# Today my first day of retirement - Advice needed



## jman123 (Jan 28, 2015)

Greetings,

After almost 44 years working I decided to retire two weeks ago and Friday was my day. I was lucky in that I enjoyed my work for probably 90% of the time and I kept on for the 4 or 5 last years because of the money. Also, it helped in that I was able to work from home those last years and I cut my working days from 5 days to 4 days to eventually 3 days a week. 

I probably never thought of retirement until I was in middle 50s when the stress was starting to build up. I worked in mainframe computer support and there were plenty of late night calls and software/hardware installations performed in the middle of night. I don't miss that but it sure stirred up the blood. 

I remember on my first job older colleagues around me would talk about retirement. I used to say to them "Why, retire? We're having so much fun!". Now , maybe I can see their point. My philosophy is if you truly enjoy what you are doing keep doing it. And if you don't like what you are doing try to find something else. I guess that is easier to say than do. I have 2 children, my son is a chip off the old block, who loves his software programming job but my daughter who is a librarian does not. It is a job to her. So, for her and I guess a lot of people hobbies/travel and stuff make up the fulfillment that she does not get from work and probably retirement is that pot of gold at the end of the rainbow.

Another observation before I ask for some advice. I was lucky in that both my wife and I were both savers over the years. I started working 1975 when I was 25 years old and make a grand total of $8K per year. Switched a few years later because another company offered me $11.5K per year. Wow! Left there after 22 years making slightly more than $60K a year then on my last job , took a pay cut, started at $60K in 1999 and when I retired on Friday, I was making about $78K per year. Last job was non-unionized and still feel I got screwed salary wise as probably I had a less than 1% annual pay increase over the last 20 years. But hey, I loved the job and money was not so important.
Even with all that we were frugal and managed to buy a home, have 3 children (unfortunately I had a daughter who was severely mentally retarded and died 12 years ago just before she turned 22 years old) and save about $1M in RRSPs and approximate $200K in TFSAs and non-registered funds even though my wife stopped her career to take care of my daughter and our other 2 children. 

It's great to be a saver but sometimes difficult to reverse that now that you see the great reaper is not that far away. It's always so nice to see that nest egg grow and there are some (including my wife) who just don't want to see it drop. Live on the principal, they say. That's why, in some earlier posts I would ask on how to get 4% return,dividend income etc...
Now , me and my wife of 40 years are just not on the same page with regards with what the future looks for us. I want travel and adventure with lots of activities, she is worried about care when we need to go to the residence in our old age or leaving monies to the kids (hopefully the kids will be in their 60's when we die and I ain't paying for their retirement). Doesn't want to travel so now I have to think on looking for a travel buddy (oh brother!). Also, will probably complain on how much it's costing us. 

Now, as I am sitting at my kitchen table, Monday, March 25th, 2019, day 1 of my retirement I never believed this day possible. Too bad my Dad who only lived till 62 years old and was so looking forward to retirement never got there.

I hope pickleball, gym, bowling, swimming at the pool (summer), some hiking, reading, chores, reading, a little computer programming, learning to play the guitar will fill my days and I can also convince my wife to do some traveling will keep putting a smile on my face like the one I have now. 

Anyways , enough of my autobiography. Now I would like to talk about money and taxes.

So, I'm figuring and correct me if I wrong, that we should look into evenly splitting our income from now on and each have a gross income somewhere below the 40-43K line
based on some of the tax tables I have seen for Canada and Quebec. That would be the 15% tax rate. I figured above that I would be in the same tax bracket when I was working and that would defeat one of the arguments about saving in a RRSP. Is that split so terribly important? Does a $50K/$30K split that much worse than a $40K/$40K one? 

Since I only collect QPP now ($11K per year) and have held off taking OAS so far plus my wife's income is about $16K gross and having a base monetary requirement of 40K per year to live along with and not paying too much taxes at 71 when hopefully my RRSPs will have not changed that significantly it boggles my mind on exactly how I should proceed. 

