Episode 119: How Sequence of Returns Can Balloon or Bust Your Financial Plan: The Math Behind Early Retirement Part 2

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Are you relying on average annualized rates of return to plan your Canadian financial freedom and retirement future? Discover why that strategy might be putting your wealth at risk—and how you can secure better outcomes and better predict the worst-case scenario for protecting and compounding your pile.

For anyone planning their financial future, understanding the realities of market returns is crucial. In this episode, we challenge the common assumption that steady, average annualized rates of return will carry you comfortably into retirement. Through real-world examples and historical S&P 500 rate of return data, we highlight how sequence of returns, timing, and creative withdrawal strategies can dramatically affect your Canadian retirement nest egg.

Whether you’re a part of the Financial Independence, Retire Early (FIRE) movement or simply building a long-term wealth strategy for a Canadian financially free lifestyle, this episode offers invaluable insights into how early down years or unexpected market dips at the wrong time can derail your later life income plans. We explore strategies to mitigate these risks, like diversifying your withdrawal options, preparing for worst-case scenarios, and building financial buffers to ensure that your retirement income remains steady—even during market downturns.

What you’ll learn:

1. Learn how the sequence of market returns can significantly impact your financial outcomes, and what you can do to plan for it.
2. Discover the power of alternative “buckets” like cash wedges or borrowing options to safeguard your portfolio during downturns.
3. Explore actionable strategies to build a robust financial plan that ensures stability, regardless of market volatility.

Unlock the secret to minimizing market risk and maximizing your wealth—listen to this episode now to future-proof your financial freedom plan!

Resources:

• Dig Into Our Ultimate Canadian Retirement Planning Guide
• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.  
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Achieving financial independence retire early (FIRE) requires smart planning, especially when it comes to growing your net worth and generating passive income with a focus on the sequence of returns of your Canadian investment portfolio. For business owners, navigating the complexities of corporate structures, tax implications, and investment strategies can feel overwhelming. From understanding capital gains rules to leveraging life insurance for wealth optimization, the right approach can transform your financial future. By aligning your strategy with tax-efficient tools, you can unlock the full potential of your business and investments, ensuring sustainable growth and long-term independence.

Transcript:

Jon Orr: In a previous episode, we talked about the power of compound interest and how we can think about our investments in a very particular way to, you know, obviously maximize your investment. talked about thinking about, you know, retirement and, know, putting our investments in a particular place and going, well, does it make sense for us to pull it out at this time or this time and this time? we, we analyze different scenarios and it made sense. 

The power of compound interest in time, over time is very, powerful. And we very clearly in that particular episode highlighted that case and helped make the case that we have to be realistic about when we think we’re going to retire, if we’re going to rely on the power of compound interest to do the work for us. Because we, there are only three inputs into using compound interest as that vehicle. You’ve got your time, you’ve got your principal, and you’ve got an interest rate. 

You can only play with those three things to create, say, the outcome you’re looking to create. And the reality is you really only get to control a couple of those things. And in this particular episode, what we’re going to do is we’re going to look at the idea of the rate of return. So in the last time we looked at time, this time we want to talk about the rate of return on the compound interest. really it comes from, I think when people think, OK,

part of my strategy for building wealth and this is like the fire movement, the fire folks who are like, I’m going to invest in heavily and say equities, maybe index funds, I’m gonna start at an early age, I’m gonna use the power of common interest, but I’m going to now assume I’m going to think about the average rate of return on say the S &P 500 is like, I’m gonna get 9 % on average every year.

over the course of a lot of years. It’s like, I know that there’s going to be some down years and I know there’s going to be some years that beat that but on average, I’m going to assume the 9 % and people start to calculate based off this and predict based off this. Today, what we’re going to look at is like, how likely is that outcome? Like, can like, can we rely on the 9 %? Should we rely on that 9 %? Because the time even though like this phrase, Kyle, it’s time in the market, not timing the market. But actually timing the market plays a huge factor.

