Semi-Retirement Q&A with Mark McGrath

The financial independence retire early (FIRE) community is a very supportive and tight-knit one. One thing I appreciate from the diverse FIRE community is that there are people ahead of us who are always willing to share their knowledge and help others slightly behind them on the FIRE journey.

I would like to welcome Mark McGrath, CFP and CIM, who entered the world of semi-retirement on April 30. Before semi-retirement, Mark worked as a financial planner and associate portfolio manager at PWL Capital Inc. Based in Squamish, BC, Mark has been helping Canadian physicians, small business owners, and high-net-worth families on their financial decisions about portfolio management, retirement planning, tax planning, estate planning, and risk management. If you like the Rational Reminder podcast, Mark is one of the regular contributors as well.  

Q1: Hello Mark, welcome to this little blog of mine. Can you tell us a little bit about yourself? 

Thanks Bob! 

I’ve been a financial planner for the past 15 years or so, and have worked primarily with physicians and their families. My most recent role was as a Financial Planner and Associate Portfolio Manager for PWL Capital, and as of May 1st I’ve decided to semi-retire and step away from full-time employment. 

In 2022 I started creating educational financial content, writing mostly on Twitter and LinkedIn. I’m a huge advocate for basic financial literacy and getting the big things right, and while I occasionally write about more complex topics, a lot of my content is focused on those core basics like index funds, using your RRSP and TFSA, getting insurance in place, etc. 

Outside of work, I spend most of my time with my wife and two young children, and I enjoy reading, playing strategy games, listening to music, and playing the guitar. We like to travel as well but haven’t had much time for that over the past few years, but hopefully that changes now that I have more free time.

Q2. Congrats on your semi-retirement! You mentioned that financial planning is more than spreadsheets, retirement projections, and optimal portfolios, it’s really about helping people find and fund a good life. What is your definition of a “good life?” Explain why it’s important to focus on having a good life rather than spreadsheets and projections. 

Having worked with hundreds of Canadians of varying ages and backgrounds, I’ve realized that many of us never really decide what a good life is for us. We follow the traditional path – go to school, work your whole life, and retire at 65 – without pausing along the way to reflect on what’s important. Retirement can end up being very anti-climactic as a result, and those who haven’t prepared mentally and emotionally can find themselves lost. I saw this happen with my own father, unfortunately, and have spoken to literally hundreds of people who know someone who has gone through something similar.

I recently had this conversation with a 66-year-old professional client of mine, who was having what he called an identity crisis – he had worked hard for decades, amassed a small fortune, sent his kids through university, and was now unsure about what he was supposed to do with his life. Designing a good life, intentionally and earlier on in his career, may have led him to optimize his time more instead of his wealth. Avoiding this type of regret is a big impetus for my decision to semi-retire.

A good life means different things to different people, of course. For us, it means optimizing the use of these precious years with our young children while we have the energy to do it, and while they still want to hang out with us. My kids are 7 and 2, and growing up fast. I still love financial planning, and likely always will, but we wanted to design our lives so that I could engage in that on my own time, at our own pace. 

For me, that means more writing and creating educational content, and likely taking on a select number of clients on a fee-only, advice-only basis. If I can do that successfully, it also means I can do it from anywhere in the world, so we plan on travelling extensively as well. My wife is a systems and industrial engineer specializing in supply chain management and data analytics. She’s basically a math and data nerd. She stepped away from work about 4 years ago to be a full-time mom, but she also wants to find a way to put her skills to use on her own terms.

So our “good life” is spending time together as a family creating experiences, travelling, and doing some fulfilling work. 

Q3. It was not easy to walk away from PWL and reach the decision on semi-retirement. Walk me through how you and your wife reached the decision. 

The genesis of this idea came over Christmas in 2023. My wife is from Mexico, and most of her family, including her parents, still live there. We try to visit them twice a year. Her sister Tamara, and her sister’s husband Fernando, moved to Sweden for work four years ago and joined us in Mexico for Christmas that year. Fernando’s hobby is photography, and he was showing us pictures of all the amazing places in Europe they’ve visited since moving to Sweden. My wife and I kept joking that we should just retire and travel as well. 