Right now, all I am thinking is opening a small RIF and taking out 4K so I can split this pension with my wife and get the pension income tax credit. Then , I figure, if I'm low on dough (still have monies in cash in savings account both in and out of of TFSAs) I will need to tell my financial advisor/broker to start selling some mutual funds or produce more income within my accounts so I can live on the dividends without selling any of my investments. Or I can make up my monetary needs by using my saving accounts but probably not my TFSAs. All the while looking at which accounts to use and this even income split between the two of us. 

So, as a newbie retiree (Yay!) what sage advice do you have?

Thanks


----------



## Dilbert (Nov 20, 2016)

Congratulations, I’m eight months into retirement and I worked for 44 years, as well.

Good idea about having a small RIF in order to benefit from the pension tax credit.

I have found it helpful to consult with a small local Financial services company. They have been most helpful with not only tax preparation, but also in planning strategies to minimize paying unnecessary taxes for my wife and me. 

The service isn’t cheap, but well worth it, IMHO.


----------



## Plugging Along (Jan 3, 2011)

Congratulations JMAN! Enjoy this next chapter of your life. Sounds like you have worked hard, saved hard, managed have a lovely marriage and a family. Those are quite the accomplishments! Now, it's just a new adjustment with you and your wife. Give it some time, and the nice thing is you don't have to rush. 

I don't have the full answers about the taxes in Quebec. The difference between a $50K/$30K split is about $385 more in federal taxes (Sorry I couldn't find the tables for Quebec) than if you did a $40/40 split. I can't give a more detailed analysis without looking at all the numbers laid out in terms of what you should take out.


----------



## Longtimeago (Aug 8, 2018)

A good introductory thread, congrats on your retirement jman123.

As an early retiree who has now been retired for 30 years, I would say start by slowing down and looking at one thing at a time. Separate threads on individual topics will get you much more focused input and attract different responders. Some here love nothing more than exercising their income tax expertise while others feel the same about what to do with your free time now that you have it. 

You are on day one and my advice is to do nothing for at least a month. Just relax and enjoy your freedom. A favourite saying of mine is 'you can't see there from here'. It refers to all the things that change after you retire and that you were not able to and still can't on day one, see yet. As you get into your retirement, these will become apparent to you over time. 

I see several topics in your introduction of yourself here as a retiree. 

1. Differing desires re travel.
2. Differing desires re capital protection vs. income generating.
3. How to handle income tax going forward.
4. Income requirement for living expenses, which also means thinking about discretionary spending income separately as well.

Each topic should be dealt with separately as it is all too easy to confuse your readers and yourself when you combine them as you have in this thread.


----------



## jman123 (Jan 28, 2015)

Longtimeago said:


> A good introductory thread, congrats on your retirement jman123.
> 
> As an early retiree who has now been retired for 30 years, I would say start by slowing down and looking at one thing at a time. Separate threads on individual topics will get you much more focused input and attract different responders. Some here love nothing more than exercising their income tax expertise while others feel the same about what to do with your free time now that you have it.
> 
> ...


Yes, I think I will take your advice as well as another one on this forum. I will slow down and leave this for a month. 

As you noted I have different topics to address. Biggest issue for me is not so much the money but the switch from saver to spender (most especially for my wife). 

My philosophy now is I saved it for retirement now it's time to spend it (the problem is how carefully or not) 

All through my working life I never paid much attention to money. I had a financial adviser, he made me money, always maximised my RRSP and I was focused and happy in my career. For the last few years it's been money first, job second. 

Anyways, I realize this a Retirement money forum and not a "Dear Abby" column so will get more specific in asking questions regarding income and taxes in further posts as well as reading what others have experienced.

Regards,

Mike


----------



## jman123 (Jan 28, 2015)

Plugging Along said:


> Congratulations JMAN! Enjoy this next chapter of your life. Sounds like you have worked hard, saved hard, managed have a lovely marriage and a family. Those are quite the accomplishments! Now, it's just a new adjustment with you and your wife. Give it some time, and the nice thing is you don't have to rush.
> 
> I don't have the full answers about the taxes in Quebec. The difference between a $50K/$30K split is about $385 more in federal taxes (Sorry I couldn't find the tables for Quebec) than if you did a $40/40 split. I can't give a more detailed analysis without looking at all the numbers laid out in terms of what you should take out.