Kyle Pearce: Hmm. Yeah, kind of matters. Yeah. And as you’re going to see here today, it’s like it makes a massive impact on what you might expect, right? Like this is this is the hardest part of this whole journey is really the fact that most investments, especially growth investments are very hard to predict. Now, we flip all the way to the other side and we look at, you know, a lot of people are jealous of those defined pensions that are out there, right? So you know,

You and I coming out of the education space at one point where we were walking away from those golden handcuffs. A lot of people assume the pension amount is actually a lot higher than what it really is, but it’s the certainty, right? It’s the fact that you don’t have to guess as to what’s gonna happen. That’s the part that people really gravitate towards and knowing that there will always be money coming. But in reality,

Jon Orr: Sir, it’s locked in.

Kyle Pearce: those pensions actually aren’t providing you with this massive return like a lot of people are anticipating. So what we saw in last episode, if you’ll recall, we had looked at different ages. We were looking at a 40-year-old. And we were looking at, if they were going to contribute until age 64 and then retire at age 65 compared to age 55 or 54 and then all the way down to a quicker early retirement like going to age 49,

and then retiring at 50. There were massive differences that we saw. Like we saw investing for 24 years gave you a long enough time horizon where you could start with less. We had 100,000 as the example we were looking at and contribute less, about 10,000 and giving a average rate of return of 10%. We’re using like just the S &P 500.

We’re like, wow, like you could potentially start withdrawing about $183,000 in the age 65. So in year 25 of this plan. Now, again, that’s assuming it’s 10 % every single year. And what we saw is that when we put in for less time and you know, when we put in lesser amounts, obviously it actually impacted that amount massively. Like when we went down to a 10 year,

a timeline with someone who is compounding to age 49 from age 40 to 49, putting in 100,000 and 10,000 a year got them only $35,000 per year based on that 10 % compounding rate of return. And of course we explored different asset allocations. We looked at, know, if you were 100 % equity all the way down to like a 60, 40 or a 50, 50 with fixed income and equity is like that impacts the rate of return. But in like,

almost like a fictitious way, because those aren’t real rates of return. Those aren’t real, what we call sequence of returns that you’ll expect to receive in the markets. And therefore the actual result can vary quite drastically. And that’s really what we plan on looking at today. And we’re actually going to use the S &P 500 and the actual historic rates of return. And we’re going to take those and just start in various years.

so that we can explore very similar scenario here where we’re going to contribute similar amounts of money until age 64 or until age 54 or until age 49. And we’re going to show what would happen if the market acted like it did from a certain time point in history, right? So whether it’s like right before the great depression or whether it was like during one of the up.

years, you know, where it was like one of the best times to start investing. What if we start taking money out during a bad time in the market, right? And we get to see that dramatic differences in what you can actually achieve based on the actual sequence of returns. But here’s the other part is that we don’t know if any of these sequences will happen in the exact same way ever again either. Right. So it introduces still

Jon Orr: They won’t.

Kyle Pearce: a really, really no exactly. And it’s going to introduce this variability, which means like, what do we do? And we’re going to talk at the end of this episode of like, what are things we can do in order to prepare ourselves? And we always like to talk about base cases, like to get yourself a base case, where hopefully you get only better, like only better scenarios than maybe some of these worst case scenarios that we’ll look at.

Jon Orr: Hmm. I like it. I like it because I think that floor helps prepare. Because I think what we often do is we think of average and we think, and this is where most people are predicting from. It’s like, what is the average rate of return? What do we get on average if we do this, which is the middle? And you say, yep, I’m going to go up from the average down from the average, but on average, I will get this value.

We like to look at the base case. We like to look at what is the minimum and how can I structure the minimum so that when I hit the minimum, I’m real happy. And then anything above the floor, anything above that minimum is like bonus, you know, because then you’re putting yourself in an amazing spot because if you plan for the average, you’re never going to be on the average. Like if you think about data,

data management and data analysis, you know, the average is rarely a data point in the data set. You know, the median is the is the middle value of a data set. And that is a value, you know, often is a value in the data set. And but if you plan for a minimum, if you plan for the base case, what you’re going to say is like everything above that is gravy. Everything above that is bonus for us. And we’re already happy with the minimum. So let’s structure for the minimum.

