Choose your Discount Broker Wisely

The Globe and Mail recently published their 17th annual ranking of online brokers.  Twelve brokers including all the major banks plus other members of the Canadian Investor Protection Fund (CIPF) are ranked based on the following criteria:

1. Client Experience/Website User Interface
2. Cost
3. Account Reporting and Maintenance
4. Research and Tools
5. Innovation

Comparing the Globe and Mail rankings over the past three years, the trend has been for the three largest independent (non-bank) brokers, Virtual Brokers, QTrade and Questrade, to consistently lead the pack, driven mostly by their lower trade costs and user-friendly web interfaces.  Being smaller companies with less overhead, they are also more nimble and able to quickly implement a constant stream of innovation in terms of new tools and offerings.

When we first selected a discount broker over 10 years ago, our portfolio was relatively small and we felt comfortable in choosing the independent broker e-Trade, which at the time was offering the cheapest trade commission fee on the market at $9.99 as opposed to $29.99.  Since then, e-Trade has been taken over by Scotiabank, was rebranded as iTrade, and is no longer the leading choice when it comes to ranking discount brokers.  In the past three years, Scotia iTrade has ranked somewhere in the middle of the pack with a consistent B rating–not the best, but not the worst either.

This year we decided that we should at least investigate the pros and cons of moving to a higher ranked broker.  Regardless of the excellent track records of the top three independent brokers, now that our investment portfolio (which is also our retirement income nest egg) has grown beyond the $1-millon protection limit that the Canadian Investors Protection Fund (CIPF) provides, we are no longer comfortable going with a smaller broker. It feels so much more secure and comforting to know that our retirement savings are being managed by a discount broker that is owned by one of the blue-chip Canadian banks.  While the chance of these three smaller discount brokers going under is probably slim, the chance of the banks doing so is likely closer to none. 

So that left us to compare the rankings and offerings of the brokers from the five major banks.  In terms of progress, TD Direct Investing has made the biggest and steadiest improvements over the past three years, moving from a last place C-ranking shared with constant cellar-dweller CIBC, to leading the bank-backed brokers with a B+ ranking by the end of 2015.  Scotiabank iTrade lost marks for its fees, which are now amongst the highest of all the brokers by charging $24.99 per trade for portfolios under $50,000 and higher commissions on most ETFs.  But since our holdings exceeded that minimum and we did not own any ETFs, these extra fees did not apply to us and did not influence our decision.

Where we found iTrade the most insufficient was in their lack of support for US registered accounts, which would allow us to trade in US stocks and be paid dividends in US currency, thus eliminating the fees and fluctuation of currency exchange. While most of the other banks and independent discount brokers have offered US accounts for RRSPs, RRIFs and TFSAs for several years now, iTrade so far has shown no intention of providing a comparable product.  This deficiency was annoying enough to prompt us to seriously look into what would be involved in moving to a new discount broker. 

It became quickly apparent that the pain involved in moving brokers, in terms of cost, time and aggravation, significantly outweighed the benefits.  First there are the transfer-out fees charged by the current broker, which typically cost $150 per account.  We have 8 accounts with iTrade (2 RRIFs, 1 Spousal RRSP, 2 TFSAs, 2 LIRAs and a non-registered account) for a total of $1200.  I read that it may be possible to negotiate with the new discount broker to cover these fees but there have been numerous horror stories of brokers reneging on the agreement after the fact, or stalling for many months before finally coughing up the reimbursement.  Then we considered the onerously long forms that we had to fill out to create our iTrade accounts in the first place and dreaded the prospect of potentially having to repeat that process with a new broker.  

Another concern for us would be the time period during which portions of our portfolio would be in limbo.  Typically the transfer takes 5-10 business days but there have cases where significantly longer delays occurred  or not all funds transferred properly.  Once our funds are properly transferred, we would need to link the new broker accounts back to our bank account, which would cause a further delay.  We depend on the regular flow of dividends to cover our expenses and monthly RRIF payments and might not have access to them during the transfer period.  We could use our emergency funds to temporarily cover our expenses while waiting for accounts to settle with the new broker, but I'm not sure what would happen to our monthly RRIF payment if the cash from the RRIF account was not available when the payment comes due?

