# A friend sold her house, where to invest her money?



## suzuki (Jan 14, 2019)

As the title asks, my friends mother sold her house recently and has about $300,000 to invest for her retirement. She is living in rental apartment. She has no RRSP or TFSA accounts and is over age 71.
I suggested to start a TFSA and put the max $69500 in that. The remainder would be put into a non registered account. Since she doesn't have a financial advisor I suggested to use an all in one ETF to keep it simple for her. I'm thinking to use Vanguard VCNS or VBAL.
Thoughts?


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## AltaRed (Jun 8, 2009)

She needs to do a cash flow plan to determine how much she needs (or can afford) to pull from these investments to fund her lifestyle. I see nothing wrong with VCNS or VBAL except VCNS will not perform quite as well.

Look at the VPW table here https://www.finiki.org/wiki/Variable_percentage_withdrawal#VPW_Table to see what can be safely withdrawn from a DIY investment account. At age 71, VCNS factor is 5.1% and VBAL factor is 5.5%. However, the actual annual amounts that can be pulled using the VBAL factor will be more volatile from year to year due to equity market performance.

My view is she should pay a 'fee-for-service' planner $1-2k to run a plan for her using all her sources of income to see if she can balance her cash flow. Also, if she has not been a DIY investor in her entire life, this is a highly challenging time to start. You have not given us nearly enough information to comment further.

Added: If this lady does not have experience with DIY investing, she might be better off in one or two of the better bank based D series income mutual funds.


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## suzuki (Jan 14, 2019)

Alta Red
My friend has no DIY experience and I don't know a lot of the details myself so that is why there is very little information about the mother.
I was also wondering about suggesting a 'fee for service'. Thanks for your input.


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## AltaRed (Jun 8, 2009)

If she has no other investing experience, she will need help working out a plan to make that $300k span 25 years of cash flow needs. She cannot afford to be pennywise and pound foolish, meaning trying to save $1-2k while risking the destruction of her nest egg.

Added later: Reflecting a bit more on your post #3, I think it is essential this lady have a fee-for-service planner provide her with a financial plan to help her balance her lifestyle with income over the next 25 years. Recommend AGAINST her going to the financial advisor at her local bank branch if for no other reason than the advisor is beholden to recommending bank funds from that bank, and that is an inherent conflict of interest. She needs an independent to be able to sit down with her to work out potential solutions.

This lady will have to have some information with her, i.e. her cost of living budget including rent, utilities, food, income tax estimate, etc., and a list and value of her sources of annuity income, e.g. CPP and OAS, which may, or may not, be the maximums depending on her work history, etc. From that, the planner can work scenarios in terms of what kind of investments might be best for her, and where to get them. This lady is clearly not going to be managing DIY discount brokerage accounts on her own, so she will need someone with Power of Attorney to do that for her, employ an advisor, or pick one of the D series bank income/balanced funds that have a good track record.

It might help us to know which bank she uses so that we can be more definitive on some options. For example, if this lady banks at RBC, RBC does have a few PH&N products that might work for her OR this lady might actually be better off in one of RBC's Managed Payout Solutions....that, for example, pays out 5% distribution on an ongoing basis. There are a variety of solutions but the ones that are right for her will depend very much on her specific situation.

Added again: I hesitate to even float this idea, but this lady may be better to invest most of the cash in an annuity for about $1500/month if she invested it all in an annuity. The downside is annuities are not indexed to inflation and annuities are expensive at the current time. None the less, a good financial planner would/should at least provide this as one of the scenarios. Since we don't have a clue of her risk tolerance, this is a total wild card.


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## Prairie Guy (Oct 30, 2018)

AltaRed said:


> If she has no other investing experience, she will need help working out a plan to make that $300k span 25 years of cash flow needs. She cannot afford to be pennywise and pound foolish, meaning trying to save $1-2k while risking the destruction of her nest egg.


There will be also OAS, some CPP depending on work history, and if income is low enough, GIS. A modest rental along with frugal living and she likely will never run out of money. $15k a year in benefits and 5% of $300k is another $15k without even touching the principle.


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## suzuki (Jan 14, 2019)

I've recommended a 'fee for service' advisor. I've also said not to use someone from her bank.
Thanks again for the input.


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## Longtimeago (Aug 8, 2018)

I would have thought the first question is what does she want to get out of her money? The assumption being made is that she wants to invest it, get a return and then draw down the capital over a period of time such as 25 years. That is just an ASSUMPTION.

What if for example she has had a dream all her life of going on a round the world cruise for a year? Or, she may be happy just continuing to live life as she does now and she may already have enough income to do that from pensions, CPP, OAS, etc. She may have no need for more income at all. There is nothing to tell us any of that. Maybe she should just gift the entire amount to her children now. Who knows what her goals are?

Here is a 245 day world cruise that starts at $118k. If that is something she has dreamed of doing, what does that do to any advice being given. https://www.vikingcruisescanada.com...ions/world-grand/2020-world-cruise/index.html

I say, blow the bundle unless she needs more income for everyday living.


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## AltaRed (Jun 8, 2009)

What part of


> my friends mother sold her house recently and has about $300,000 to invest for her retirement.


 did you not understand from the original post? Why would you second guess what the OP has posted?


