A DIY Investor's Guide to Determining Your Financial Independence Number and Sustainable Withdrawal Strategy

Today’s guest is Jason Heath, one of Canada’s best known fee-only financial planners that you’ve probably seen in all sorts of media here in Canada over the years. He’s a Certified Financial Planner (CFP), has been providing financial planning for over 20 years, and is currently a personal finance columnist for the Financial Post, MoneySense, and is also a regular contributor to RetireHappy.ca.

I’ve been reading his insightful financial planning articles for years, so it’s really great to have him on again, and in this episode, we get his perspectives on:

1. How much do you actually need to be financially independent here in Canada and have the option of retiring? What is the process that should be undertaken to figure this out?
2. Next, we get his take on how to live off your investment portfolio by withdrawing a sustainable amount every year, along with some alternatives to the 4% rule (which as you likely already know, has some limitations).
3. We actually go through the process and calculations that he does annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year, and we discuss how you can do it yourself in case you’re purely DIY and want to do it all yourself, and not have to meet with a financial planner every year.
4. Also, since Jason has been doing fee-only financial planning for over 20 years, we talk about the patterns that he’s noticed between those that are successful financially in and in life, long term, vs those that are not. From those, we hone in specifically on the things that you and I can actually control and do in our own lives, to help get us there too.

Enjoy the episode, it’s great having you here, thanks for tuning in, I hope you leave the show a rating on Apple Podcasts or Spotify, and now let’s get into the interview.

Questions Asked:

1. When somebody is trying to determine how much they need to be financially independent and have the option of retiring, what is the process that should be undertaken to figure this out?
2. One strategy that has really peaked my interest and that I think can be highly relevant for those that have hit their financial independence number, is doing some sort of variable withdrawal strategy with a spending ceiling and floor. When a client comes to you and says that they don't just want to use a fixed withdrawal strategy like the traditional 4% rule, and instead would like to be able to take out more when the markets are doing well, and are okay withdrawing less when the markets are not performing well, is there a certain variable percentage withdrawal strategy that you have found to work well, along with any particular rules for a spending ceiling and floor? or is there maybe something else entirely that you prefer recommending to clients?
3. What is the process and calculations that you do annually with clients to ensure that they are withdrawing a sustainable amount from their portfolio every year? My understanding is that the ideal way to tackle this, is to work with a fee-for-service financial planner like yourself or somebody at your firm, where every year the numbers get updated in the financial planning software for that person's particular situation. Then the expertise and analysis of the Financial Planner is used to determine what the withdrawal rate should be for that year. Is that the ideal way you'd recommend that it’s done?
4. For those that are more on the DIY side and do not want to meet with someone annually, what approach or process do you recommend for them? For instance, maybe they just want to meet with a Financial Planner when there are significant life changes or financial events like an inheritance, the birth of a child, getting married, etc.
5. You have been a Financial Planner for decades at this point and I'm sure with that level of experience you've noticed certain patterns when it comes to clients that are successful financially and in life, versus those that are not. Can you give us any insights in terms of the best practices or patterns that you've noticed from those that are financially successful and also appear to be happy and fulfilled in their day-to-day life?
6. On the flip side, are there any common and/or major mistakes or regrets that you have seen clients have over the years that we can all learn from so that we do not repeat those mistakes in our own lives?
7. In your practice, I'm sure you've helped clients of all different net worth sizes; from those struggling to very high net worth individuals. What have you noticed that the wealthy do that the poor or middle class do not?
8. You have been in this industry for multiple decades. Would you be able to recommend some resources online that you find to be reliable and reputable sources of information, for those that like to continue to educate themselves when it comes to financial planning, retirement planning, and investing in Canada?
9. Tell us more about where we can see your work and tell us more about your practice.