2023 Year End in Review: After Eleven Full Years of Retirement

My husband Rich and I have been retired for more than eleven years now and hardly remember what it was like to work anymore.  In 2023, I reached a bit of a milestone when I turned 60.  But while reaching a whole new decade should feel more momentous, in financial terms it was a non-event.  When we turned 55, we qualified for our first “seniors” discounts at Rexall and Shoppers Drug Mart, although Shoppers recently raised their seniors discount age to 65 which is why we frequent Rexall more now.  Turning 60 does not really qualify me for anything significant in terms of extra seniors’ discounts.  I have to wait until I am 65 to really benefit from this.  I do qualify to start receiving CPP at a severely reduced rate if I want, but as we don’t need the extra money right now, I will try to wait until I am 70 unless something changes drastically in our portfolio.  I do “officially” qualify to play pickleball in the 60+ community centre drop-ins now but we were considered “close enough” at 58 and 59, so we have been playing for the past 2 years anyways.  So for now, 60 is just a number and since I still feel 25 at heart, it doesn’t make much difference.  I do take note that there are only 5 more years until I am 65 and 5.5 years for Rich.  While we will receive more benefits at that age, there will also be more scrutiny and expense in terms of medical and travel insurance.  So we are making a 5-year travel plan to tick more places off our bucket list before we hit that next milestone.

Our strategy of holding good quality stock that regularly raises its dividends and using those dividends to fund our income continues to work for us.  By the end of 2023, the dividend income generated from the stocks in our non-registered account was up another 4.92% from the previous year, while the rate of inflation in this year was 3.4%. Of the 26 different companies that we held in this non-registered account, 24 of them had raised their dividends.  Looking back from the time we retired in 2012, the income generated from this account has risen 60%, to a small degree from adding stock-in-kind RRIF withdrawals that would generate more dividends, but mostly from regular dividend increases.  Following the old adage “If it ain’t broke, don’t fix it”, we will carry on doing the same thing which at this point is more or less doing nothing and letting our dividends do the work for us.

Equitable Bank (EQ Bank) has been our primary bank for our US dollar savings account since 2021 and currently pays an unprecedented rate of 3% annually on all US funds with no minimum balance required.  2023 was the year that we fully committed to using EQ Bank as our primary bank for Canadian funds as well. Up until then, each month we would remove enough dividends paid to our Scotia iTrade non-registered account into Simplii Financial (the no fee bank under CIBC)  to cover our monthly bills plus our credit card bills.  Then any excess dividends would be transferred to EQ Bank to  bolster our emergency fund savings accounts.  In 2023, not only was EQ Bank paying 2.5% annual interest on our savings accounts, but it offered an extra 0.5% if at least $500 of pre-authorized bills were paid from that account.  This gave me the impetus to finally contact all of our recurring billers and fill out all the tedious forms required to move our pre-authorized payments from Simplii Financial to EQ Bank.

It took about a month to accomplish but by the beginning of March, I successfully migrated our condo fees, property tax, and heating bill to be deducted from my EQ Bank savings account, pay all our credit card bills from here and reassigned my primary email for Interac payments to point to this account as well.  In terms of income, I transfer all of our dividends paid to our non-registered account into my EQ Bank account and I receive an interest rate of 3% annually on the daily balance.  I also redirected my climate change rebate and income tax refund to be deposited into this account.  I still keep my Simplii Financial account to pay any small billers who are not registered with EQ Bank and will transfer money there as required.  If I had employment income that I could direct deposit into EQ Bank, I could be earning another 1% bonus for a total of 4% !  I need to investigate whether having a pre-authorized monthly RRIF withdrawal deposited into EQ Bank would qualify me for this extra bonus.  That will be a topic for next year’s review.  <UPDATE: I found out that only employment income qualifies for this bonus, not monthly RRIF withdrawals>

Having some bills be paid from Rich’s EQ Bank savings account so that he could achieve the bonus as well would be too much work to keep track of, since he  would then need to continually make sure he had enough funds to cover the payments.  So Rich’s account makes the base rate of 2.5% and we just keep enough funds there to use as a short term emergency fund.

The value of the stock market experienced a steep decline in the 2nd quarter of 2022 and was still relatively low at the start of 2023.  This made it a bad time to sell but a great time to withdraw “stock-in-kind” from our RRIFs into our non-registered account for our annual RRIF withdrawal.  The lower the stock price, the more shares we can withdraw at the same income level, and the more dividend income those shares will generate for us. Since we did not have any major extraordinary purchases or expenses planned for the year (or so we thought in January!), this seemed like a good thing to do since it would reduce the value of our RRIFs and increase the income generated from our non-registered account.