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## lonewolf :) (Sep 13, 2016)

She should probably look into to an annuity & maybe holding a portion in gold maybe use gold money. 300,000 is not much so would have little to no stocks. As she gets older she could scale the gold holdings into an annuity as the monthly payments would rise as she gets older plus less time to live the smaller the window for the system falling apart & the less that would be need to survive less years. Dont want to die leaving to much on the table.


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## Longtimeago (Aug 8, 2018)

AltaRed said:


> What part of did you not understand from the original post? Why would you second guess what the OP has posted?


LOL, because I am all too familiar with how often people don't know the right question to ask. All forums are full of what appear to be simple, straightforward questions that in fact are made on assumptions.

In a travel forum, someone may ask, 'what is there to see and do in X' and no one thinks to ask FIRST, 'what are you interested in seeing and doing, going to X may not be the place to go for that.' 

I've learned in forums, not to ASSUME anything but instead to question any potential assumptions first. Only after the potential assumptions have been shown NOT to be assumptions do I then want to move on to suggestions of how to achieve whatever the goal is.

In another current thread here you will be aware of, someone wrote they were looking for a place to retire and had a couple of choices they wanted to ask for opinions on as to suitability. The ONLY criteria given in determining suitable was 'proximity to family'. Then it turns out later in the thread that there are no immediate family, only extended family and the reason for wanting proximity was so there would be someone who might help out if the writer became unable to deal with their own affairs. At the same time, the writer is talking about retirement in their 50s. To me, the OP in that thread was misleading the readers and the readers were making assumptions based on the 'simple' question as asked. You don't decide where to retire in your 50s based on some future event that might see you needing some help with your affairs that is likely to be 20 plus years away still.

I have simply seen far too many posts in forums where assumptions turn out to be misleading. Asking for clarity FIRST rather than accepting what MIGHT be a potential wrong assumption is something I have just learned to try and do rather than wasting time answering a question as asked and then finding out later that it was a waste of time to do so. People sometimes don't know that they don't know and need help in realizing that.

We don't know what the woman this thread is about wants, we only know what the writer has asked on her behalf. I prefer to know what the woman wants before offering an answer. To do that, I have to ask the writer to go back and ascertain with CERTAINTY (or tell me she already has) what the woman wants to get out of her money. More income to spend in her retirement, preservation of capital to be able to leave it to family, knocking off some bucket list things, whatever. I know what I don't know, the answer to that question.


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## Longtimeago (Aug 8, 2018)

lonewolf :) said:


> She should probably look into to an annuity & maybe holding a portion in gold maybe use gold money. 300,000 is not much so would have little to no stocks. As she gets older she could scale the gold holdings into an annuity as the monthly payments would rise as she gets older plus less time to live the smaller the window for the system falling apart & the less that would be need to survive less years. Dont want to die leaving to much on the table.


See this is part of what I mean by assumptions. The woman in question has no investment experience according to the OP. She may not want to do anything that she sees as 'complicated' or 'complex.' Your advice may be sound financial advice lonewolf but it may not be the best advice for the PERSON in question given her personality. Your advice if given to her might scare the bejesus out of her. 'Annuities, gold, gold money, scale gold holdings, system falling apart, survive, die leaving money on the table.' 

It might suit her far better to just stick it all in a bank account, collect the interest and not worry about it. Simple, easy to understand, safe, easy to do. It might not be the best financial advice if the goal is to make money but it might be the best advice for HER.

And by the way, she might WANT to leave it all on the table for her children, you don't KNOW.


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## AltaRed (Jun 8, 2009)

The advice is for her to see a fee-for-service planner to sort it all out....


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## lonewolf :) (Sep 13, 2016)

AltaRed said:


> The advice is for her to see a fee-for-service planner to sort it all out....


 It is not really that simple if the fee for service planner knows what they are doing why are they working for money ? Who trains these people ? Universities teach courses that even include talking snakes 

For the most part school is useless i.e., was listening to Martin Armstrong & I remember him saying a major university wanted him to teach economics he asked them why & the university told him what they were teaching was not working.


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## Eclectic12 (Oct 20, 2010)

lonewolf :) said:


> It is not really that simple if the fee for service planner knows what they are doing why are they working for money ?


Because they enjoy it?
Because they want more income to fund their retirement?

I don't know many who have the resources and/or credit to invest without some source of capital like a business or job.


Cheers


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## newfoundlander61 (Feb 6, 2011)

"The advice is for her to see a fee-for-service planner to sort it all out...." Yes this is the best route for this lady. The video link is worth watching,*some* of the info would be worth hearing. Video is towards bottom of web page.

https://www.moneysense.ca/columns/ask-moneysense/what-to-look-for-when-choosing-a-financial-advisor/


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## Brian K (Jan 29, 2011)

I agree with the Independent Fee for Service CFP. Try 2 of them to see what is in common and pick what makes her most comfortable. I was financially planned by someone linked to Sun Life (for free) and all I got was that I needed to buy more and more insurance - from her of course. No plan from her other than that. I understand the need for insurance when young when there are kids around too. But I wanted to know how to maximize my income and minimize taxes, not a way to spend more of what I had! 

A CFP should know/recommend what portion of income should be dividends and interest so as to maximize CPP, OAS and GIS benefits. Blue chip companies or ETF's based on solid companies or sectors might be good for some portion as long as the overall monthly income is enough to live on, then how the Capital goes up and down is not as crucial. $300K at 5% is $15K and if she can get CPP that could be $600 to $1000 per month plus whatever OAS and GIS is available that may be sufficient to enjoy life.


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