Thanks for the info on the tax situation. I do have uFile (did my taxes for 2018) and am going to try to put in different scenarios regarding possible gross incomes for 2019 to see what it comes out with pretending I am one year older. My last T4 has so many boxes to re-enter the numbers in UFile. I will probably get my last pay check next week and will to have figure out how to enter some of the numbers on the YTD info there with UFile. Then to plug in my QPP and maybe I'll take my OAS and then try to figure how to do the same for my wife's pay. 

A learning experience. I think once someone suggested StudioTax for what-if scenarios but I think it doesn't handle Quebec.


----------



## scorpion_ca (Nov 3, 2014)

Would you care to share what type of investment you have such as mutual funds, ETF or stocks?


----------



## Gruff403 (Jan 30, 2019)

Congratulations JMAN123 on your retirement! Enjoy the next phase. I found it hard to adjust to moving from a saver to a spender as well. Found if I continued to pay myself first into my TFSA that helped. That builds up to become my foolish play money spent on something fun. Do not rush into anything as there are tons of moving parts to this phase. Take your time and enjoy the hard earned rest. My dad passed at 67 so one of the first things I did was get a full physical - all is good there. I also spent a lot of time lining up my health care provider for dental and medical needs etc... Health before wealth.
Taxtips.ca has some tax calculators for free that are easy to use - including one for Quebec. I used it to run lots of scenarios. I also used my 2017 tax program but that took more time.
Do you need 40K total or 40K each???
If you have a Million in RRSP I would get some solid tax advice on how to start moving that out before age 71. At age 71 you must take out 5% minimum so it might make sense to pay for professional advice. That percent only goes up each year. Nice problems to have. Good luck and enjoy!


----------



## AltaRed (Jun 8, 2009)

13 years into retirement. Enjoy the freedom and don't be in a rush to fill your time. It should come naturally as you discover what motivates you to get up in the morning and to enjoy the day. A big part of it is a re-alignment of one's relationship with one's spouse, including roles and responsibilities, and activities, both together and separately. My retirement schedule didn't get to a reasonable 'steady state' until about 3 years into retirement. Now 10 years after that, much of what I currently do isn't what I was doing 10 years ago.

P.S. Don't be in a rush to re-align your portfolios and how they are managed, changes in budgets, etc. etc. It should be a smooth transition based on an outline of a retirement plan you prepared for yourself pre-retirement. It is fun to do if one doesn't try to build Rome in a day and it will change from pre-retirement pre-conceived notions of where one wants to spend their money.


----------



## jman123 (Jan 28, 2015)

Gruff403 said:


> Congratulations JMAN123 on your retirement! Enjoy the next phase. I found it hard to adjust to moving from a saver to a spender as well. Found if I continued to pay myself first into my TFSA that helped. That builds up to become my foolish play money spent on something fun. Do not rush into anything as there are tons of moving parts to this phase. Take your time and enjoy the hard earned rest. My dad passed at 67 so one of the first things I did was get a full physical - all is good there. I also spent a lot of time lining up my health care provider for dental and medical needs etc... Health before wealth.
> Taxtips.ca has some tax calculators for free that are easy to use - including one for Quebec. I used it to run lots of scenarios. I also used my 2017 tax program but that took more time.
> Do you need 40K total or 40K each???
> If you have a Million in RRSP I would get some solid tax advice on how to start moving that out before age 71. At age 71 you must take out 5% minimum so it might make sense to pay for professional advice. That percent only goes up each year. Nice problems to have. Good luck and enjoy!


Will take a look at Taxtip.ca . Thanks for the heads up. I have a financial adviser but frankly I'm a bit disappointed. I think taxes is not his strong point and this Naviplan software he uses seems to give some strange results and seems not to take into consideration pension sharing.