We considered the fact that we would lose all investment history of past purchases, sales, capital gains and losses that we have accumulated for over 10 years.  We would also lose all of the Dividend Reinvestment Programs (DRIPs) that were set up with the old broker and would need to reapply to have them reinstated with the new broker, assuming that new broker supports the same DRIPs.  Not all brokers have the same DRIP coverage.  

 Scotia iTrade actually has excellent DRIP support, offering broker DRIPs on more Canadian and US stocks than most if not all of the other brokers.  Its Web interface also allows you to request to enroll in or withdraw from a DRIP for a stock within an account or across all accounts that hold that stock, without the need to contact customer support.  For those corporations that do not offer a discounted DRIP for their stock, iTrade offers the Dividend Purchase Plan (DPP), which reinvests cash dividends commission-free.

 Although it did not score the highest for innovation and has not increased in ranking for the past 3 years, Scotiabank iTrade has added a few new features that are useful, such as the calculation of "Realized Gains and Losses" within an account, which helps calculate annual capital gains and losses for tax reporting purposes, and "Income Details" for an account, which provides historic and projected annual and monthly distributions from equity or fixed income holdings that pay a distribution.  The Income Details view also splits out distributions paid out in cash versus those that will be reinvested in DRIP or DDP programs.  iTrade is also holding surveys to poll client interest in potential future improvements, including a few that I really hope they implement.

What we learned from this exercise of comparing discount brokers and investigating what it would take to move brokers is that you need to choose your broker wisely based on the factors that are important to you, because it is a painful, costly and non-trivial process to move between discount brokers later.
But keep in mind that things change and these competitors will continuously try to one-up each other.  So unless a much more pressing impetus arises in the future, for now we are sticking with Scotiabank iTrade as our discount broker, but will continue to lobby for them to finally start supporting US currency registered accounts.

The Rewards of Patience in the Buy and Hold Strategy

In these tumultuous times where stock prices have been sinking like stones across the board in every sector, it takes patience and nerves of steel to not panic and to hang tough with the game plan to "buy and hold".  The strategy of choosing quality stocks that pay a good dividend and hanging onto them as long as there are no dividend cuts has served us in good stead over the years.

Take for example our shares of Exchange Income Fund (EIF-T), which we bought for around $25.3 back in January 2012.  It was paying an annual dividend of $1.68 for a yield of over 6.6% and seemed like a good buy at the time.  For the next few months, the stock price continued to rise, closing as high as $28.84 in March 2013.  Then an adverse acquisition caused the stock to plummet, and for the next two years, the price stayed depressed.

It was tough watching the market value of this holding continue to fall and the red loss numbers under $ Change and % Change continue to rise.  At its lowest, the stock closed at $15.49 in October 2014.  We had to keep reminding ourselves that it was just a "paper loss" as long as we didn't sell, and more importantly, the dividend payout never wavered, although it also did not rise over this down period.  Rather than dump the stock, we took advantage of the lower price to buy more shares, using EIF's Dividend Reinvestment Program (DRIP), which offers a 3% discount on the market price for DRIP purchases.

After hitting that lowest point, the EIF stock started to rally at the end of 2014 and has continued to do so through 2015.  After two years of waiting out the dip, EIF has finally rebounded and is now trading for more than our purchase price.  It has a consensus "Buy" rating from the financial analysts and a target price of over $29.  But best of all, rather than lowering its dividend, EIF has now raised its dividend twice since November 2014.  So throughout this period of waiting for EIF's share price to rally, we were actually rewarded by being paid more and more dividend income and were able to grow our number of shares by DRIP-ing while the price was low.