Over the next 15 months or so, that joke kept coming up, and we realized neither of us was really joking. The more seriously we looked at it, the more apparent it became that we had to do it. At first I had planned to see if PWL would let me be a digital nomad, but we quickly shot the idea down – working full time, but just in a different country wouldn’t do – we wouldn’t have control of our time, and would be dealing with different time zones, potentially making work even harder. PWL is an incredible firm with incredible people, and it was really my dream job. At first, I thought I might be crazy for leaving. But I eventually realized I would be crazy to stay. 

Being a financial planner I’ve always had a good head for our own personal finances. We saved as much as we could, and I’ve largely used index funds for the past decade. We got lucky a few times in the housing market as well, so our finances were in good shape. That obviously made the decision viable in the first place. That said, I tried not to overthink this decision from a financial perspective. I didn’t model a hundred different scenarios or anything like that. 

Knowing that each of us can find a way to generate income if needed, and that we have a decent sized portfolio, was enough analysis for us on that front. Most of the decision making process was a discussion about the non-financial aspects of retirement – purpose, identity, how we want to spend our time, the benefit of being there for our children, etc. 

Tawcan: Interesting that your sister-in-law and brother-in-law inspired you on the early retirement idea.

Q4. Tell me more about your plans for the new chapter of your life. 

This summer we’re going to travel Europe, primarily Spain. I plan to fully disconnect from work over that time period and reassess in the fall. I do really like writing and creating educational financial content, so I’m going to focus more on that when we return, though I’m not exactly sure what that looks like yet. Likely a blog at least, perhaps another book or two in the future. I’ve wanted to get into video for some time now, so maybe a YouTube channel at some point. 

Other than that, I plan to provide advice-only financial planning, but not full-time. I’m fortunate that I’ve built up a social media audience and an incredible network of other financial professionals, so generating an income this way likely won’t be a challenge for me. So I’ll do that as a way to stay engaged in the planning community and bring in a few bucks to pay the bills as needed.

Q5. You mentioned on X that Hook is one of your favourite childhood movies and in it Peter, played by the late, great Robin Williams, struggled to find work-life balance. This seems to be the #1 issue in modern society and something I’m working to get better at (tough when working in high tech). Do you have any suggestions on how to focus on what’s important in life and how to make big life decisions and keep a work-life balance? 

Obviously, reaching some form of financial independence gives you leverage for this. Whether it’s traditional FIRE, CoastFIRE, or something else, having a portfolio that can sustain you for at least some period of time allows you much more freedom in your decision-making. The type of work you do also makes a big difference – there are many industries and roles where you can never really “clock out” at the end of the day, and are either expected to, or want to, make yourself available after work hours. The financial advice industry is pretty notorious for that – your clients rely on you, and you’re often on retainer. To deliver exceptional service, you often find yourself working or answering emails off-hours. I also firmly believe that some people don’t actually want work-life balance – they use work as an escape from their day-to-day lives, and would not do well without it. I’ve seen this with many clients and even friends over the years. 

To start, I think you need to sit down and really ask yourself what your perfect life looks like, given the constraints you have, like needing to work. Then focus on the things you can control, one at a time, to start implementing that life. Maybe it means a change of role, maybe it means a discussion with your employer on realigning expectations. Or maybe it means a sabbatical or a mini-retirement, or moving to a different place. 

One of my greatest fears is getting old and looking back on my life only to realize I focused on the wrong things – working too hard, neglecting relationships, focusing on material things instead of experiences, etc. It’s very easy to remain complacent, but you must take risks and shake things up if you expect things to change.

Q6. You shared the heart-wrenching story about your father passing away just 18 months into his retirement (I referenced the story in this blog post a few years ago). Why is it important not to have your job define who you are? Why is it important to find new purposes in semi-retirement and retirement? 

