My parents are about to retire. Advice? - Page 7
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Thread: My parents are about to retire. Advice?

  1. #61
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by james4beach View Post
    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?
    My plan (retiring this year so no experience with how it will actually work) is like this:
    1. At the beginning of the year withdraw enough money from investments for the year's living expenses (after CPP/OAS when they kick in, and I don't have a pension) from whatever asset class is the highest, rebalancing after if necessary. Keep it in a HISA like EQ Bank or Oaken, or Tangering (if they have a good interest rate). From that I will "pay" myself monthly into my chequing account. Keeping a retiree's spending money for the year in the market is picking up nickels in front of steam rollers.
    2. I will build a savings fund or sinking fund to pay for large infrequent expenses like car replacement, new roof, driveway, HVAC, kitchen and laundry appliances. I based the amount needed on estimates of cost and lifespan. Every year I will deposit a set amount from my annual draw above into MAW105 in my non-registered investment account to fund this.
    3. Keep a moderate emergency fund for unanticipated expenses (couple of thousand $). This is so I don't have to withdraw small amounts from my sinking fund above on short notice, especially in the middle of a market crash.
    4. Keep about 5-years expenses in a 5-year GIC ladder, and another 5-years expenses in a Canadian aggregate bond fund like ZAG or VAB. The rest of my portfolio will be kept in equities, about evenly split among Can, US & global. This will result in around 30-35% fixed income initially. The GICs give absolute certainty of available funds and the bond ETF gives a high certainty of available funds no matter the market conditions, avoiding the likelihood of having to sell equities into a market crash. This may seem conservative, but it's based on looking at historical stock returns through the great depression, the 1970s (stocks went sideways from the late 1960s to the early 1980s with a huge crash in 1973-75) and the lost decade of the 2000s. Equities can get seriously disconnected from fundamentals for a long time and I am structuring my portfolio to survive such an event in a possible 40 year retirement. I don't want to make assumptions about portfolio returns on the good results of the last 8 years.
    5. I will withdraw enough* from my RRSP each year from retirement to age 71 to minimize or avoid OAS clawback, then take the rest from non-registered. (*enough is hard to determine, but based on estimates of mandatory RRIF withdrawals and OAS clawback thresholds.)
    6. Dividends/distributions will be withdrawn from non-registered and RRSP, but I don't plan any withdrawals from my LIRA until mandatory withdrawals start at age 71.
    7. TFSA will be the last to withdraw from (if ever) because of the tax-free compounding and no tax payable on withdrawals.


    I am also interested in hearing others' perspectives on managing the retirement & spending phase of life.

    Eschew obfuscation. Espouse elucidation

  2. #62
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    Thanks, this is great stuff

  3. #63
    Senior Member leoc2's Avatar
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    I just recently retired. I have a DB pension and a nest egg. The nest egg is allocated 50 % equity ETF and 50% bond ETF. With the help of Steve41 I have a plan that will see me zero the nest egg by age 95. I have converted the plan into a spreadsheet that gets revisited each year. Each year I draw down the annual allotment and re-adjust the die broke at 95 plan. The annual draw down comes from the side of the asset allocation that has done the best. I don't worry too much about rebalancing the asset allocation as the DB pension takes care of living expenses. In theory, I can survive a 10 year bear stock market by drawing funds from the bond ETFs. At that point in time my asset allocation will be near 100% equity ETF. The beauty of a DB pension is that it affords me the luxury of distorting my asset allocation. I don't expect this scenario to occur but it is comforting to think that I can enjoy then next 10 years of retirement.
    Last edited by leoc2; 2017-04-10 at 04:46 PM.

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  5. #64
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    Quote Originally Posted by james4beach View Post
    Are there people who provide this kind of advice, who aren't in the business of selling mutual funds and annuities?
    I'm not in the business and I'm happy to share some advice.

    They should buy distributing stocks instead of growth stocks.

    Sorry, James. I had to. lol!


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