09-27-2006, 03:38 AM
Retiring at 34 is working out well, says Derek Foster. His income and wealth have grown with his family since he quit the workaday world two years ago, and he sees no need to go back to punching a clock.
"I haven't found that expenses have been rising faster than my income so far," he revealed yesterday in an early progress report on his unusual life experiment.
The portfolio of stocks and income trusts he assembled while being paid less than $30,000 a year now generates enough cash to support a family of five.
Their income has risen enough to accommodate the arrival of a third child and such luxuries as a trip to Disneyland, some hockey equipment and ice time for him and his eldest son.
"We've been living a middle-class lifestyle," he says. "The only difference is I'm not working."
Foster insists he could have gotten by with his nest egg even without an unexpected bonus he earned by self-publishing his book: Stop Working: Here's How You Can Using the Strategy of Canada's Youngest Retiree.
When I first wrote about his book in early 2005, some readers were angered that someone as young and capable could make use of government tax and income benefits to retire.
They may now be relieved to learn that his book was successful enough that it will drastically reduce Foster's eligibility for programs aimed at helping low-income families.
On the other hand, professional writers may be offended that Foster calls what he does retirement.
"I've sold between 14,000 and 15,000 copies (triple the Canadian benchmark for a national bestseller). So I've made close to $100,000," he said after quickly multiplying the sales times the $19.95 cover price and subtracting expenses in his head.
That extra book income, combined with the new tax treatment of income from stock dividends, will result in Foster and his wife Hyeeun Park collecting a smaller child tax benefit than he expected, and less money from GST and other tax credits.
But his move into a higher tax bracket will not cut into Ottawa's new $100 per month universal child care benefit. The $2,400 a year available for the two of their children who are still under age 6 is to be declared by his wife, a stay-at-home mom whose income is not enough for her to owe any tax.
I reached Foster in Ottawa at his family's condominium townhouse, which he initially bought and rented out while he was abroad teaching English. His family moved there after selling a home in Wasaga Beach and after repaying their tax-deductible investment loan on the townhouse.
Foster says they can now live comfortably on about $3,000 a month because they have no debt, no deductions for employment insurance, pension, disability insurance, work-related expenses or child care.
Nor is he socking away money for his children's education, reasoning that much of what they can learn will come from paying their own way.
"If I have enough money, I might help them with a down payment on a house after they graduate," he says.
Foster's timing for leaving the workforce was impeccable. His portfolio was worth about $450,000 in mid-2004 when he "retired." That's about half of what a pension plan would set aside to fund a teacher's pension from age 57. But his capital is now up to about $628,000, including some money from the sale of his book sales.
Income from his investments has risen from the equivalent of about $21,000 a year in 2004 to an expected $26,500 this year, Foster says. The type of income he earns enjoys preferential tax treatment.
Government benefits would top that income up to about $36,000 a year if he did not have his revenues from sales at bookstores and his website, http://www.stopworking.ca.
"I am totally aware that if oil prices go down, my portfolio is going to go down," says Foster, who has about 37 per cent of his money invested in oil and gas producers.
Some of his holdings have already fallen in price in September, but he is optimistic that his income trusts and stocks will increase their monthly distributions and quarterly dividend payments over time. If share and unit prices do fall, then falling oil prices will also reduce the cost of heating his home and fuelling a new van, he points out.
Foster's holding of Canadian Oil Sands Trust, which has a major interest in the Syncrude oil-sands plant in Alberta, has grown to represent a fifth of his holdings. But he does not want to sell and thus trigger tax on his capital gains. So he is going to hold on, expecting that the price of energy might fluctuate but should rise over time.
"Many people have emailed telling me the book has changed their whole investment outlook," Foster says. His strategy is still in the early test stage, but so far it's working.
"I haven't found that expenses have been rising faster than my income so far," he revealed yesterday in an early progress report on his unusual life experiment.
The portfolio of stocks and income trusts he assembled while being paid less than $30,000 a year now generates enough cash to support a family of five.
Their income has risen enough to accommodate the arrival of a third child and such luxuries as a trip to Disneyland, some hockey equipment and ice time for him and his eldest son.
"We've been living a middle-class lifestyle," he says. "The only difference is I'm not working."
Foster insists he could have gotten by with his nest egg even without an unexpected bonus he earned by self-publishing his book: Stop Working: Here's How You Can Using the Strategy of Canada's Youngest Retiree.
When I first wrote about his book in early 2005, some readers were angered that someone as young and capable could make use of government tax and income benefits to retire.
They may now be relieved to learn that his book was successful enough that it will drastically reduce Foster's eligibility for programs aimed at helping low-income families.
On the other hand, professional writers may be offended that Foster calls what he does retirement.
"I've sold between 14,000 and 15,000 copies (triple the Canadian benchmark for a national bestseller). So I've made close to $100,000," he said after quickly multiplying the sales times the $19.95 cover price and subtracting expenses in his head.
That extra book income, combined with the new tax treatment of income from stock dividends, will result in Foster and his wife Hyeeun Park collecting a smaller child tax benefit than he expected, and less money from GST and other tax credits.
But his move into a higher tax bracket will not cut into Ottawa's new $100 per month universal child care benefit. The $2,400 a year available for the two of their children who are still under age 6 is to be declared by his wife, a stay-at-home mom whose income is not enough for her to owe any tax.
I reached Foster in Ottawa at his family's condominium townhouse, which he initially bought and rented out while he was abroad teaching English. His family moved there after selling a home in Wasaga Beach and after repaying their tax-deductible investment loan on the townhouse.
Foster says they can now live comfortably on about $3,000 a month because they have no debt, no deductions for employment insurance, pension, disability insurance, work-related expenses or child care.
Nor is he socking away money for his children's education, reasoning that much of what they can learn will come from paying their own way.
"If I have enough money, I might help them with a down payment on a house after they graduate," he says.
Foster's timing for leaving the workforce was impeccable. His portfolio was worth about $450,000 in mid-2004 when he "retired." That's about half of what a pension plan would set aside to fund a teacher's pension from age 57. But his capital is now up to about $628,000, including some money from the sale of his book sales.
Income from his investments has risen from the equivalent of about $21,000 a year in 2004 to an expected $26,500 this year, Foster says. The type of income he earns enjoys preferential tax treatment.
Government benefits would top that income up to about $36,000 a year if he did not have his revenues from sales at bookstores and his website, http://www.stopworking.ca.
"I am totally aware that if oil prices go down, my portfolio is going to go down," says Foster, who has about 37 per cent of his money invested in oil and gas producers.
Some of his holdings have already fallen in price in September, but he is optimistic that his income trusts and stocks will increase their monthly distributions and quarterly dividend payments over time. If share and unit prices do fall, then falling oil prices will also reduce the cost of heating his home and fuelling a new van, he points out.
Foster's holding of Canadian Oil Sands Trust, which has a major interest in the Syncrude oil-sands plant in Alberta, has grown to represent a fifth of his holdings. But he does not want to sell and thus trigger tax on his capital gains. So he is going to hold on, expecting that the price of energy might fluctuate but should rise over time.
"Many people have emailed telling me the book has changed their whole investment outlook," Foster says. His strategy is still in the early test stage, but so far it's working.