Our Sunlife Financial (SLF.T) stock provided another example where patience was required.  We bought our shares in September and October of 2010 for an average cost of $25.32 per share.  SLF was paying $1.44 in annual dividends for a yield of over 5%.  It had a good run through most of 2011, hovering between $29-31,  once closing as high as $33.91.  Then Sunlife specifically and insurance companies in general ran into a rough patch caused by the poor economy.  There were fears by financial analysts that Sunlife would not have sufficient cash flow to maintain its dividend payout.  It was bad enough that the price dropped to the $19 range at the end of 2011, falling as low as $18.07 on one closing.  But the threat of the dividend cut was much more concerning to us, since we rely on this dividend for our retirement income.  Yet we did not want to realize a loss on our SLF holding on the mere possibility of a dividend cut.

Here is where patience, faith and a bit of luck paid off for us.  Given that Sunlife is a good solid large-cap company, we decided to stand pat and hope for the best.  As it turns out, SLF never cut their dividend and by the end of 2012, the share price had rebounded and continued to rise to its current average today of over $40.  In 2015, for the first time in 7 years, SLF finally raised their dividend to $1.52.  At the current significantly higher share price, the yield on this stock is 3.6%.  But since we held onto our stock, which we bought at a much lower price, our effective yield is around 6%.  Buying and holding onto this stock has really paid off for us.

We recognize that we will not always make the right call by holding onto a company that may be temporarily in trouble.  It was pure guesswork that led us to hold Sunlife as opposed to Manulife, who did cut its dividend in 2009, causing its stock price to dive even further.  It seems though that in general, large blue-chip companies will do whatever they can to avoid reducing their dividend payouts, since doing so signals weakness and failure and is a self-fulfilling prophecy.  On average and in the long run, we think our "dividend-stock buy and hold" strategy will succeed more times than it fails.  We can also absorb the rare dividend cut since we get dividends from so many different stocks that the net impact of a single cut will not deplete our income.   Our patience is currently being tested by one of our REIT stocks which has lost 37% of its book value and shows no sign of rebounding in the new future.  But the consistent effective dividend yield of over 6% that we receive eases the pain.

Through the past several brutal days this week, when stock prices were ravaged by news of China's flailing economy, our total portfolio fell by almost 10%.  We gritted our teeth, confirmed our dividends were solid and looked away.  By the end of the week, we have recouped more than half of the paper losses.  Better yet, we learned that three more of our stocks (CIBC, RBC and BNS) announced upcoming dividend raises. We continue to firmly believe that good things come to those who wait.

Handling Unexpected Expenses After Retirement

After three financially uneventful years of retirement, it has finally happened–we have been hit with a huge, unplanned expense that could not be anticipated.  We knew that big ticket items like a replacement for our 2005 Toyota Matrix or our aging appliances are upcoming within the next 3-5 years and have plans in place to incrementally save for those.  But earlier this year, out of the blue, we were informed that our condo building is one of the many buildings and houses across North America that installed plastic Kitec pipes for its plumbing system between 1997 and 2005.  It has been determined that there is a defect in the fittings or connectors between the Kitec pipes that could cause them corrode prematurely and possibly burst, leading to significant flooding.  The longer the pipes have been in place, the higher the risk of failure.  Given that our building was erected in 2003, time is of the essence to have these pipes replaced and the cost will be borne by each owner, since it does not fall under the jurisdiction of the reserve fund.  A class action suit has been launched against Kitec, but the settlement date is so far away and there are so many complainants that not much money will be awarded and definitely not enough or in time to pay for the pipe replacements.

The Kitec pipes can be identified by the colours of their tubing, which are bright orange for hot water lines and bright blue for the cold water lines.   They could be running behind our showers, bathtubs, toilets and washer/dryer units, and underneath bathroom and kitchen sinks.  Getting to these pipes could involve cutting holes through drywall, and even worse, through marble tiles.  The estimated cost of replacing the pipes comes in around $10,000.  The cost of repairing the damage done to our condo, which includes replacing marble and drywall, and repainting, will not be known until a contractor determines how many access holes need to be created and where.  At this point, we're guessing we need an additional $5000-$8000, since we have marble tiles in both of our bathrooms and specialty paint with a textured finish in our main bathroom that will be difficult to replicate.

