# Retirement portfolio thoughts?



## Freedom45 (Jan 29, 2011)

My parents are both retired, father will be 70 next month, mother is 65. They have a small amount (~$50k) in an RRSP, in my father's name that's currently sitting at an allocation of 65% equities, 35% fixed income.

I'm going with them to meet with their advisor later this week, but am pushing them to move almost exclusively to fixed income at this point.

Considerations:
- They don't anticipate needing the money any time soon (pension/OAS/etc income supports them currently), and my father wants it to stay put as long as possible as a nest egg to support my mother if/when he passes first.
- Within the next two years, the money will need to be rolled into a RRIF, as my father turns 71 thirteen months from now.
- They are not financially saavy, nor are they well off. Losing the little bit they've got stashed would be tough at this point in their lives. They'd rather keep their capital intact and miss out on gains, as opposed to risking their capital.

I'm thinking they may want to go with some combination of laddered GIC's, short-term bond MF, and maybe a very small (20% or less) allocation of solid dividend paying stocks. If they went with laddered GIC's are there any implications in a year or two, when the account gets rolled into an RRIF?

Thoughts? Suggestions?


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## stardancer (Apr 26, 2009)

I am 72, my husband is 76. Both our RIFs are a rough 60% equities, 40% income, and will probably stay that way. We do work with a Financial Advisor (bank related), who has been much more knowledgeable than we could ever be. I don't know much about when to go long or short term, government or corporate, in the bond area, so I rely on him to let me know when to move in and out. So far it's worked well. If your parents are shaky on when to rebalance/reallocate dollars, then the laddered GICs are probably better for them. 50K is not a huge RRSP.

Generally, financial institutions can set up a RIF that takes into account the laddered GICs, so that the withdrawals are taken from the maturing GICs. Once the ladder is set up, it can work smoothly.

When your father does start to withdraw money, it can be rolled into a TFSA. If he doesn't need the money to live on, a TFSA for each of them keeps the nest egg alive. They could also use laddered GICs here. 

At 50K, the payouts will not be terrific, so they have to think about paying nursing home costs later on; the TFSA stash would come in handy there. My husband and I don't need the RIF $$ to live on, but if/when we go into a nursing home, we would then need to draw on the TFSAs at that time, as the RIFs will be down to a few thousand a year.

Being POA for both my mother (94) and my aunt (100), I am becoming acutely aware of how much very old people need an advocate. I think it's admirable that you are looking out for your parents. Good job!


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## OnlyMyOpinion (Sep 1, 2013)

^+1 Stardancer makes excellent points.
In our experience with our parents, banks do manage annual RIF withdrawls even when invested in GIC's; do plan to withdraw from RIF and deposit into TSFA if the income is not needed; costs may well go up later in retirement if assisted living or long term care (in a semi-private or private room) is needed; and some equity allocation (within a bank monthly income fund in our case) would provide a chance of stretching the RRIF dollars, but there is downside risk, and frankly $50k is not going to go too far, so GIC's may make sense for your folks.


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## lonewolf (Jun 12, 2012)

I would probably go with GICs from Manitoba online credit unions could have them pay monthly & or annuity perhaps defurred


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## Freedom45 (Jan 29, 2011)

Thanks all. Good idea about moving from the RIF into TFSA's if/when the money isn't needed. I know my father well enough to know that he'd take it out as cash each year, and sock it under a mattress or something if I don't help them set a plan in place.

I'm thinking that putting the bulk of their funds into GIC's as planned is probably the best idea. May look for a monthly income mutual fund or similar to give them a slight exposure to equities, while staying mostly stable.

Just waiting on confirmation of the appointment with their advisor.


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## HereToHelp (Jan 29, 2015)

-My advice on this would be just because you are older does not make GIC's the only option. The major deciding factor in this case should be time frame (which sounds long - as the RIF minimum will be small) and risk tolerance. Risk it tough, because it sounds like your father wants to protect your mother with these funds. A GIC might protect the principle but might not keep up with inflation well over time and thus lose the purchasing power he hoped she would have with these funds.
-Also, your father should be able to use your mother's younger age for his RIF calculation of minimums. I would set it up this way regardless of how much you draw.
- Finally, great time to create a plan for them. Use this oppurtunity to work with the advisor to set up a financial plan for years to come.

Let us know how the meeting goes!


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## gaspr (Mar 24, 2014)

If there is no need or desire to leave a bequest, and if they are in reasonably good health, it might be a good idea to look into an immediate joint life annuity. Looks like for the ages you quoted, that a no frills version would have a payout rate of around 4.5 to 5 percent. That would continue to payout monthly for as long as the last survivor lives. No protection from inflation but right now it looks more and more like deflation is a possibility. That would make the annuity look better every year.

You will never hear this strategy suggested by the average financial advisor or the nice lady at the bank for obvious reasons...(they can't make any money from it). It is also hard to find an insurance salesperson who will sell you this product without at least first trying to sell something much more elaborate (that pays them a much higher commission).


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## Freedom45 (Jan 29, 2011)

Thanks again for all of the feedback folks. Things got delayed a bit, but we ended up meeting with their financial advisor a few weeks back, and have moved them into a MF with an 80/20 fixed income/equities split.

They're leaving the money parked until my mother turns 71, or until there is an immediate need to start drawing things down, whichever comes first.

On a related but semi-unrelated note, they're in the process of having a POA drawn up naming my sister and I.


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## My Own Advisor (Sep 24, 2012)

Considering they:
a) don't anticipate needing the money any time soon, and
b) want to preserve the money, then 
c) I think a heavy fixed-income split with some equities is a good thing.

As long as the MF is low cost, likely a good move.

In the future, they could consider turning some or part of the RRSP into a RRIF, and using RRIF withdrawals to max out their TFSAs.

Inside the TFSAs, they could keep fixed-income, GIC ladder, short-term bond fund like VSB, XSB, etc. 

This way income withdrawn from TFSA is not subject to any income-tested programs and obviously, not taxed as they get older. Win-win.

Good on you to help them out!


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## Freedom45 (Jan 29, 2011)

My Own Advisor said:


> Considering they:
> a) don't anticipate needing the money any time soon, and
> b) want to preserve the money, then
> c) I think a heavy fixed-income split with some equities is a good thing.
> ...


Thanks MOA. The MER on the MF is relatively low (largely because it's so heavily weighted in fixed income, no doubt).

When my mother approaches 71, we'll look to roll the RRSP into an RRIF, and the current plan is that (assuming they still don't need the income at that point) the RRIF income will be siphoned directly into a TFSA, and will be placed into some sort of fixed income instruments.

They're certainly not going to get rich this way, but they (and I) are sleeping a bit easier these days, knowing there's less risk of losing what they've got. 

On a semi-related, and interesting note;

It was amazing listening to their advisor try to convince them to stay in equities. He was spouting all of the statistics from the last two or three years of gains, and had I not been there, I'm sure my financially non-saavy parents would have bought it. Of course their investments rose in value over the last few years, the broad markets have done great! It wasn't until I asked him what their existing MF returned/lost in 08/09 that he realized he was fighting a losing battle, and that it really clicked in my parents' heads that we were making the right moves. Their existing MF had dropped in value by 26-27% during the bust. Explaining to them that if it were to happen again, it would turn their small $50k nest egg into $37k was an eye opener I think.


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