Free Pension Money? Yes Please!

     In May of 2002, after completing my Bachelor of Commerce degree at the University of Ottawa, and working for five grueling months in a law firm, I landed a job at the now defunct branch of Public Works and Government Services Canada.  Although my move from the law firm to the federal government meant a small raise, my primary motivation was to cultivate a career in finance. The government of Canada also offered a defined benefit pension plan that was fully indexed for inflation.

     Fast forward to March 2005 when I left Public Works to work for Canada Post (a federal Crown Corporation). Canada Post had its own defined benefit pension plan that was also fully indexed for inflation.  In contrast to the federal government's pension plan, the sustainability of Canada Post's pension plan has been repeatedly called into question. That said, during the three years I was at Canada Post, our controversial CEO, Moya Greene stood in front of employees and called the plan "perfectly safe". Like many other statements Ms. Greene made, this was at best uniformed, and at worst, a lie.

      After leaving Canada Post and starting work with my current employer, where I lucked into my third defined benefit, fully indexed pension plan, I kept my Canada Post pension plan information up-to-date informing them of changes of address, and of my marriage. This was mostly due to my desire to keep tabs on what I thought was a risky potential source of retirement income. Frankly, I think the Canada Post defined benefit plan is unsustainable, and will need to be bailed out within the next five to ten years.

     On the other hand, I've sat on an envelope describing my pension plan information relating to my time in the federal government for the past 10+ years. I never updated my address, spouse, or beneficiary information. While packing my office during my recent job change at my current employer, I came across the envelope and noticed that based on 2005 estimates, I would be entitled to over $200 per month once I hit the ripe old age of 60. A quick calculation showed that in order to generate that kind of income, I'd have to invest over $60,000 at an average yield of 4%. 

       Needless to say, today, during my vacation, I took the five minutes to look up a phone number for the federal government pension plan, called them, and updated my information. It's scary to think how long I left that free money on the table. One five minute called just shaved a couple year's worth of working, saving, and investing. After the call, I felt fantastic!

     While I'm grabbing at this free money, tomorrow's task will be completing all the necessary forms for my son's RESP. My plan is to contribute $2,500 a year to his RESP in order to receive the maximum $500 match from the government of Canada. Boom! A risk free, immediate, 20% return! If there's free money on the table, you might as well take it!

Preparing my Portfolio for Vacation

I’m preparing to take a three week vacation from work.  We’re heading to Washington DC for two weeks and then to Quebec city. After a busy year at work, and a job change in May, the three weeks should give me an opportunity to recharge.

While preparing to go on vacation, there are many details to handle in advance to ensure things go smoothly while I’m away. Setting up my out-of-office notifications for work, assigning my tasks in progress to my back-up, exchanging some Canadian dollars for suddenly even more expensive US dollars, getting a haircut, cleaning up around the house,  packing, prepaying bills, and many other activities need to be done before Friday morning.

What I’ve been thinking about today is how I should prepare my portfolio for vacation? More specifically, here are a couple of the issues I’m facing:

1.       Do I leave my portfolio notification e-mails on?

Each day, I receive about 150 articles through three e-mail alerts designed to keep me abreast on my various stock holdings. Although this might sound cumbersome, the e-mails contain many interesting articles, and I can generally skim through them in 10-20 minutes. However, coming back to about ~60 emails containing ~3,000 articles might be overwhelming.

2.       Do I invest cash or keep it?

As I’ve previously written about, I still have in excess of 3% of my portfolio in cash. Although the percentage seems reasonable enough, I know I’ll think about what to do with it while on vacation, instead of taking the mental break that I truly need. Although I like the flexibility that cash provides, the thought of it sitting there in my accounts, doing nothing for almost a month, seems counter intuitive.

3.       Do I force myself to log off for three weeks?

In the past, during extending vacations, I made it a habit not to check my portfolio, and not to conduct any trades.  Afterall, dividend investors should be thinking of the long-term, and I’m comfortable enough that none of my companies will announce earth shattering news during a lazy three week period in the summer. That said, the control freak in me knows it’s hard to ignore the financial news for three weeks. With the potential Grexit, maybe I’ll miss an excellent buying opportunity.

What all three items boil down to is how connected I should be during my vacation.  My preference would be to have very limited connectivity. A by-product is that this blog will likely be less active over the course of the next three weeks. 

If anyone has any tips about managing their investment portfolio during vacations, please send them my way. 