Let’s plan for the minimum and then we’re going to be in a great shape if anything above the minimum happens.

Kyle Pearce: I that you said that beautifully. It’s like, you know, you, John, were going back to your high school math teacher days, you know, and you were explaining that so clearly. And really, though, it really has a massive impact on everything that we’ve done in our own financial planning. Right. Like this is for me, my primal question being like, am I financially secure? Like to a fault is something that I want to almost have.

Jon Orr: I was, I was, you picked up on that, huh?

Kyle Pearce: in my mind, almost like a base case that I know will only be better than that amount, right? Like, cause I’m like, I don’t want to potentially put myself in a position where I go, shoot, that didn’t work out too bad. Try again next life, right? Because guess what? We only have one of these things. So what we’re going to explore today, we’re not going to look at, you know, different asset allocations today. We’re going to assume all equities here today. Okay. We’re going to assume all equities. Now you can consider this being

100 % of your portfolio, if you’re like someone from the podcast that we had had a conversation with recently that is in 100 % equities, or it could just be the equity portion of your portfolio. Your fixed income is gonna be significantly less, and here’s the sad reality is a lot of times your fixed income moves in similar ways during bad times as your equity, so it’s actually not that protective. So we’re gonna look just at equities today.

And you’ll see up on the screen, we’re gonna use that $100,000 starting point, $10,000 a year. Again, not suggesting this is what you should do or if it’s enough or not enough, but just so that we sort of keep the baseline sort of similar and you can kind of play in your mind with what this might look like if we change some of these numbers. But you’ll see here the first couple of columns on my screen, so those who are on YouTube can see this, you’ll see the scenario, the 100 % equity scenario with a 10 %

rate of return each and every year. And it gives you a really awesome result. It gives you the opportunity to withdraw about $183,000 starting at age 65. So this is after 24 years of contributing, earning 10 % per year every single year, not a down year, not an up year, always 10%. And the result is quite nice. But then what we did is we’ve actually taken this scenario and we’ve actually

created a handful. So this isn’t like a full Monte Carlo simulation where we’re looking at every possible scenario, but we were kind of taking past historic years, like in this first column here was like, Hey, what if like we started this and it was like year one of investing, right? I put this hundred thousand into the market and then 10,000 every year after that. What if I did that? And it was like, it turned out to be exactly the same as being in 1926 where the SMP

return was 11 % and then the next year 37 % then it was 43 % and then ooh, 1929 happened 8 % down then 25 % down then 43 % down then 8 % down. So we had like four years in a row of down and we kept doing this but you know, shockingly and surprisingly as we scroll down here and we just follow it out pretending like that you did this starting in 19, what did we say 26?

And we just kept going, kept going, kept going because we had such a long time horizon. It still ended up working out for this person fairly, you know, helpfully, right? And when I say that it’s like, they ended up being able to take out $173,000. Now we pause there for a second. You go, wow, like you went through the quote unquote worst time in the history of being invested in the market, but

here’s the nuance is that we didn’t have a ton of our money in there yet. When it happened, it happened early, but it happened after a couple up years and it didn’t actually impact because we actually had such a long runway before we needed to take money out of this account that it was able to recover just based on some of the up years that were to follow in the thirties and so forth in the late forties and so forth.

Jon Orr: Right. So rewind there just for a sec. We invested $100,000 starting at age, what was the age again?

Kyle Pearce: So this person is 40 years old and he basically started this investment as if it was the beginning of 1926.

