My parents are about to retire. Advice? - Page 6
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Thread: My parents are about to retire. Advice?

  1. #51
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    Quote Originally Posted by mordko View Post
    Someone who is retiring at 55 can easily live for another 35 years. That raises the risk of things going wrong with inflation, the stock market, taxes and a whole lot of other relevant factors. If we think back, life was quite different in 1980 and the assumptions made then wouldn't be valid today.

    One has to be a bit careful when claiming that someone retiring at 55 with 1M will be able to easily live off his investments while maintaining a consistent lifestyle.
    It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.


  2. #52
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    Quote Originally Posted by Spudd View Post
    It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.
    Indeed. I'd suggest the vast majority of senior couples have less than $50k of annual cash flow expenses. Full CPP (if applicable) and OAS alone for each of both individuals could provide more than $42k of pre-tax income. In reality, few sensior couples today actually earned enough to qualify for full CPP (each) so CPP and OAS is likely closer to $25-30k. Regardless, it doesn't take all that much in additional capital assets to provide a total of $50k in annual income.

  3. #53
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    Quote Originally Posted by Spudd View Post
    It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.
    Indeed. The point is that risk is substantially higher for someone retiring with 1M who is 55 vs 70.

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  5. #54
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    Whether you are retiring, you need money to live from or you are working today, you need money to live from.

    For the most part, it all comes back to how you want to live and your expenses for that lifestyle.

    You can work and live cheap. You can work and live large. You can retire and live cheap. You can retire and live large. The choice is yours.
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  6. #55
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    Thanks for all these great replies. Retirement is a long way off for me, but you never know... maybe my next business venture will work out great and I can hit my 2M mark earlier than planned.

    Quote Originally Posted by My Own Advisor View Post
    So, simple and quick math, you've got $2 M non-reg in one of your favourites (XIU) with 3% yield - there's your $60k with almost zero tax paid.
    Something like that was in my head. The nearly pure eligible dividends off XIU are attractive for exactly this reason -- surely nothing can beat the tax efficiency of that. But I also see your point about more aspects of flexibility including dipping into capital, plus of course the CPP & OAS (assuming these still exist when I retire).

    Still, I can't get my mind off the beautiful simplicity of a massive amount in just XIU. And for the dividend-growth'ers out there, it's got that too:

    xiu-distributions.png
    Last edited by james4beach; 2016-12-27 at 09:12 PM.

  7. #56
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    An update ... I think my parents have set things up nicely for their retirement. They are using MAW104 (Mawer Balanced) and MAW105 (Mawer Tax Effective Balanced) as their core holdings. They consolidated the amounts from three other places, and nearly all investment assets went to Mawer. Separate from this they have accounts at a Big Five bank where they hold savings accounts and GICs.

    Here I see there is some difference of opinion between mom & dad. My mom strongly believes in "don't put all your eggs in one basket". She doesn't really know who these Mawer people are, and she's very uneasy about suddenly seeing all their retirement savings (about 85%) with that firm. I completely understand her anxiety. They haven't even received a statement from Mawer yet... it feels like wiring away all your savings that you worked hard for into an unknown place.

    Dad on the other hand doesn't want too much unproductive money so he's against the idea of keeping too much cash-like amounts at the bank. He wants to send even more of the bank's allocation to Mawer, maybe pushing that towards 90%.

    This is something they are having disputes about. I can see both sides of the argument and they both have shown excellent money management instincts over the decades. And it's hard for two people to agree with everything about money decisions... that would be unheard of.

  8. #57
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    Quote Originally Posted by james4beach View Post
    Today I got the chance to look at the paperwork from their fee-only planner: retirement plan, tax strategy, withdrawal schedule, etc. I'm really happy with what I saw... the numbers work, and the overall result (sustainable net after tax income) matches my own rough calculations based on a 3% withdrawal rate out of capital.

    Seems very doable for them and the key factor is my dad's pension. Really makes me wonder - as a 35 year old - what I'm going to do without a pension.

    When I run with the assumptions shown in their own financial plan (assuming similar taxes and CPP/OAS) it tells me that I need $2 million in savings to retire. It looks like I won't be retirement for a looong time!
    Again it all depends on costs though. Look at it like this, if you are 30 years old, have a mortgage and are supporting a young family of 4, paying taxes, EI, CPP and putting away additional money towards retirement even a solid salary like $100K a year doesn't leave you a lot of breathing room. (unless you are living an extreme frugal lifestyle)

    But then 30 years down the road, when you are looking at retirement. The house is payed off, you are no longer paying into CPP & EI, and instead collecting the CPP. You are no longer paying an additional 10-20% of your earnings into savings. All of the sudden 50K of income is pretty close to the 100K you were getting at 30. (I'm ignoring inflation)

    From what I've seen in my experience there are 2 types of people when it comes to retirement. Those who do absolutely no planning for it. Those people are in trouble, for obvious reasons. And those that do, and honestly, all of the people I've seen make any attempt to save for retirement ended up with more than they needed, because they underestimated what a huge percentage of your working income goes to CPP, EI, RRSP & Taxes. (the latter obviously doesn't completely go away)

  9. #58
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    "Again it all depends on costs though. Look at it like this, if you are 30 years old, have a mortgage and are supporting a young family of 4, paying taxes, EI, CPP and putting away additional money towards retirement even a solid salary like $100K a year doesn't leave you a lot of breathing room. (unless you are living an extreme frugal lifestyle) "

    Agreed. $100k salary is really just over $60k net or $5,000 per month. Good money but after mortgage/rent/home insurance = $2,000; food and household supplies = $1,000; cars and car expenses = $1,000; maybe $1,000 per month to save and invest. That will still leave most couple's with a great nest egg at age 60 if they save $1,000 per month every year for ~30 years.

    "...The house is payed off, you are no longer paying into CPP & EI, and instead collecting the CPP. You are no longer paying an additional 10-20% of your earnings into savings."

    $60k net in retirement is a great sum of money I think. You don't have to save anymore (you spend) and you've kill debt (mortgage is likely gone, ideally).

    Back to James, well done with Mawer. They have some great balanced products. I would go with some XIU and some VYM or HDV myself and a cash wedge. Less $$ in fees and solid yield + capital gains as well.
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  10. #59
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    Just so I can pass this info on to my parents, how do you decide how much of a cash wedge (and GIC ladder) to keep?

    I'd love to hear thoughts from the wise forum members on this. Should a retiree have about a year's worth of expenses, more in a cash/GIC wedge?

  11. #60
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    Well, I'm not "there" yet but I've decided a one-year cash wedge is good to ride out markets and will give me time to adjust if I really need to ramp up any fixed income. I figure $50k cash on hand at time of retirement is good enough.

    Otherwise, it's spending dividends and distributions paid early in retirement. The capital invested should churn out 3-4% yield. You can't get 3-4% yield from bonds let alone any price appreciation from bonds. I simply don't see it for the foreseeable future and actuaries are saying it might be 30+ years until there is another bull bond market. Have you read The Essential Retirement Guide by F. Vettese? A good book to buck many retirement myths.

    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

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