I don’t know that they need to be “new” purposes, though retirement can give people more time to explore their values and their hobbies. While my dad’s story was a good example, I also see this commonly with physicians and professionals. They dedicate their life to their craft, often working extended hours. It’s very difficult to go from spending the majority of your time practicing something, to not. Especially when you’re an expert in your field, and people are relying on you. I also don’t think enough people realize how ingrained their work is in their identity – they view retirement as this incredible gift of free time, but then realize that so much of who they are was actually the output of their work. And of course, there’s only so much golfing you can do. 

While activities are important, I think relationships and “being useful” are more important. You need to find ways to provide value to those around you – whether that’s a spouse and family,  a volunteer organization, or something else, humans want to be productive and helpful. Look deeper than just your hobbies, as those likely won’t give you all the fulfillment you require. I think this affects people differently, and it’s hard to know in advance how you’ll be impacted. While not always feasible, people should try taking a sabbatical or mini-retirement to test out how they’ll feel with an extended period without work. Some companies provide counselling on the emotional transition to retirement as well.

Tawcan: I can’t agree more, relationships and being useful are so important in early retirement. 

Q7. Tell me a bit more about your portfolio withdrawal strategy in semi-retirement and early retirement. Are you planning to withdraw RRSP early? Do you plan to eventually collapse RRSP or do you plan to follow the traditional way and convert RRSPs to RRIFs at some point?

We have RRSPs, TFSAs, and non-registered accounts. We have 30 years until we’ll be forced to make RRSP withdrawals, so in the beginning at least, I plan on letting my RRSP and TFSA compound, given the investment income in those accounts isn’t taxable. 

We’ll likely spend from the non-registered portfolio first, and eventually RRSPs next. Since the non-registered portfolio pays dividends, we have taxable income coming in. As that account gets smaller, I’ll likely start making smaller RRSP withdrawals to ensure we’re using up the lowest tax brackets. We do plan on bringing in some income as well, as I mentioned above. 

In a perfect world, we’d bring in enough income to cover our expenses so we can let our portfolio continue to compound. That said, I’ve tested withdrawal strategies for hundreds of clients, and I can confidently say there’s no single rule of thumb that always makes the most sense over a long period of time. What I used to do for clients was re-optimize their withdrawal strategy on an annual basis, and plan only for the next year. Depending on the relative size of the different account types, the investment portfolio and expected returns, other sources of income, time horizons, etc. – different strategies are optimal on paper, and they don’t always stay the same year to year.

Q8. Why is it important to “learn” how to spend money and enjoy life a bit more in retirement rather than a “save-save-and-save-some-more” mentality so many FIRE seekers tend to have? 

It’s easy to understand the risk of undersaving, and how that will impact your life. It’s much more difficult to see the risk of oversaving, which means additional time spent working, experiences missed, and opportunities not taken in the pursuit of having a bigger safety net. 

The tricky thing about financial planning is we don’t actually know what “enough” is, because it’s so dependent on future returns, inflation rates, spending needs, longevity, etc. I used to joke with clients that if they could tell me the date they’d passed away, I could design a much more accurate retirement plan for them. Absent that, we have to find a balance between spending now, and deferring consumption to the future. It can also be a slippery slope, where you get used to spending a lot during your working years, and then once you no longer have a paycheque coming in, you maintain that same spending rate and lifestyle. That works if your portfolio is large enough and is well-designed, but for others, they end up spending too much. And that’s a very difficult problem to overcome – it means either a significant reduction in your lifestyle to extend the life of your portfolio, finding a way to earn an income, or running out of money early. This is where smart financial planning can help, including stress testing your portfolio for volatility, reviewing “what if?” scenarios, and being able to reduce your discretionary expenses in times of bad market returns. If done right, and reviewed frequently, the probability of running out of money can be reduced, if not eliminated.

Q9. What’s your plan on equities vs. fixed income allocation in semi-retirement and early retirement? Do you plan to shift more towards fixed income as you get older? 

I’ve been 100% global equities for many years now, and don’t ever intend on changing that. The common advice is to hold more fixed income in retirement, or use a glidepath where you decrease equity exposure and increase fixed income exposure over time. 

