[I’ve never featured a guest on this blog before, so as an experiment, I asked (okay, pestered) Derek Foster, author of Stop Working: Here’s How You Can! to contribute a post. Derek hopes that his post might spark some discussion.]
In 2004, at the age of 34, I retired. I then wrote and self-published STOP WORKING: Here’s How You Can! showing how I did it and how anyone else could. But I still encounter scepticism. Some people say you need at least $1 or $2 million dollars. Others think I’m going to run out of money because I’m looking at a half-century of retirement.
I retired with less than a $500,000 stock portfolio generating around $25,000/year. This seemed crazy! How could a family of four manage to live on that? In my book, I outline how this sum is equal to working for a much larger amount (over $60,000) once Canadian taxes and benefits are factored in.
Am I running out of money? No! My portfolio has grown over 30% – but with my strategy that’s not important. The real story is that my income has increased as dividends and distributions have.
Most “stodgy” dividend payers pay out 40% or less of their earnings in dividends and reinvest the other 60% into either share buybacks and/or growing their businesses. This reinvestment compounds over time – so I can simply spend the increasing dividends forever.