Suddenly, we need to come up with an extra $15,000 - $18,000 within the next 6 months or so.  This is where the "contingency" part of our retirement strategy kicks in.  Since we do have a bit of time to save some of the money, our first approach will be to cut back on discretionary spending.  While going out less often for restaurant meals and watching fewer live theatre shows will help a bit, where we will get the biggest bang for our buck will be to cut back on vacation spending.  Since we enjoy traveling abroad, when preparing our post-retirement budget, we set aside a healthy amount of money to spend on this each year.  In the past two years, we've taken advantage of this by embarking on 6-7 week trips to Europe.  Next year, we will cut right back and just take a short 1-2 week trip within Canada or even within USA, which won't cost much despite the poor exchange rate on the Canadian dollar since we have saved up US currency from our US dividend stock.  If we feel that even this short trip is stretching our income, then we can consider a Toronto staycation.  Depending on how soon we need the money, we can temporarily borrow  from our emergency cash float, where we aim to always keep sufficient funds to pay up to 3 months of regular expenses.  Adhering to our game plan to slowly reduce the value of our RRIF accounts while our taxes are still relatively low, we could make one-time taxable withdrawals of any excess dividends accumulated in our RRIFs, making sure we leave enough to still meet our yearly minimum withdrawal criteria.  Finally as a last resort, we can consider taking money out of our TFSAs tax-free, with the goal of reinvesting that amount once we save it up again in a future year.

So we have many options and strategies at our disposal for addressing large expenses that arise suddenly.  While we did not anticipate this specific expense, we knew that we had to be prepared in general for unexpected spendings that could arise.  Accordingly, we are not as panicked about the situation as others might be, since we put careful thought in advance as to how we would respond to just such an occurrence.  It is now simply a matter of methodically putting our contingency plans into action. 

No Fee Banking with President's Choice Financial or Tangerine

Recently, Royal Bank (RBC) made the news for finding creative new ways to charge its customers even more fees than it already does.  The additional costs include charging $2-$5 for previously free transactions such as making debit, credit card, mortgage and loan payments, and higher fees for services such as stop payment, cheque certification, and wire services.  The general consensus is that other banks will eventually follow suit, in their never-ending pursuit of greater profits.

I still remember the ultimate example of unreasonable bank fees–a news story about a mother who wanted to teach her young son the value of saving.  She helped him deposit $20 into his own bank account and returned some time later to show him how much the money had grown.  Instead, they were informed that the account balance actually had a negative balance after service charges ate away all the money.  Instead of making money, the boy now owed the bank money!  I guess the lesson this child learned was that he would do better by hiding his money under his mattress.  The negative press from this story led to the banks offering "no-fee children's bank accounts", but it illustrates the general trend for banks to try to gouge you whenever they can.

It has been over 12 years since we renounced doing business directly with any of the big five banks, in protest over their service charges.  Instead, our banking choice has been President's Choice Financial (PCF) with its offerings of  chequing and savings accounts with no minimum balance requirements and no fees for unlimited deposit, withdrawal, automatic bill payment or chequing transactions.  This is fabulous for regular day to day banking fees, as long as you do not miss the additional services that it doesn't provide.  PCF is a virtual bank that only supports online and telephone banking and does not have any branches or tellers. It also does not offer services such as certified cheques and its debit cards do not support CIRRUS or PLUS for access to cash from international bank machines. 

It should be noted that President's Choice Financial is actually owned by Canadian Imperial Bank of Commerce (CIBC) and acts as its "discount banking" brand.  Accordingly, PCF accounts can be accessed not only from PCF bank machines (which are harder to find), but also from any CIBC bank machine, at no cost.

