My Retirement Number: $1,777,777

Dividend Earner

Dividend Earner

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Do you have a retirement number? I have mine and it’s $1,777,777. You can easily calculate your retirement number too. Just plug in a few numbers to come up with your target.

A big number but not so scary if you systematically plan for it. You may wonder how I got to this number and it’s pretty simple. You work backward from how much you want per year and you do a little bit of math.

Calculating Your Retirement Number

It’s based on the retirement income I wish to receive before tax and the dividend yield I expect to receive.

$70,000 is the retirement income I wish to have for our family and allow us to travel. $60,000 could have worked but I wanted some safety for luxuries like dining out and travel.

4.0% is the dividend yield I expect to target to reach $70,000 and 3.5% will cover $60,000. It’s achievable with the stocks from the retirement model portfolio.

To get to those numbers, divide the income by the yield and you get the total amount needed in your portfolio.

Before you ask about inflation, the dividend growth from the portfolio will grow the income every year and that’s enough to keep up with inflation. That’s a proven concept from my current portfolio and inflation is nothing to worry about.

The above exclude any Canadian government income from Old Age Security (OAS) or the 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 am not starting from zero as you can imagine and assessing if the number is within reach is about using historical growth rate based on savings and rate of return.

I use the Rule of 72 to assess my trajectory. The Rule of 72 tells you the number of years needed to double your money based on a rate of return.

My portfolio rate of return is over 11.00% and has fluctuated between 10.00% and 14.00% and has rarely gone below 10.00% since 2009. Using 10% ROR, I would double my money in 7.2 years.

To select solid blue-chip stocks with a strong dividend growth, I leverage the Chowder Score to make my selection, and also take advantage of many US mega-cap dividend growth stocks.

Below are the 3 components of wealth building. Simple, isn’t it? The rate of return is the most difficult to control but I can tell you that I beat the index since 2009.

Wealth Triangle - Pillar Funnel

The Path to Retirement

I am starting with $1,066,000 in 2019 ($1,350,000 in 2021) and in 7 5 years I would reach the $2M mark without adding any more money. I don’t plan to blindly trust that and stop investing. Instead, I will continue to invest and see if I can reach our goal earlier.

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

The strategy is that all new money goes into the retirement stocks I selected in the retirement model portfolio and also reduce my positions from the high dividend growth stocks like VISA or Canadian National Railway in favor of higher dividend yield stocks.

Even at the current rate, my dividend income forecast is as follow and that’s with 2.5% dividend yield with high dividend growth stocks.

As I switch stocks for a higher dividend yield for retirement income, I should be able to accelerate the dividend income but it will slow the dividend growth. It’s an inverse relation (high growth is low yield and vice versa).

Annual Dividends

wdt_ID Year CAD Dividends USD Dvidends Gross Annual Dividend Gross Monthly Income Annual Dividend Growth
1 2010 3,785 0 3,785 315
2 2011 4,674 68 4,742 395 25.28
3 2012 5,579 177 5,756 480 19.14
4 2013 5,948 347 6,295 525 10.96
5 2014 7,740 477 8,218 685 29.32
6 2015 9,777 792 10,569 881 28.45
7 2016 11,589 1,081 12,670 1,056 19.64
8 2017 13,694 2,015 15,710 1,309 24.20
9 2018 16,089 2,923 19,013 1,584 21.21
10 2019 16,924 7,711 24,635 2,053 24.25
11 2020 19,446 9,613 29,059 2,422 21.37
12 2021 18,151 7,883 26,034 2,170 -7.96
13 2022 23,999 8,763 32,763 2,730 25.85
14 2023 29,136 9,300 38,436 3,203 17.32
15 *2024 27,785 9,854 37,640 3,137 19.92
16 *2025 45,139 3,762 19.92
17 *2026 54,132 4,511 19.92