My expenses total last year were 37K. With the loss of some company benefits we thought to round up our expenses to 40K. I want to add $10K for travel and $10K for unforeseen expenses (house repairs) to have an income of 60K net. So, I figured maybe 70K gross but when I mentioned to my wife that that would involve taking out a bit of capital to get that she freaked out. I backed off on that and now we will start with a small RRIF , taking out 4K at first to split and get the income tax credit. Then add to RRIF every so often and take out more as we go along. Hopefully less painful (for her). Also, I guess I will start my OAS to also ease the pain of lost income. 

Probably won't need $70K gross and I guess what we don't spend wlll go into our TFSAs (for our retirement, sigh) 

First , I thought of holding off on our OAS's but honestly for our marriage's sake maybe it's best to maximize our income through OAS and QPP and take the rest from our RRSPs and my LIRA. I just wanted to have less in my RRSP at 71 so when converted to a RRIF I'll be paying less tax. 

I figure with the government pensions for both of us along with a small work pension for her our gross income from that could be about $30K a year starting next year. If we have $1M at 71 at RRIF time then will need to take out $50K or so and together we would have a $80K gross income. If we can split 50/50 maybe that would be gross $40K each and maybe the tax hit wouldn't be so bad after all and I shouldn't fuss about whether I should be taking more now then when I have no choice but to. 

Will let it stew for awhile. I have a friend who is a CA and plan speak to him after tax season is over.


----------



## Gruff403 (Jan 30, 2019)

jman123 you are absolutely rocking it. Correct my numbers if I missed something:
Your QPP: 11 000
OAS for both of you: 14 424 probably more since you haven't started yet
RRSP @ 4% 40 000
TFSA and Unreg Acct 8 000
That easily puts you over 73 000 Gross without ever touching principal EVER! 
That does not include any capital accessible from your house or other savings or government programs. WOW Most people only dream about these problems.
Well done!


----------



## james4beach (Nov 15, 2012)

Congrats jman on the retirement, and thanks for sharing your story too. It sounds like you're in a great position here!

Some thoughts. The terms "tapping into capital" or "not touching principal" are used a lot, they actually don't mean much. You mentioned that your wife was sensitive to the idea of taking something out of capital. Many people have strong feelings on this and it's often misplaced, because the terms really don't mean anything.

Any withdrawal out of savings, even taking dividends, is in fact tapping into capital. No matter what you do, you will be drawing out of your capital... it's inevitable, and it's OK. There is a very popular, but incorrect, perception among many people that "if you only live off dividends then your capital is not being touched and the capital will last forever". It's a flawed notion.

(There is currently a craze around this, which is why I'm making this point... trying to get ahead of the misinformation you will receive)

Instead, the key factor is _how much_ you withdraw out of your capital, not whether it's a dividend or interest. In practice, living off dividends is often sustainable but only because the dividend amounts being spun off are relatively small. The danger of getting sucked into this line of thinking is that you may start to believe that higher dividend yields mean you can _arbitrarily create more income_ while preserving capital, as if there's something magic about the dividends. People sometimes then start chasing higher and higher yields, landing them in trouble.

The dividends are beside the point, and not a key factor in sustainability. The correct way to approach this problem is to (1) invest properly in a diversified, low-fee portfolio, (2) make sure you don't withdraw too much each year, and (3) don't get caught up on the term "not touching principal"

A resource: https://www.fa-mag.com/news/why-earning-investment-income-is-overrated-12462.html


----------



## timemoveson (Nov 22, 2017)

james4beach said:


> Congrats jman on the retirement, and thanks for sharing your story too. It sounds like you're in a great position here!
> 
> Some thoughts. The terms "tapping into capital" or "not touching principal" are used a lot, they actually don't mean much. You mentioned that your wife was sensitive to the idea of taking something out of capital. Many people have strong feelings on this and it's often misplaced, because the terms really don't mean anything.
> 
> ...


J4B's advice is articulate and useful so I recommend you try to absorb it. 

There are others, me included, who have won the game at a high financial level and do aspire to "never touch principal" to extend our wealth indefinitely while paying for whatever lifestyles we chose in retirement. 