Financial Goal Update at June 30, 2015

My primary motivation of maintaining this blog is to hold myself accountable to reaching my financial and non-financial goals. At the end of each quarter, I like to check in to see if I'm trending in the right direction, or need to take corrective action. To simplify things, I decided to only track three financial goals and two non-financial targets in 2015.  Here's how I did against my five goals in the second quarter of 2015.

Increase Expected Forward Dividend Income by $1,800/yr 

From the outset, I knew that this was an incredibly aggressive goal. In Q1, with twelve dividend raises, one distribution cut, and by regularly investing a relatively high percentage of my pay, I was able to add $453 putting me on track to achieve this goal. I'm happy to report that another nine dividend raises in Q2 and adding new funds to my accounts resulted in the addition of another $687 to my expected forward dividend income, putting me ahead of schedule on this objective. However, I know that some of my portfolio transformation trades will result in lowering my average yield in Q3; mainly due to buying US stock when the exchange rate adds 23-30% per share of US stock (Note: I continue to track my forward dividend income using a CAD/USD exchange of 1:1).  I'm happy with my progress toward this goal, and will continue to pursue it aggressively during the second half of the year. 

Complete the Transformation of my RRSP by Year End

My RRSP transformation is all about making my portfolio more tax efficient, while moving shares in companies into the same account (TFSA, RRSP, and non-registered). I made great progress during Q2, selling my H&R REIT shares in my non-registered account at a small capital gain, and re-buying them in my TFSA. I was also able to pick up shares of Royal Bank in my unregistered account, which will eventually result in me being able to sell my holding in my RRSP, and invest the proceeds in a US/global company. Lastly, I sold my Telus and Rogers shares in my RRSP, so that I know hold these companies exclusively in my unregistered and TFSA accounts respectively. All that's left to do in the second half of the year is to purchase shares in Bell Canada in my unregistered account, so that I can sell them in my RRSP (after waiting at least a month in order to avoid creating a taxable event).

Give Twice as Much to Worthy Causes as in 2014

I continue to be on pace to double the amount of money I gave in 2014. After donating to the Red Cross, the Canadian Cancer Society, and my local food bank in Q1, I'm proud to have given money in Q2 to Oxfam Canada's efforts in Nepal (a donation that was subsequently matched by both my employer and the Government of Canada!), St Paul’s church (where my son was baptized), the  Renfrew Hospital, and the United Way of Ottawa. Soon I'll be posting about my giving plans for the second half of 2015. Without letting the cat out of the bag, I'm happy to have found a great strategy to make my portfolio more tax efficient, while contributing to a very worthy cause. 

My non-financial goals to maintain my weight under 165 pounds at the end of each month and average a blog post each week are both being met. In fact, I haven't weighed over 160 pounds since March, and have decided to revise my target downward to that amount. Also happy to report I had 21 blog posts during Q2, well ahead of the pace of one per week. Consequently, my number of page views continues to climb as I post more often, and possibly do to creating a Twitter account for this blog. To that end, thanks to all the new readers :)

Looking back, I had a pretty stellar second quarter. The fact that North American markets remained stagnant allowed me to pick up shares of great companies at lower prices than during past quarters.  I'll keep you posted at the end of next quarter of how I'm tracking against my goals.

Two Recent Buys: Royal Bank of Canada and Alaris Royalty Corp.

While the North American markets dropped 2-3% Monday due to turmoil relating to Greece default, I was lucky enough to deploy cash and buy stakes in two fantastic companies.

I’m been looking to buy Royal Bank for my non-registered portfolio so that I can sell it in my RRSP and move the money into a US/international company. With Royal Bank's share price down 2% on Monday and the yield over 4%, I snapped up shares in Canada’s largest bank.  My first purchase of Royal Bank was in October 2007, and since that time the share price and dividend are up 43% and 54% respectively.  As I’ve indicated before, I’m a big believer in our Canadian banks given their strong lobby group that has resulted in a very friendly regulatory environment.

After re-establishing a position in Alaris Royalty Corp. late last month, I bought enough shares at a slightly lower price to consider my holding a full position. I’ve already talked about why I love this royalty company, and how I consider it the only true private equity play in Canada.

After complaining about the curse of having cash in my account, I’m happy to report that these two buys resulted in my cash holdings only representing about 3.5% of my total holdings at quarter end. Still a bit too high in my mind, but it does leave me with more ammunition should the Greece situation further depress North American markets in coming weeks.