Recent research from Scott Cederburg, in his paper “Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice” turns this on its head. He found that the optimal portfolio for nearly everyone is 100% global equities at all times, with a healthy “home bias” (a larger-than-market-cap weighting to your home country’s market). This is pretty much how most of the popular all-in-one ETFs are run, like XEQT, VEQT, ZEQT, etc. While Scott’s research did show that the optimal portfolio might have more fixed income right around retirement, it then reduced fixed income and went back to 100% equities for the duration of the retirement horizon. 

The basic takeaway is that bonds reduce returns, which we know, but the increased expected return from holding a globally diversified portfolio was greater than the benefit of a less volatile portfolio that held fixed income. All that’s to say, I’m 100% stocks and intend to stay that way. But I also respect that as I get older I might feel differently about that, so who knows.

Tawcan: very neat to hear that you have been on 100% global equities and have no plan to change that moving forward. That’s what we’re thinking too.

Q10. In retirement, what’s more important, income flow or portfolio value preservation? Or is it both? 

I don’t really care about “income” from my portfolio. It’s largely just mental accounting, as that income isn’t free money. Whether it’s dividends or covered call income or something else, it’s just a component of the total return of the portfolio, not “extra” returns. I’d rather have high returns in the form of capital gains and be able to control the amount and timing of the income to match it to my expenses, as opposed to having a set amount of taxable income coming in regardless of my need for that income. 

Preservation is an interesting goal, but the trade-off is lower returns – the only way to preserve your portfolio is to make it more conservative. And as I mentioned above, those reduced returns can actually be more damaging than the volatility of a portfolio, using historical volatility measures at least. So I’ll continue to own the global stock market, will have some income from dividends, and will sell shares/units of my ETFs as needed to make ends meet. If we enter a bear market, we’ll do our best to reduce our spending until markets recover. As long as our spending is in check, this will preserve the portfolio to the extent that we won’t run out of money.

Q11. What’s your plan for protecting yourself from unexpected expenses in semi-retirement and retirement? Is it a good idea to have a sizable emergency fund? Or are there better ways to handle unexpected expenses? 

An emergency fund is a good idea for most people. At the same time, I haven’t really had to use my emergency fund in the past 15 years, and can’t think of an emergency that would cost so much that I couldn’t just take the money from our investment portfolio if needed. For larger risks, we buy insurance. Insurance is meant to cover improbable events that would have a huge negative financial impact. 

Remember, the point of the emergency fund is to have a source of cash available. A non-registered portfolio or a home equity line of credit meets that definition, but that’s a matter of risk profile. Are you comfortable having to access part of your portfolio in a pinch, even if markets are down? What about using debt at a time when you’re facing a financial emergency? What kind of emergency is likely to happen, how much will it cost, and how meaningful is that in relation to your portfolio value and net worth? All of this needs to be considered. 

For us, we keep roughly $15k in a high-interest savings account, about $10k in our chequing for bills, and the rest is invested. I might shore up that savings account a bit, but I also don’t like the opportunity cost of holding too much cash for too long. 

Q12. If you were to start saving and investing for retirement today, what would be your recommendation? Would you have done something differently? 

I made plenty of mistakes along the way. Thankfully, most of them occurred when I didn’t have enough money for it to do a lot of damage. If I were to start again today, I’d do what I’ve done over the past decade or so – save a lot, buy globally diversified index funds, and sit on my hands.

A high savings rate is incredibly important, but you don’t want to completely sacrifice your life in order to save more, either. 

Take advantage of your RRSPs and TFSAs, get your wills and estate plan in order, and get the proper amounts and types of insurance. Do that and you’re probably ahead of 95% of people. 

As always, it’s about balance, and understand that luck is likely going to play a big role. But as the saying goes, you need to be good to be lucky – if you make smart financial decisions, you’ll find yourself getting “lucky” more often than not.

Q13 Any good retirement and money books you’d recommend reading? 

Can I plug my own book here? I recently co-authored a personal finance book with NYT Bestselling Author Dan Solin out of the US. It’s called “Wealthier: The Investing Field Guide for Canadian Millennials.” (https://a.co/d/5PtZMbl) It covers retirement planning, but we also touch on basically every area of personal finance, from budgeting to life insurance to taxes to estate planning. I think the information in that book is useful for anyone getting started, whether they’re a millennial or not. 

