I used to think this way, however I don’t think it’s realistic to live off dividends and never touch your capital in retirement. First of all, any RRSP savings will eventually be converted into an RRIF and face stiff withdrawal rates. Second, what if you want (or need) excess capital in one year to pay for a car, new roof, large vacation, etc.? You’d probably look to sell off some stock to access the capital. Finally, there’s the potential to work longer than needed in order to reach a target dividend income stream. It’d take a million dollars in capital to spin off $35,000 to $40,000 in dividends. Why wouldn’t you want to tap into that million dollars?
I’m sure it’s just coincidence, but I’ve come across a lot of “When do you know you’re ready to retire?” articles the last little while. — EDIT: Just this morning, Robb at Boomer and Echo has written a post on this very topic. — After reading a few of these, it struck me that I had never really considered the question of when I would reach my (financial) retirement threshold. It’s not just because retirement is so far away, or because I haven’t taken the time to make a specific goal. The reason is because, as a dividend investor, the answer is so obvious that almost no thought is needed.
Almost as though to prove my point about the fact that individuals need to stop counting on others, whether the government or their employer, to ensure their financial future, and to take charge themselves, the federal government announced that same day that they were introducing a new variation on the two standard pension options available, and introduced the Target Benefit pension plan. It is worth noting that this new type of pension plan will only be available for, “crown corporations and federally-regulated industries, such as transportation, banking and telecommunication”. For now. (Author’s snide comment.)