Jon Orr: Yep. So then we did that until, you know, and we did that for 25 ish, 24 ish years, right? And then we started pulling money at 65. Got it. So then,

Kyle Pearce: Exactly. Yep. So that would have been in like 1950 if this person started pulling money and it’s like the market’s been up and it’s been down and it’s been doing all these things. And again, we didn’t mix up the numbers at all. We just took like from 1926 and then pasted them all in until age 100. And if we got this exact same replica, like so all the way to age 100 would make 1985 for this individual like

Jon Orr: You’re right. Yep. Mm-hmm. Yeah. They pulled $173,000 every single year during that timeframe. did not run out of money, would run out of money, maybe age 101-ish, you know? but, we, they, they got to kind of live on $173,000 if they were putting a hundred grand into this particular fund. And we followed the S &P 500 from 1926 to 1985. So, so that’s like that, you know,

Kyle Pearce: They’re smooth sailing based on what we see here.

Jon Orr: That sounds promising. You did point out there’s three years of up years in a row, like some good up years, and then four years of down. And then you’re right, what year was it when we started withdrawing money? So was 25 years later, after the first six years were up and then down a bunch, and then still you have 20 years of growth before you even start pulling any of that money.

Kyle Pearce: Yeah. And I think one of these things, and I’m glad you asked it because it could have slipped by is like one thing that really helps this particular case is that in 1949 was the last year this person put $10,000 into this account and the return was 19 % basically the year they started taking money out was a 32 % return year. So basically it’s like 32 % on what was a one point almost $2 million is

a massive up year right to start taking money from so it’s not actually hugely hindering but imagine a world and we’ll explore this case shortly where let’s say they were about to take money out and that was a massive down year and then all of a sudden that one down year that’s the year that you wanted to start pulling money out of this account that is going to significantly impact how much you can take for the rest of your life right like so basically it’s like this person

for 24 years is putting money in and it kind of doesn’t matter all that much if you know it’s up or down or sideways or whatever it is. It’s like it’s all fine. It’s the year that this person took money out that’s going to really dictate how much money they’re gonna be able to start taking out moving forward. And we’re gonna explore this in a couple other cases because even in the next case like you’ll notice in this first scenario, we had three up years before

hitting 1929 where we had four down years. So I thought, you know what? You know, me being the math teacher, I am, I was thinking, you know what? What I’m gonna do is I’m gonna make those down years right away. Like, let’s like really punish this person, right? They put a hundred in and it’s like, you lost 8 % in the first year. Yeah, and it’s like, you know, and a lot of people, what ends up happening, right? Is that if this does happen, they go, ooh, I don’t wanna put any more money in.

Jon Orr: All right. Let’s. Yeah, let’s see. You picked a bad year to invest.

Kyle Pearce: which is actually the opposite. They should be like, no, actually we should be piling in more and more money here. So this person got four down years in a row, but you’ll notice that they’re able to actually withdraw more money by age 65 than they were in the previous case. Well, they’re not only buying low, but John, these down years have affected less of their dollars because they happened upfront and those up years happened.

Jon Orr: This is right. Sure. Well, they’re buying low.

Kyle Pearce: a little bit on the bigger amounts of money. So that actually didn’t hinder here in this particular case. like bumping the first year to 1929 actually wasn’t as bad as it would be if we made 1929 the year that they wanted to start pulling money out. So I did a couple other scenarios. I picked like 1937 as a starting point. That was a 35 % down year. If they started in 1937,

And like, imagine you get to just play in the time machine here and like decide when you start investing this money and do this. And they did it for 24 straight years, even though it was 35 % down in the first year, they can still take out $262,000 at age 65. And when we look at this, look at that again, the year that they want to start pulling money out, what do you notice? What do you wonder that’s something we used to do with all our math students? We get a 26.

almost 27 % up year in that first year that they want to pull money out. So it’s almost like by chance and again, I didn’t actually set this up this way. It was like I just picked a different starting point and it just so happens that the year that they wanted to take money out was a big up year. The next year was a very small down year was 8.7 down, but then it went 22 up 16 up 13 up before having another down year and that has a massive.

impact on how much this particular individual is going to be able to take out. So again, long time horizon that they’re contributing and growing it and not taking any money out. And in the years that they start taking money out, they have actually been in up years. And in these cases so far have been massive up years, which does something for the rest of their lifetime.