But, you can do this at any financial level if you understand the concepts. When you have "enough" money in your asset base supplemented by other guaranteed income flows, *as you do*, you could do exactly that if you chose to. 

Just don't take the saying too literally. You can pretty much take incomes or capital interchangeably at your level. Taxes can be mitigated. You are already getting some insight into that. 

Capital (your actual assets) and your other income streams are largely fungible - money is money. Aside from what kind of account it sits in and what tax effect there is in withdrawal, it doesn't really matter much over time if it comes from a stock, bond or ETF unit *sale*, or from a dividend, interest or REIT distribution *payment*. 

It's largely the same in the end in terms of the impact on your wealth, how you pay for your lifestyle, and the health of your financial plan in retirement.


----------



## AltaRed (Jun 8, 2009)

Along this theme that capital is capital, i.e. money is money, I suggest the OP take a look at Variable Percentage Withdrawal methodology at finiki.org here https://www.finiki.org/wiki/Variable_percentage_withdrawal to study a concept of what one CAN safely withdraw from a portfolio and not run out of money. The one caveat is that one's annual withdrawal can vary with how the portfolio performs each year, but if one is in the position where staying within the percentages is easy to do, variable withdrawals will not be a difficult concept to live with.

Some retirees want to have a portfolio with a disproportionately high income stream relative to capital appreciation because it is an easier concept to grasp and implement simply using the investment income thrown off by a portfolio than by selling holdings, and it feels like one is not tapping into capital, but technically whether one is tapping into investment income or capital appreciation is not very different. If Stock A's business performance is such that it gets a 10% return on its own capital, you should be indifferent to whether that 'return' comes to you in the form of stock price appreciation, or via a dividend. That all said, many of us in retirement find it far more comfortable and easier to manage if most of what we need from our portfolio comes in the form of stock dividends, ETF distributions, or bond/GIC interest. 

It is perfectly okay to default to this investing strategy BUT be careful not to 'overreach' on yield. High yielding securities, high relative to their peers, often means the market does not like the higher risk of such securities, whether it be a high yield (junk) bond, or a stock with a high yield, e.g. exceeding 6-7%. Many investors get sucked into high yield only to risk having those securities implode due to faulty business models, or a business model that is not going anywhere. Most of us have all participated at one time or another in high yield securities that have flamed out. Per Hill Street Blues, "be careful out there".


----------



## james4beach (Nov 15, 2012)

Nice points timemoveson and AltaRed, I totally agree.

There can even be the problem of a retiree saving too much and not spending enough. For example, say that a retiree keeps their retirement savings in a diversified balanced fund and observes that the fund spins out 2% in distributions (pretty typical of a diversified portfolio these days). The retiree might think, well if I just try to live off that 2% then it's sustainable... so they make do with whatever the fund distributes in dividends / interest, afraid to take out more since that would involve "selling".

This person would be over-saving, potentially depriving themselves of access to income or vital life comforts. As AltaRed says, look at the variable percentage withdrawal technique. Make sure you don't withdraw too much or too little from your investments.


----------



## OnlyMyOpinion (Sep 1, 2013)

Congats to the newly retired.

Jman indicated that most of their savings are in their RRSPs (_about $1M in RRSPs and approximate $200K in TFSAs and non-registered funds_). So it sounds like most of their income beyond QPP/OAS will come from their RRIF's. 
RRIF prescribed withdrawls are a VPW scheme, so they will be following AR's good advice whether they intended to or not. 
Whether the withdrawl gets fully spent or saved in large part is a different question, and may become a point of 'discussion' among the mr & mrs. 

Hopefully preparing an illustration of their various income sources over time, long into retirement, can help them both feel comfortable with spending plans.


----------



## jman123 (Jan 28, 2015)

james4beach said:


> Congrats jman on the retirement, and thanks for sharing your story too. It sounds like you're in a great position here!
> 
> Some thoughts. The terms "tapping into capital" or "not touching principal" are used a lot, they actually don't mean much. You mentioned that your wife was sensitive to the idea of taking something out of capital. Many people have strong feelings on this and it's often misplaced, because the terms really don't mean anything.
> 
> ...


