t think the paltry amount it would pay out for the rest of my life as a result would buy more than a six pack of soda a month. On top of the dividends, the pension plan will give me a good solid base on which to provide me with retirement funds.

3)      RRSP contributions. Regardless of your situation, you should be contributing to an RRSP. Whether you plan on retiring early, late or never, a plan for RRSP contributions is critical. I don’t plan on drawing down from my RRSPs until I hit 65 though, which is where point 4 comes in.

4)      Stock investing. Between Age 55 and 65, I don’t want to touch my RRSPs. That means I need a cushion until those benefits kick in to supplement my income from my Pension and Dividend Base. My company has a stock plan and I fully intend on participating in it as long as they keep matching contributions (currently the match is a generous 40%. If I buy $100 of stock, the company contributes $40 to purchase as well). However, on top of that I plan to keep at least 10% of my planned retirement funds in various stocks.

WHY?

So, what’s the purpose of this blog?

It’s  not just for myself to keep track of how close I am to my goals, but also so people can see how it’s possible to retire early without breaking the bank. I am not wealthy. I have a good job, with good benefits, and little debt, so I’m in a situation where I can demonstrate how an average person can really make a good retirement for themselves, and maybe even do it earlier than they thought they could.

Every month, I plan on showing you where I sit with my retirement plans. It will take the form of the following:

Holdings

This will be a disclosure of my current retirement holdings and any changes, contributions, withdrawls (hey, who knows, emergencies happen).

Estimated Monthly Income

This is based on if I were to retire today. Obviously, the amount is going to be a lot less than I’d like it or need it to be if I were to, say, retire today. However, it will give a good idea of how my monthly retirement income is growing over time. For now, it’ll include only Dividends and Pension payments, since that’s all that would be all that I’d receive on a monthly basis from my retirement funds.

In the end, my goal is fairly modest, but should provide for a comfortable retirement. I would like to see my Pension and Dividends providing about $4500 a month, with Stock holdings capable of providing another $5500 a month until I hit 65. At 65, I can then start drawing down on my RRSP holdings. Ultimately, I want to see $10000 a month at 55. It sounds like a lot, but remember, we’re also looking at 20 years of inflation between now and then. $10000 in 2028 is going to be a lot less than $10000 today.

To reach those Stock numbers, I’ll need at least $1.2 million in stock holdings in 20 years. My pension will need to be paying out at least $2000 a month, and my Dividends providing another $2500 a month. I think this is a realistic, obtainable goal.

Let’s see how it goes.

(This post will always be the first one, at least until I leave LJ, or Retire, whichever comes first)