But… I wonder if there are particular industries/companies that are at less risk of having inflation eat away profits. Presumably the ’safety’ stocks including infrastructure, utilities, and some consumer goods companies can increase prices at the rate of inflation. – Again, this is what we always read, but has anyone done some sort of meta-analysis looking at these types of companies and their earnings and found any trends/relationships with inflationary rate?

If investors sell stocks, the “current” yield of the stocks would go up – that is, the yield calculated based on the current stock price would go up.

But you would have invested at an earlier price – so, your yield, based on the price at which you bought the stock, would remian the same irrespective of price movements of the stock.

Yield for you would change only when the dividend amount per share changes, or in case of corporate actions like stpck splits or bonuses.

QCash: Thanks for posting your expenses! How is retirement going? Have you invested your portfolio in mostly dividend paying stocks?

You asked way back in a previous post what sort of expenses I have reduced in the 2 1/2 months since my early retirement. Here is a quick list:

Gas – $25-35 per week (down from $100) I expect this will drop further once the nice weather is here and I can use my bike more often

Dry Cleaning – $0 per week (down from avg $25/week)

Lunch – $0 per week (down from avg $15-20/week) granted this is now in our grocery bill, but I am not eating out like I did previously. I always kept trying to take lunch to work, but never quite pulled it off.

Coffee – $10 per week (down from avg $25/week – I still enjoy my Tim’s, but instead of needing two or three a day, I have one on my way back from the gym – the $10 is based on me actually getting to the gym everyday :-)

These are just the ones of the top of my head. I still need to get into my “routine” but there are certainly some intangibles that I haven’t factored in yet.

Q

The dividend tax credit is probably the best thing I learned from reading Derek Foster’s book. Up until then, I hadn’t realized what a huge difference it could make to your tax scenario.

I have a monthly income fund (from BMO) in my portfolio which also offers a nice return (6.2% currently) but also includes a ROC component that I am not taxed on (it reduces my cost base, but if I am not planning on selling anytime soon, who cares). There are a few other income funds like that out there, so you might not need as much as you think you do.

And don’t forget about all the reduced expenses that “retirement” brings.

Q

PS for DAVID – I think most of us define “retirement” as not having to work. I think I have been busier since I started my early retirement, than I ever was working. But it is doing things I WANT to do and things I enjoy a lot better than my job. If you have a job you love, then all the power to you. But there is an inherent freedom and reduction in stress working when you know you can leave any time. :-)

One of the discussion points that often seems missing from many financial blogs that discuss retirement is the idea of working at a job you love, possibly far beyond normal retirement age. My father, a well-known St. John’s businessman, just celebrated his 50th business anniversary. He’s there, not because he needs the income — he’s there because he truly enjoys what he’s doing. Admittedly, he is not as involved as he once was — my sister manages the daily grind. He and Mom travel as they wish; visit their granddaughter in BC multiple times per year, and wander around the island on a regular basis. I hope that more of us can find that joy in the vocations we have chosen, and be able to continue doing the things we love as long as we possibly can. I truly hope that Dad never “retires.”

David

In a province where if it’s not raining, there’s drizzle or fog? THAT shows Common Sense!

David

Here, start a few laundromats:
http://realneo.us/Beach-Solar-Laundromat
10% return on investment

I did this analysis just for analysis sake. I do plan on depleting my portfolio during retirement as stated in my retiring early series.

David: I discounted OAS/CPP in this analysis b/c I assumed that we would retire early. If we were to retire early, all of our expenses would have to be covered by our dividends without depleting the capital. Even when OAS and CPP kick in, they will be in addition to the dividend income already being received to cover our expenses. Also, our expenditures account for travel and a fudge factor. Please see my “retiring early” series on the right side bar under “Popular Articles”.

I’m also curoius about your expenses. My accounts indicate the two of us spend about $15,000 PA on necessities, not including mortgage or car payment. We also are mostly beyond the stage of buying large items for the house. So, while I agree that my utilities are lower than you pay in Newfoundland, and you may want to travel more than we currently do (work gets in the way of pleasure) I’m not sure that you’d need three times the income I calculate to be comfortable in retirement. Did you derive the numbers in your earlier post based on actual expenditures, or is it simply an estimate?

Please be aware, I have not included any allowance for expenses like the hot water tank, furnace, or roof replacement in my base costs, and need do that, but each should properly be amortized in a sinking fund prior to their replacement.

Finally, I agree with Mike, you should also expect to deplete your portfolio, unless you plan on leaving your retirement income to your kids or the SPCA.

David