Other than that, I enjoyed Fred Vetesse’s books. Chock full of data and written from a Canadian perspective. Morgan Housel’s Psychology of Money is another classic, and while it’s not really a retirement book, it’s loaded with personal finance tips that can benefit any reader. 

Lastly, I think every DIYer should grab a copy of Christine Van Cauwenberghe’s “Wealth Planning Strategies for Canadians.” It’s really a textbook and reference book, but I consider it the Bible of financial planning for Canadians. She updates it annually, and a current copy has lived on my desk for the past 10 years or so. It’s not cheap, but that’s for good reason – it’s a tome of information on all things personal finance in Canada.

Tawcan: I love Psychology of Money and his new book Same as Ever is very good too. 

Q14 Not related to semi-retirement at all. You are into spicy food and hot sauce. What’s your favourite hot sauce? Why? 

Tabasco is of course the most useful and versatile hot sauce, everyone knows this. But my daily driver right now is Melinda’s Original Habanero.Very tasty, lots of kick. Great on pizza or eggs, and can be found in most Canadian grocery stores.

Q15. What would you tell someone like me who is trying to achieve financial independence and semi-retire or early retirement in the near future?  

I’ve followed you for quite a while Bob and I’m pretty confident you’re on the right track. While you and I disagree a bit on portfolio construction, I don’t think that’s different between success and failure for most people. 

If you maintain a low cost and well diversified portfolio of global stocks, you’re likely to outperform 90% of the pros. I think a lot of DIYers focus disproportionally on achieving a certain portfolio value, like “I’ll retire when my accounts are $2M”. But that doesn’t tell you the full story, and doesn’t by itself constitute a financial plan. 

There’s so much more to smart financial planning than investing, and it can get quite complex. People should ensure they’re playing defence before they plan offence – get the right amounts and types of insurance, review your beneficiary designations, and get your estate plan in order if you haven’t already. 

The trick to building wealth is really just not getting knocked out of the game by some unforeseen event like a disability, loss of income, or having a concentrated stock position get blown up. I also hate all these new “income” funds that have become so popular. Single stock ETFs with an option selling overlay, leveraged dividend ETFs, etc. The fund companies aren’t there to provide the optimal fund; they exist to sell you anything that they think will allow them to extract fees from you. Most of these high-yield funds are dangerous at best, and many are nearly guaranteed to go to zero over time. 

Novice investors think that income is free money, and that the yield of a portfolio tells you what you can spend. Yet if you look at any astute retirement income research, they barely, if ever, mention portfolio yield. There’s a reason for that – yield tells you nothing about the sustainability of a retirement portfolio. 

Outside of that, folks should be acutely aware of what they can control and what they can’t. You can’t control the markets, tax rates, or inflation for example. But you can control your spending, saving, investing habits, fees, and making smart financial and tax decisions. 

I’m not big on budgeting myself, but at least understanding what expenses you’re likely to carry into retirement, what expenses will disappear, and what additional expenses might be tacked on is going to go a long way to understanding what your income needs are going to be. 

From the,re you can adjust them for inflation and project them out over time, then work backwards to determine the amount of money you would need to meet them. And for many, they’ll have other sources of income like CPP and OAS, which are guaranteed, inflation-indexed pensions. 

Early retirement will affect your CPP payments, so review how your target retirement date impacts your future CPP income. Lastly, I’ve come to believe the best way to ensure a successful early retirement is flexibility – be willing to reduce expenses if needed, or take on some work to bring in income to stave off portfolio withdrawals. 

Q16. Do you have anything else you would like to share with me and my readers?

Just keep up the great work Bob, and thanks again for having me on your blog – it’s an honour and a pleasure!

Thank you very much, Mark, for sharing your story and insight with us. I’m very excited to hear more about your semi-retirement life on X and hopefully we can meet in person one of these days and nerd it out personal finance style! I’m sure my readers really appreciate this excellent Q&A interview.