Jon Orr: Huge. All right. All right. So what I’m hearing you say so far is that even if I’m investing in my first few years or down years, that doesn’t have that much of an impact on my overall portfolio growth. As long as it’s, you know, the, I guess the average plays out after that, which we’ll typically do is we think, what happens if I start investing when we were at all time lows? Well, you’re at all time lows, which is great for

maybe investing on your upward growth at that point. So I think we’re saying, you know, this rate of return in down years at the beginning, that’s not such a big deal. Okay, now what’s the next scenario we got for us?

Kyle Pearce: All right, so we kept going along. I kept adding like different scenarios. This one once again was starting in 1964 and same thing, funding starting with 100,000, 10,000 a year for 24 years straight. Notice the year we start pulling is 1988, 16.6 % up year followed by a 31 % up year, then a 3 % down year, not too bad at all.

Then 30 % up again, 7 % up again, 10 % up again. It’s just like an amazing time to start pulling income for this particular individual. So I’m not gonna spend much time there. We go to the next one, again, same deal, starting in 1970, we start pulling in, ooh, we only pull in a 1.3 % up year, but then the very next year, 37, 23, 33, 28, 21, like look at that run.

Jon Orr: I was the 90s. Okay. Yeah.

Kyle Pearce: that we have here. This person is like basically hit the lottery on the actual up years when they started taking income. However, I’m going to show you the last one where I intentionally went and I went, you know what, John, I don’t care about when we start. I’m going to work backwards here and I’m going to start when I want to pull money out and I’m going to start 1929 in the 65 age year for this particular individual when they were planning to pull money out.

So they’re gonna go four years in a row down. They’re gonna start with an 8 % down, then a 25 % down, then a 43 % down, then an 8 % down, four years in a row. And we’re gonna start pulling income and try not to run out of money by age 100. And note that we’re just gonna follow the sequence of return, how they happened in history, which again, will never happen again this way, right? So it still doesn’t give us any certainty, but it certainly does make us go, huh.

because look at the income that this person can generate. This person can only safely pull out 69 and a half million or million, 69 and a half thousand dollars. So that’s $69,500 for the rest of their life. Now, some people might say like based on a hundred thousand a year, $10,000 per year, sorry, a hundred thousand to start and then 10,000 a year for 24 years, like,

Jon Orr: That million, wow. Yeah, 100,000 total. Yeah, to start.

Kyle Pearce: This isn’t actually all that bad.

Jon Orr: Well, go back, go back. And also I wanna make sure we say it out loud for the listener who’s not watching this on YouTube. Go back to the year before we withdrew, say, that year 24. So how much is in the account at that point?

Kyle Pearce: We’ve got two million in the account at the…

Jon Orr: Okay, now compare that to the previous scenario where this person could, know, based off the sequence of returns, it worked out great for them. You know, all of a sudden they’re pulling $287,000 a year and will never run out of money till age 100. Like how much do they have in their account when they start, like the year before they start pulling? A little bit more?

Kyle Pearce: Yeah, I love this. They had $2.9 million in the case where, and again, and they didn’t have any down years when they started pulling, whereas in

Jon Orr: So, Okay. What about that first case, like the one where it was like, we started in a bad year? Yeah.

Kyle Pearce: when we started in a bad year, that would have been this case here, but still turned out okay, because they had 1.5, almost 1.6 million. And then they, yeah, but again, look at the second year they started pulling that, a 52 % up here, then a 31 % up here. And then when we go all the way to this, we’ll call it bad case that we’re looking at here. We’re looking here and we go, this person had 2 million to start, which is a lot.

Jon Orr: Yeah, so it’s a little closer.