At the end of 2022, I selected which stock I wanted to withdraw from each of our accounts. I made the decision based on which company was generating less income for us in our non-registered account, and also on which month in the quarter the dividend was paid.  I am always trying to smooth out our monthly dividend payouts so that we have enough cash to cover our bills every month of each quarter.  The middle month of the quarter (February, May, August, November) is always the most troublesome because for some reason, very few companies pay out in those months, unless they make monthly payments.  From my LIF, I chose to withdraw Emera (EMA.T) and from my RRIF I picked Bank of Montreal (BMO.T) since they both pay in the middle month.

When withdrawing stock-in-kind, you can request the withdrawal to be made at any price that it hit during that day. In general, stock prices rise and fall over a day, usually moderately but sometimes dramatically.  By requesting the “lowest price” of the day, you maximize the number of shares that you can withdraw for the same income level.  To try to find a day when the stock price has dipped, I set up two alerts in my discount broker account with Scotia ITrade.  First I selected a price that I would like to withdraw at and asked to be notified if the stock falls to that price or lower.  Next I set an alert to be triggered if the stock price drops 2.5% or more from the previous close.  Based on these alerts, on January 5, I was able to swoop in and withdraw some BMO shares at the lowest price of that day which was $124.78.  After that the stock market started to rebound and by the end of January, the price was trending around $133.  I also completed my withdrawal in time to qualify for the first quarter dividend payout in February, so all in all, this worked out. I didn’t do as well in getting a good price for EMA in my LIF but still ended up withdrawing some shares in-kind to pad our dividend income in the second month of the quarter.

Luckily, I had not yet gotten around to making the annual withdrawals for Rich’s RRIF and Spousal RRIF accounts since unexpectedly our priorities changed at the beginning of March.  We had been discussing for several years about the necessity of renovating our aging condo.  By 2023, it was now over 20 years old, and our equally ancient appliances were all at risk of failing catastrophically at any moment. The rest of the unit was looking tired and run down as well, with chips in our hardwood and paint, sagging kitchen cupboard doors and a poorly designed shower in our master bathroom that we have cursed since we first bought the place.

The main issue that had held us back from embarking on a major renovation was finding a trusted contractor who was experienced in and would agree to working on a job in a condominium building, which presents many unique challenges over renovating a house.  These include condo rules and regulations as to when work can be done, booking of elevators for delivery and removal of debris, parking, finding staging areas and more.  Because of these extra logistical challenges, it is more expensive and might take longer for a condo renovation and from a scale perspective, it would probably be more lucrative for the contractor to work on an entire house.  So when our friends recommended a contractor who did good work for them and who had practical experience working on condo buildings around our area, we jumped at the chance to finally get our renovations done.  The scope of work would involve a gut job and redesign of the master bathroom and kitchen, upgraded toilet, mirror and light fixtures in the guest bathroom, new hardwood floor throughout, repainting all walls and surfaces, addition of pot lights in the living room, upgrade of other overhead lights and a new electrical outlet on our terrace.  As part of the renovation, we would replace the fridge/freezer, dishwasher, stove/oven (finally getting the induction stovetop that Rich coveted) and microwave.

Now we had to switch gears in terms of our financial goals for the year.  Instead of withdrawing stock-in-kind to grow the dividends and therefore income generated in our non-registered account, we needed large amounts of cash in a short period of time.  Unfortunately, I had already made my annual in-kind RRIF withdrawal so taking out extra cash to help pay for the renovations meant increasing my taxable income for the year.  We would be billed in stages as renovation work was completed so we had to go through an exercise to figure out how/when/where to remove money from our investment portfolio in order to fulfill our payment obligations as they came up.  This was similar to the analysis that we did back in 2021 to fund our new car, but at a much larger scale.

To pay for the renovations, we started out by using up all of our emergency fund cash that we kept in our high-interest savings accounts at EQ Bank, which was augmented each month with excess dividend payouts from our non-registered account that we did not need for paying our monthly expenses.  To reduce these monthly expenses, during the renovation period, we cut down extraneous spending including lengthy expensive vacations, dining out and discretionary purchases.  We also took out all of the cash sitting in our various registered RRIF and TFSA accounts, using these funds to further top up our EQ bank accounts.

