# Sequence-of-returns in LIF withdrawals from Bonds



## Ben Tunite (Aug 30, 2016)

I have all of my LIF/RRIF in Mawer bonds (87% Maw100 Canadian, remainder Global) and started withdrawing in late 2017 as recommended by my financial planner. I bought Maw100 at the high in July 2016, YTM is 2.5% and duration 7.5 yrs. Last year I was 59 and withdrew the minimum ~3.1% (~$16,600), remaining bonds ~$520k. As of today the bonds cumulative performance since inception is about -3% and annualized RoR% is -1.8%. I shared some details in 2016 in this thread 
http://canadianmoneyforum.com/showt...0-or-self-direct-VAB-in-LIF-and-RRIF-accounts
and received many beneficial comments, thanks. 

I recognize rate prediction is futile, and that holding bonds over long time periods negates the effects of shifts higher in the yield curve. But, given that rates have increased 0.75% since 2016 and given I am now withdrawing, even without additional interest rate increases, I am concerned that I am now suffering a sequence-of-return issue. The Mawer advisor recently said 
1) leave the LIF/RRIF 100% bonds, switching even a small portion to stock funds too risky at this point
2) since I don't need the withdrawals to live on simply buy back bonds, or maybe stocks if they've dropped dramatically, in my non-reg account.

I am wondering if I should stay the course with Mawer or look to self manage the RRIF/LIF with some combination of bond ETF, GICS and floating-rate and senior-loan funds (of which I know little, things like MFT, HFR, more risky ZFH...) ? thanks...


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## OnlyMyOpinion (Sep 1, 2013)

Hmm, tough row. 
As I understand it, you chose to 'melt down' your LLIF starting at 59, but with the poor performance to date of MAW100 and MAW140 you are second quessing whether to sell and redeploy. But, you are talking about redeploying into a DIY bond etf, GICS, etc.

Key I think is your comment that you don't need the RRIF w/d's as income - is this only because of your 3yr (now 2yr?) cash wedge?
I think selling only to buy back into other fixed income would be a mistake. It would just crystalize losses and flush the (modest) YTM you will get if you stay the course, and you able to reinvest the w/d's and continue to grow them. 

I'm inclined to tell you to stay the course, but I don't know all the other moving parts of your assets and sources of retirement income. I'd be running various scenarios, including what I can do with the annual payments (monthly income fund, bank stock dividends, etc.)


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## Ben Tunite (Aug 30, 2016)

correct, income not needed from LIF withdrawal as cash wedge is being fed by dividend paying stocks that I self direct at TD DI. My financial planner said to start early melt-down of LIF for tax purposes.


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## GreatLaker (Mar 23, 2014)

If I understand right you have significant other funds in non-registered accounts. You should look at the returns of your portfolio across all your accounts, not on individual accounts. If you have a "bake-off" comparing returns on an equity based non-registered account vs a fixed income based RRSP/RRIF/LIF, the equities will "win" most of the time. 

Cover the basics. Develop a portfolio with an asset allocation across all accounts that is in alignment with your risk tolerance and timeline. You say you don't need the RRIF withdrawals to live on, so just rebalance your portfolio back to your target allocation. You might not like the returns of your bond funds, feeling they are dragging your portfolio down. How would you feel if there was another crash like 2000 or 2008? Or even a 20% equity bear market that happens frequently? Your fixed income would look good then.

Also remember that when rates rise, fixed income performance drops. But then as older bonds mature or are sold, new bonds are bought with higher rates, so returns go back up.

Needing to withdraw from a RRIF does not mean you need to spend the money. You can just transfer in-kind to a non-registered account. (Of course you will need cash to pay the taxes, either from cash on hand or liquidating some securities). Perhaps you cannot do that because your RRIF is all in Mawer and non-registered is in another broker. But money is fungible (Emphasis on FUN). So if you can't transfer in-kind from Mawer to your non-registered, then sell some Mawer fixed income in your RRIF, transfer the cash to your non-registered and buy some fixed income there. You solve the need to withdraw from the RRIF, and your asset allocation remains where you want it. 



> I am wondering if I should stay the course with Mawer or look to self manage the RRIF/LIF with some combination of bond ETF, GICS and floating-rate and senior-loan funds (*of which I know little*, things like MFT, HFR, *more risky* ZFH...)


Hmmmm....... you have a dilemma that the safe fixed income part of your portfolio is not doing well. So you want to sell fixed income and buy *more risky* securities *of which you know little*. Ummmm.... why are you considering risky securities about which you have no knowledge? Does not sound like a great plan.


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