Kyle Pearce: but they actually lost 8%. So that brought in and took money out. So that 2 million went to 1.77 million. The next year they lost 25%. Okay. This is the four years in a row, 1929 to 1932. So now that 1.77 million after taking their $69,500 of income goes down to 1.23 million. The next year they lose 43%. That 1.23 or that

Yeah, 1.3 million goes down to 684,000 and we’re still needing to pull income. This is massively massively challenging like said another way. If you would have taken all this money out and put it on the sidelines, your 2 million and you just put it on the sidelines and let it sit there. That 2 million would have gone further in the next four years than it has here because we wouldn’t have lost all of these high percentages, right? Which

Jon Orr: Yeah, if you went to cash, for sure.

Kyle Pearce: Exactly, which speaks to the risk that we’re exposing ourselves to. If we just put money in the market and we do, as you mentioned at the beginning of the episode, don’t do any sort of quote unquote timing or any type of market analysis along the way.

Jon Orr: Now just to give everyone kind of some clarity here where we’re coming up with say the withdrawal amount. know, what Kyle has done here in each of these scenarios is again, we’re same input, you know, we’re putting $100,000 at the beginning of age 40, adding $10,000 a year into this. In the sequence of returns, he’s explained this that he’s, you know, not randomizing it, but taking different points of history.

But then what we’re doing is based off those returns, we’re looking at how that grows and then adjusting or calculating what amount we could pull before we run out of money by age 100. So in this case, in this particular sequence of returns, we went back and recalculated how much he could pull and get away with after knowing the sequence of returns before the running. This is where the, before running a month, this is where the $69,000 comes from. This is also where the $287,000 comes from.

comes from in the best case scenario, where you have some great returns at the beginning and also some great turns when you start pulling your money out. We have calculated and kind of reverse engineered the amount you could pull out knowing in history. So if you had a time machine, you know you could pull this money out at that time. So in this worst case scenario right now, when we have the four down years, we went and calculated that we would be able to pull the $69,500 out. Kyle, here’s a question.

Let’s say I don’t, like obviously you don’t know how much money you can pull out in the future to know that you’re gonna run out of money because we don’t know the sequence of returns. But let’s say in this case, when you know you have a down year, and let’s just theoretically go, you know what, it’s not looking great for the next couple years. Let’s say you did not withdraw the 69,500 from those four years of down years. Like let’s say you’re like, you know what,

I’m gonna, there’s nothing I can do. I’m gonna leave my money in the accounts. I’m not gonna like, I’m not gonna do what you said, like go to cash. I’m gonna leave it in say the investment account. So the 2 million is gonna become 1.7. But let’s say I just don’t pull the 69,000. And I’m like, okay, you know what? I can go over to this thing over here and maybe I’m gonna draw down on this other account that’s, you know, maybe safer. I’ve got, you know, it’s not, the drawdown didn’t happen as much over here.

or you’re borrowing something that you’re not like, there’s a better scenario over here. I’m going to let that be what happens at that point.

Kyle Pearce: Yeah. Yeah. So I did that as you were talking, cause I knew exactly where you were going there. And you know, I think being able to have the opportunity to go to a different bucket is really important. However, here with these four years in a row, it’s still going to be really, really hard. We’ll say to recover. And I’m actually going to say, you know what? We’re not even going to take any money out for the first up year. So I’m going to do something there.

Jon Orr: Okay, yeah, let it go.

Kyle Pearce: And I’m going to take that out because there was a 54 % return up here. And this is where we’re going to get into some discussions in the next episode about cash wedges, for example, where, you know, what we want to do is if we are going to be exposed in the markets, especially when we’re taking income from these portfolios, we want to make sure that we have the opportunity to be able to pull from other buckets. So when a cash wedge of some sort during down years, because this can be massively, you know,

detrimental. So here what we’ve done is instead of starting to take out at age 65, we’re not going to keep contributing. So we’re not contributing anymore, but we’re not taking out until age 70. So that allowed four years down years to happen and then a good up year to happen and kind of buffer here. And now all of a sudden the portfolio pops back up to a million dollars. And what you’ll notice if we scroll all the way down to age a hundred,

is you’re going to see that if we only took 69,500 starting at age 70, what you’re actually going to have is a portfolio that’s grown to $13 million. Meaning what does it mean? We get to actually take more out of this thing, right? Let’s see how far we can get. We can actually bump this thing up to a hundred and it looks like 2000, a hundred and $2,000 starting at age 70.