This kept us going for a while but eventually what we owed outstripped what we earned, so we had to decide which stock to sell to get more funds from the rest of our investment portfolio.  The decision was between selling losers which would lock-in what was previously a “paper” loss and not net as much in value since the stock was depressed in price, or selling winners which were paying out good dividend but would yield us more value.  There was also the decision of whether to withdraw more from our RRIF accounts which helps my goal of reducing their values to reduce claw-back when we take CPP/OAS but would generate taxable income, or from our TFSA accounts where we could get money out tax free.  We ended up with a blended approach, taking funds from all of these accounts.

From my RRIF account, I decided to get rid of two losers which had not been pulling their weight over the years.  Cineplex (CGX.T) had eliminated its dividend back in 2020 when the pandemic hit and has never resurrected it.  Walgreens (WBA-Q) was another loser that had tanked in value since we bought it.  Selling these two stocks netted some much needed cash to help pay for the renovations but also increased my taxable income by the same amount.  To account for this, I requested that sufficient withholding tax be held back to cover the estimated extra income tax owed.  I could not take more out of my LIF account since I had already withdrawn the maximum allowed amount for 2023 at the beginning year.

Next I raided my TFSA and sold my shares of Plaza REIT (PLZ.UN) since it has not raised its dividend since 2017, as well as Brookfield Renewable Partners (BEP.UN) which was not doing well at the time.  I also sold some shares of Exchange Income Corp (EIF.T) despite this being an excellent dividend-paying stock. We hold a lot of EIF shares throughout many of our accounts, so this withdrawal was a good way to rebalance.  I was able to get a large chunk of cash out of my TFSA tax-free but have decimated its worth, so I will need to slowly build it up again over the next few years.

Rich’s RRIF held all winners, so it was a matter of deciding which ones to unload.  Thinking ahead to when we could afford to take out stock-in-kind for our RRIF withdrawals again, he would not be choosing any income trusts since they are painfully complex to deal with outside of registered accounts.  So he sold shares of Canadian Apartments REIT (CAR.UN) and Brookfield Infrastructure (BIP.UN) as his contribution to the renovation costs.  Although it was worth almost nothing at this point, he also dumped Corus Entertainment (CRJ.B) from his Spousal RRIF just to get rid of it, since it was more of a nuisance to keep track of for so little return.

Finally we decided to dump the Cineplex shares that we held in our non-registered account, having given up hope that this stock would ever recover and start paying dividends again.  I would normally never sell stock in our non-registered account to gain cash since reducing dividend-paying stock meant reducing our monthly income.  But given that Cineplex had not paid a dividend since the beginning of 2020, there was nothing to lose.  Although its sale only gave us a very small amount of extra cash (every bit helps!), we were able to bank the capital loss to apply against any future capital gains.  With all of these trades, plus the continuing flow of our dividend income, we were able to pay for our renovations.  I did press the contractor for an advanced schedule of when payments would be due so that we would have time to get the funds ready.  To sell stock, wait for the trade to settle and then move the funds to a bank that recognized our contractor as a biller could take over a week to complete.  An added complication was that the contractor was too small a biller to be registered with EQ Bank where our savings resided.  Accordingly, each time we needed to pay our bill, I had to first transfer the sum to Simplii Financial causing a further delay of up to 3 business days.

After paying a small retainer in March to secure the services of the contractor, we went through a design phase that spanned April to June with a plan to have the work done from mid July through mid October during which we were required to vacate our home.  It was important to me that the bulk of the construction be done in the summer since I had a plan in mind for saving the cost of temporary accommodations. Our good friends who lived in the same building but several floors above us moved to their house in the Haliburton Highlands for the summer months.  We could stay in their unit for about 9 weeks while still being on-hand to check on the construction work, answer any questions that might arise and book elevators when required.  This turned out to be crucial as we caught a few errors early before too much work had proceeded and were able to give timely feedback that kept the job moving smoothly.  Having the renovation done during nice weather also meant that our outdoor terrace could be used for staging, sawing, sanding and other tasks that would have caused a huge mess inside our unit.  Once the 9 weeks were up, we embarked on a 2-week road trip while our neighbours kept an eye on our renovations and took regular photos of the progress.  For the rest of the duration, we went “couch-surfing”, staying a few days at a time at the homes of various friends who were away on vacation or who had a spare room that we could use.  We owe a lot of people some big favours!

All of our belongings had to be removed and placed in storage in order to have new hardwood flooring installed.  To save some money on the actual removal and return of our things as well as the storage fees, only the large furniture was taken away by the movers.  I spent six weeks packing and finding hiding places for all other items including cooking/eating utensils plus all food items in our pantry, bathroom sundries and towels, knickknacks, wall art, and all excess clothing that we were not taking with us. I filled up both of our storage lockers by stacking boxes from floor to ceiling, hid items under the covers to our patio furniture on the terrace and stuffed every closet in the condo that did not have to be disassembled to install the flooring. This also gave us incentive to mercilessly purge all non-essential items so that we didn’t have to pack and stash them.