President's Choice Financial even has comparable if not better interest rates when stacked up against the major banks with their bricks and mortar branches.  At last check of Cannex Financial's listing of deposit accounts, PCF is paying 1.05% annually on savings accounts as opposed to 0.8% paid by RBC, Bank of Montreal (BMO), Scotiabank (BNS), and CIBC, with the latter only paying this rate if you have a minimum balance of $5000. Similarly, PCF is paying 0.1% on chequing accounts as compared to no interest at all from BMO, BNS, RBC and TD Canada Trust (TD). 

Having a no-fee virtual bank alternative has been a brilliant strategy for CIBC, one that has been recently copied by Scotiabank when it bought ING and rebranded it as Tangerine.  I trust that both PCF and Tangerine are smart enough not to mess with a good thing and try to increase their bottom line by slowly introducing new fees.   If they did that, they would lose the very concept that currently gives them a competitive edge for customers who want no-fee, self-service banking.

Choosing President's Choice Financial to be our primary bank all those years ago has been a great decision for us.  We have been able to easily deposit and withdraw money from the numerous CIBC/PCF bank machines, set up regularly scheduled automatic bill payments and even connect our accounts to our Scotia iTrade discount brokerage accounts for easy transfer of dividend income.  Why worry about fees and keeping minimum balances with a major bank, when PCF offers us about 99% of what we need?

The only reason we found for keeping an extra bank account with a major bank is for access to emergency funds from an international bank machine while traveling out of the country.  For that purpose, we opened a basic chequing account with TD and keep a balance of $2000 (recently increased from $1500) in order to have the monthly service charges waived.  When we travel, we transfer extra funds into this account as contingency and if we don't end up using it, we transfer it back after.

New TFSA Contribution Limits and Reducing Size of RRSP/RRIF

In the Investment section of the Globe and Mail dated Saturday April 25, 2015, there was an article titled "Retirees Can Save Tax by Trimming RRIFs".  This was a theory that I explored back in 2011 prior to retiring, and which I wrote about in my book "Retired At 48 - One Couple's Journey to a Pensionless Retirement". 
 

At that time, I had created two spreadsheet models to compare the implications to the value of our portfolio and our tax burden between funding our annual retirement expenses by spending all of our non-registered funds first followed by RRSP/RRIF money versus a more balanced approach that drew some funds from all accounts at the same time.  My calculations showed that the balanced withdrawal approach would reduce all accounts at a slower rate, resulting in the total portfolio lasting longer before the money ran out.  By taking smaller amounts from multiple accounts rather than a larger sum from a single account, it allowed each account to maintain a larger balance from which to generate growth and pay dividends or otherwise generate income.  I describe this in more detail in my book.

In addition, by slowly reducing the size of our RRSPs (converted to RRIFs) starting at an earlier age, we would be able to spread out the tax burden of these withdrawals rather than being forced to withdraw huge amounts starting at age 71, due to government enforced minimums. I created a comparison of the total amount of tax paid by age 94 when withdrawing the minimum value starting at age 49 versus age 71.  In both cases, I assumed a starting balance of $300,000 and an investment rate of return of 4%.  Converting to a RRIF at the earlier age results in keeping the value of the RRIF from growing too much, which means the minimum withdrawals also remain relatively low.  Waiting until the mandatory age 71 to convert to a RRIF allows the RRSP to grow significantly in value in the intervening years.  By age 71, the minimum withdrawal percentage is also much larger, resulting in a much larger tax hit, due to our progressive tax rates which tax higher income brackets more than lower ones.  The projected cumulative tax paid on income generated from the RRIF up to age 94 is less for the scenario where the RRSP size is kept smaller (in this example, $107K vs $153K).  The difference would have been even more extreme prior to the recent lowering of RRIF withdrawal percentages at age 71 from 7.38% to 5.28%.