Jon Orr: Well that sounds pretty good. Let’s take a little more out. Let’s take them out. Yeah.

Kyle Pearce: for the rest of your life to age 100 instead of that, you know, just a massive improvement by making that tweak. But here’s the other nuance though, is that again, we were massively exposed by being 100 % equities. And of course those four down years in a row, you know, you don’t know if they’re gonna happen or not, but by being able to pull out of a different bucket, it massively changes the outcome for the remainder of your life.

Jon Orr: Massive improvement.

Kyle Pearce: from this particular bucket. So this sequence of returns is massively, massively important. What we’re gonna be doing in the next episode is we’re actually gonna take this a step further. We’re actually gonna look at how this impacts you even more if you’re on some sort of fire quest. What we mean by that is, listen, we’re looking at 100,000, 10,000 a year on top of that for 24 straight years and seeing that there was a quite a wide range of possible outcomes here.

As we lower down the amount of time that we have to put into these accounts, all of these impacts, all of these factors are magnified, right? Which means it actually makes your opportunity the window of what could happen spread out even more. So which is really problematic if you want to set yourself up for a financial freedom early type scenario. So that’s what we’re going to be exploring in the next episode.

We’ll actually look at taking money at after age 59, after age 49. And then we’ll also look at how much more might we need to contribute if I’m 40 and I only have a nine-year runway or if I only have a 14-year runway along the journey.

Jon Orr: Love it. it. Secret sauce here for me, you know, this last, this last scenario outlined the exact impact you could make and save yourself without, you know, leaving money on the table by having that extra bucket, having that extra, you know, that extra kind of cash wedge where if I don’t need to withdraw and pull down, say that investment, cause I had a huge down year, then I can move to this bucket, draw down that bucket.

because you saw that in that 43 % down year, you know, if I go over here and borrow, say, from my home equity line of credit that year, or if I borrow from on an asset that I have, let’s say have a rental property and I go and I borrow on some of the equity on that. If I have any, say, whole life insurance policy that all of a sudden I can borrow against, then I get to utilize that and pay, say, $680.

Maybe, know, in those down years, maybe the interest rates are changing to be lower. And all of a sudden I could borrow against that. And I’m only paying that much interest. then instead of losing, you know, those, those huge drawdowns and the gains. knowing that in a, in a, in a downturn year, moving towards a different bucket is a great secret sauce move to avoid massive impact on your portfolio for your retirement and for longterm.

wealth generating using a particular fund. Switching between buckets is a great move when those downturns happen. So now knowing that downturns happen, have a massive impact, have that available bucket ready to go in case you need to pull from that. That’s the secret sauce we want you to have after listening to this particular episode.

We want to thank you for joining us in this episode. And if you’ve never listened to episodes before, and this is your first time, we want to welcome you and hit that follow button, hit that subscribe button so you can get notified as our episodes get published on Wednesdays and Fridays every single week. If you’ve listened to episodes before, we welcome you back and also encourage you to hit that rating or review button that helps the show grow, it helps other people find the show, but it also helps us keep producing.

content here for you so that you can get some secret sources to build your wealth. Make sure you hit that rating and review button. All the show notes and links can be found over at our show notes page. Scroll down in your podcast platform and click that link below. And if you are a business owner, if you are an entrepreneur and an investor and you’re looking to create say that cash wedge and you’re looking to look at that bucket, we have some options available for you.

We encourage you to head on over to our masterclass and look at how you can use and take your retained earnings in your business and help create a tax efficient optimized way to create that bucket, but also get cash flow tax free from your business. Head on over to Canadianwellsecrets.com forward slash masterclass and register for our free masterclass on how to get that tax free cash flow from your business into your personal.

Pockets, that’s CanadianWealthSecrets.com forward slash masterclass. That’s it from us folks. Until next time, we’ll see you soon.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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