With any large project, there is the risk of unforeseen issues and ours was no exception.  The first problem arose when the workmen tore up our old hardwood floor planks. Underneath, they found thick pieces of plywood with giant nails driven through them into the cement subfloor.  Removing the plywood involved prying out the nails at great effort which left huge gouges throughout the cement.  It took extra days and additional cost to fill all the holes and smooth the cement in preparation for installing the new soundproofing and hardwood.  The next two issues were supply-chain related when we learned that both the new solid wood doors that we ordered for our closets and entryways, as well as the bathroom tiles for our new shower would not arrive in time to meet our desired schedule of moving back in by mid October.

Considering the classic project management triangle of scope vs time vs cost, our contractor understood that the most important thing to us was schedule.  If something had to give way, within reason, it would be cost as we did not want to cut corners and impact the quality of the work.  In each case, they found creative solutions that would keep us on schedule by adding a relatively small amount to the overall budget for the renovations.  For the doors, they offered to custom-create the doors for us which would cost about the same as the ones that we ordered, but we would have to pay for two extra coats of primer.  The bathroom tiles required a bit more ingenuity since they were to be shipped on a slow boat from Italy!  Who knew that we had selected Italian tiles?!?  Our alternatives were to go back to the drawing room and select new tiles (with no guarantees that these would arrive sooner) or wait up to 3 months for the tiles to arrive.  A third option was proposed by our contractor.  The supplier could air-ship the tiles and these would arrive in less than a week.  Our contractor even offered to chip in a small portion of the transportation costs and then had to juggle the project plans to account for the delay, moving tasks around in order to maintain our schedule.  Although we paid a bit more in renovation fees, this more than offset the extra costs that we would have incurred with a delay of even a week, let alone a longer one.  We had run out of friends to impose upon and would have had to find rental accommodations during the delay, as well as continuing to pay for the storage of our furniture.  This did not even factor in the emotional cost of living out of a suitcase for 3 months.  I don’t think I could have handled continuing like this for even one day longer.

Understanding our motivations, our contractor did an outstanding job of completing all the “necessary” work that would allow us to move back home.  There were still a few minor, inconsequential tasks that needed to be completed and the workmen continued to come by for several weeks after to finish the job.  In the end, we are very happy with our newly renovated condo and thrilled to be back home again.  Although by no means inexpensive (remember the project management triangle), our contractor did high quality work on schedule, even finishing one day early.  On the last day, they sent a full crew of cleaners to vacuum, dust and shine all of our surfaces so that there was very little to do when we returned, other than relocating and unpacking all the items that I stashed away 3 months ago.

While our Canadian funds were dedicated to paying for our renovations, we also have a stash of US cash in our US EQ Bank account which pays daily interest of 3% annually.  The US account was funded for years from dividends paid in US cash from AT&T and Algonquin Power (AQN) which we held in the US side of our non-registered account.  At the end of 2021, there were rumours that AT&T was experiencing financial issues and planned to cut its dividend (which it did by 2nd quarter 2022).  Accordingly in December of 2021 we sold our shares of AT&T and added the US cash from that sale to our US account.  Because of the pandemic, we had not resumed traveling out of the country until 2022, so by 2023, we still had a healthy balance of US cash.  This came in handy in terms of going on vacation in the States using our US cash, not needing to pay currency conversion, and without eating into the Canadian funds that we needed for the renovations.

In May, we took a 7 day trip to New York City using travel points for the airfare and US funds for all other expenses including accommodation, food, and entertainment.  We brought along some US cash but found out that just about everywhere in Manhattan takes credit card, even the hot dog vendor!  In September we took a second vacation the States in order to use up some more of the time that we needed to be out of our condo during the renovations.  This was a road trip to New York State and Pennsylvania, which I’m still working on blogging about.  Once again, other than the initial tank of gas to get us across the border, we paid everything in US funds.

Despite our focus and finances being devoted to home renovations for most of the year, we still had fun with our usual activities of tennis, pickleball and live theatre.  We didn’t do much cycling since our bicycles were blocked by stacks of boxes.  Now that we have tackled replacing our old car and upgrading our old condo, hopefully 2024 can go back to being a normal year in terms of spending.  We need to replenish our emergency fund accounts and TFSAs but would also like to venture back to Europe (in line with our 5-year plan for traveling more before we hit 65).  But you never know what unexpected expenses may come up, so check back in next January to see how we fared.