One final advantage of reducing the amount of taxable RRIF income generated in the later years is the impact that income would have on the Old Age Security Pension (OAS), which starts to claw back this benefit for income over a given threshold ($71,592 in 2014).

Part of our RRIF withdrawal strategy was to use money from our RRIF withdrawals to fund our TFSA contributions, thus absorbing the tax hit slowly up front in order to have more tax-free money later on.

At the time when I came up with this concept for early RRIF withdrawal, I was not aware of anyone in the financial industry who was advocating this theory.  Instead, the typical advice from the experts was to hang on to your RRSP money and let it grow tax-free for as long as possible.  To vet my hypothesis, I submitted a question to the financial magazine MoneySense, who contacted a financial planner, Daryl Diamond, president of Winnipeg-based Diamond Retirement Planning, to validate it.  He ran the numbers and confirmed my suspicions, resulting in a MoneySense article published in October 2011.  This same financial planner is referenced in the Globe and Mail article, discussing much of what I originally surmised, but now in context of the recently increased TFSA limit of $10,000.  Lately, I have been seeing more and more analysts write about the same idea that I had years ago.  It is gratifying and reassuring to get further confirmation that I was on the right track back then, despite all the contrary conventional wisdom espoused at the time.

The two new budget items, raising the TFSA contribution limit to $10,000 and reducing the mandatory minimum RRIF withdrawal percentages at age 71, both dovetail into the strategy that my husband and I have already been following since our retirement in 2012.  The only difference is that up to now, we were able to utilize just our dividends in order to fund the RRIF withdrawals and make the TFSA contributions.  Now with the increased limit, we may actually have to sell some stock each year to cover the larger amount.  This actually helps with our goal of slowly decreasing the sizes of our RRIFs, which we accepted intellectually as the right thing to do, but still find emotionally difficult to implement.  Knowing that we are decreasing one savings pool to increase another makes this exercise easier.

Year End Review 2014 - After Second Full Year of Retirement

It's hard to believe that my husband and I are already half-way into our third year of retirement after leaving the workforce together at age 48 back in May 2012.  Now that we are both over 50, being retired feels less of an anomaly, but is just as much of a joy and blessing as when we first embarked on this adventure.  So far, each calendar year of our retirement has been marked by a major event that "defined" that year. The latter half of 2012 was spent researching, selecting, downsizing, packing and moving Rich's parents into a retirement home.  2013 was unfortunately marked by my illness when I was diagnosed and subsequently treated for breast cancer.  Luckily I fully recovered and in 2014, we finally took our dream vacation with a 7 week trip through France.  Now that 2014 is about to come to a close, I wonder what will be the highlight of 2015?  It is also time to take stock of this past year from a financial perspective and determine how we did when compared to our retirement plan.

We completed our first year-end review (found here) at the end of last year, using the various spreadsheet calculators and techniques that I describe in our book Retired At 48 - One Couple's Journey to a Pensionless Retirement.  This year, we will repeat those steps but now we have a baseline to compare against.

Retiring at such an early age without the safety net of a defined benefit pension is quite the daunting prospect, since we are almost solely reliant on our own personal savings to fund our retirement.  To reduce the chance of running out of money too soon, we created a very conservative retirement plan, selecting an extremely modest rate of return (4%) for our investment growth while using a higher than expected initial estimate for our expenses.  The thought was to allow any good stock market years to act as a buffer for the periods of poor performance that will likely occur periodically over the next 40+ years of our plan.

We start off by updating our retirement plan spreadsheet, entering the 2014 actual ending balance for our portfolio, comparing it against the estimate and then using the actual balance to recalculate the rest of the plan for the remaining years.  This recalculation gives us a more realistic estimate going forward.

