Advice for a retiring friend and nephew

My job had a very poor pension plan. If I relied on my company pension in retirement, I couldn't pay my bills. But my wife and I live well. How? Dividend investing. Each year we earn as much or more from our stock portfolio than we do from my company pension plus our CPP and OAS payments combined. For this reason, I am a big booster of investing in stocks in retirement.

With any luck, one will be retired for a long time. So, don't be cheap with your time. Put some time aside for research. To get you started, here are a couple of Webinars I believe a retiree should watch. Log-on to WebBroker and click on Learn -- Webinars -- Past Events. Watch: Five Stock Dividend Portfolio and Defensive Dividend Income for Retirement.

(After posting the above, I found Five Stock Dividend Portfolio on YouTube.)

One caveat: five stocks is a bare minimum. It can be done but why? Why buy one Canadian bank when you could buy two or three? Adding diversity while maintaining quality is always a good move.

Last June I decided to test my retirement theories. I created an imaginary retirement portfolio with an initial value of $1 million dollars. It can been seen here: Retirement Portfolio.

Today, that portfolio is worth $999,619.09. In January, I withdrew the minimum amount as an inkind withdrawal. In accordance with RRIF rules, these stocks were transferred to a newly opened TFSA now worth $42,397.06.

To sum up, my imaginary $1 million retirement portfolio is now worth $1,042,016.15. Later today, after making my monthly $3,470 withdrawal, I will have withdrawn a total of $27,076.65 to cover living expenses in retirement. I think I can claim success for my approach at the moment.

A retiree could choose to buy an annuity rather than buy stock. They could, I wouldn't and didn't, but it is done. On the plus side, an annuity locks in annual payments. On the minus side, the locked in annual payments stays the same for the life of the annuity. A locked in payment loses a lot of buying power over the years. I have an annuity-based pension paying $6273.72 annually. To deliver the same buying power today as it did when opened in 2009. it would have to be paying $8790.

How do insurance companies raise the money to make annuity payments? The insurance companies invest in stocks, bonds and cash funds for one thing. I like to think I simply cut out the middleman. Unlike my annuity payment, my portfolio payment has grown with the passing years and thus far my imaginary portfolio is doing the same.