For the second year in a row, our actual balance exceeded our estimates, with a net growth of 12% after withdrawing dividends for income, as opposed to the assumed 2%.  Several factors led this.  First, because of our conservative plan, we are still spending less than estimated although that gap narrowed a little in 2014 when compared to 2013.  In a later step, we will drill down and examine our expenses to explain this.  Also, the TSX had another relatively good year, with an overall upward trend for Canadian stocks in 2014 (despite several dips along the way).  As a result, many of our stocks grew in value. Finally, we benefited from the bonus of having 23 out of our 35 stocks raise their dividend payouts one or more times in 2014.  While we knew this was likely for some of our stock, we did not factor the dividend growth into our retirement plan, since we could not count on this happening.  In fact, the total amount of dividends generated by our non-registered account grew by 17% in 2014, after a 14% growth in 2013.

We then examine each of our RRIF accounts, calculating the new annual minimum RRIF withdrawal for 2015.  This amount, which grows each year, is determined by the formula (2014 closing balance * (1/90-age of younger spouse)).  We confirm that the annual dividends which we generate from the RRIF account are still sufficient to cover the minimum RRIF withdrawal.  We do have enough for 2014 and should continue to enough for multiple years still, especially if the dividend payouts continue to increase.  At some point, the minimum will become larger than we can cover with our dividends and at that point, we will need to either sell some stock or transfer out stock in-kind to make up the difference.

Next we review the performance of our individual stocks, paying closer attention to the stability and growth of their dividends than to the share price.  While many of our stocks increased their dividend, none of our stock decreased their payout, so we are in good shape. This year, we decided to add columns to our stock portfolio spreadsheet, to track the dividend history for each of our stock holdings.  We now have a better picture regarding which companies regularly increase their dividend payouts each year and which companies don't.  This helps us decide which stocks to buy more shares of, when we make our TFSA contribution each year, or when we select stock to register for the Dividend Reinvestment Program (DRIP).

We also take a look at our asset allocation and sector diversification, to ensure that we are not overloaded in any one sector.  We are most heavily invested in the Financial sector (banks and insurance companies), just like many ETFs or Mutual Funds, and the TSX in general.  But the value of those shares make up less than 33% of our portfolio, which is still within a reasonable range according to the experts. We examined our exposure in the Energy/Oil & Gas sector, in light of the recent free-fall of oil prices.  While we have heard horror stories such as AGF Management cutting their dividend by 70%, luckily none of the energy companies that we invested in have cut their dividends at this point.  Even if one or more companies do reduce their dividend payout in the future, it will not severely impact us since we have ensured that no individual dividend makes up a significant proportion of our total dividend income.

Finally, we run our Quicken report on annual expenses by categories, so that we can compare with previous years and look for trends.  At a high level, our overall spending for 2014 increased by 3.2% in comparison to 2013.  This is initially concerning since our projected average rate of inflation in our retirement plan was set at only 2%.  We did have some unexpected one-time expenses this year that will not reoccur in the future, so that might account for the deviation.  We will keep our eye on this and if the trend persists, we may need to recalculate the rest of our retirement plan using a higher inflation rate.

Drilling down by category, we notice some more patterns.  In 2014 our condo fees increased by over 7%, again higher than the anticipated 2% inflation rate.  Looking back at the previous years, the increase was 1.7% in 2012 and less than .05% in 2013, so maybe this was just a catchup year.  This is another area that we will need to keep an eye on.  In terms of auto related expenses, our fuel consumption and costs decreased significantly in 2013, due to no longer driving to and from work and this trend has continued in 2014.  Our auto maintenance costs are slowly creeping up as our car gets older.  Eventually we will be hit with a large expense when we need to replace our car.

In terms of money spent on vacation, we actually did not do so badly considering we were away for 7 weeks in France followed by 1 week in Calgary (for a family wedding).  Taking part in a home swap and not requiring to pay for accommodations for a large part of our France trip really helped to cut down the costs.  We also notice that we spent less on groceries and dining out than usual, so part of our vacation costs offset the usual eating expenses that would have been spent had we been home.

So the financial review after our second full year of retirement shows us in good shape.  Steady as she goes and onwards to 2015.