First, thanks to all who congratulated me. Much appreciated. 

I think I have seen the light and will not fixate on dividends and this 4% rule. Thanks James4beach on the link to the article in your post. Couldn't see some of the graphs/pictures and honestly have some trouble understanding some of what was written. I think the gist of it is when it states: 

"The prospective client that started me on this discussion can be forgiven for wanting to live off interest and not touch principal. It is an extremely appealing idea. However, it is more likely that seeking an adequate total return from a well-balanced, diversified portfolio, implemented and managed appropriately, will be more successful at generating what clients really need -- cash flow. It shouldn't matter much from where the cash flow comes."

Although I don't quite understand the following line:

"A simple way to make this point is to show interest-obsessed clients how many zero coupon bonds have better yield to maturities than corresponding traditional bonds. If they get that, they may understand the bigger picture quicker."

As I have I have never bought bonds directly (only Canada Savings Bonds in the 1980s) maybe someone can explain this to me?

In any case, I will contact my financial adviser and ask him his approach to providing me income. He did mention that he could arrange monthly income but we never got into the details.

He handles approximately 80% of my portfolio ($800K), all RRSPs and my LIRA.
I handle the other 20% as well as our TFSAs using the Couch Potato Portfolio. I would do it all myself but my wife insists on someone other than me managing the bulk of our nest egg. It's a price to pay to maintain marital tranquility.

I know that my wife will probably want to start at the 2% withdrawal rate but maybe over time if the market does well and the value of the nest egg isn't affected then will probably amp up the withdrawal rate. I see from the VPW table that AltaRed advised me on , that for age 66 , the rate of withdrawal is anywhere from 4.5% to 5.3%
but I think that would be too big a pill for her to swallow. 

I will definitely try to not to over-save as James4beach mentions. I hope that over time my wife will get comfortable in me handling our precious nest egg since to be honest I have been handling it without any interest on her part for the last 40 years. Has anyone else experienced this? That their spouse suddenly "woke" at retirement (lol). 

Also, I think I will contact Service Canada and start collecting the OAS (even though my adviser suggested, based on this Naviplan software, that I should wait till April 2020 to get it). Again, additional income to calm her fears regarding any decrease in the nest egg. I don't know if in the long run it will matter greatly whether I take it now or when I'm 71. She wants to wait till she is at least 65 to collect QPP and OAS. Her first OAS check will come in January 2020. We found out she could start collecting her work pension also when she hits 65 or she could delay that.


----------



## like_to_retire (Oct 9, 2016)

jman123 said:


> "The prospective client that started me on this discussion can be forgiven for wanting to live off interest and not touch principal. It is an extremely appealing idea. However, it is more likely that seeking an adequate total return from a well-balanced, diversified portfolio, implemented and managed appropriately, will be more successful at generating what clients really need -- cash flow. It shouldn't matter much from where the cash flow comes."
> 
> Although I don't quite understand the following line:
> 
> ...


Traditional bonds throw off their coupons as cash, but a zero coupon bond is simply sold at a discount to the final face value such that all your investment enjoys the full internal rate of return, so you can compare these two situations with a company stock that throws off a dividend in cash versus a company that offers no dividend and re-invests that money in itself (and then you sell shares to get your income). The lesson is that the latter growth company will do better than the dividend company. I could argue the other side, but that the crux of the lesson.




jman123 said:


> I know that my wife will probably want to start at the 2% withdrawal rate but maybe over time if the market does well and the value of the nest egg isn't affected then will probably amp up the withdrawal rate. I see from the VPW table that AltaRed advised me on , that for age 66 , the rate of withdrawal is anywhere from 4.5% to 5.3%
> but I think that would be too big a pill for her to swallow.


No one says you need to withdraw the entire amount. It's just providing you the maximum to take. If you take less, then you may have more the next year.

ltr


----------



## OhGreatGuru (May 24, 2009)

There is too little space to address all the issues in front of you. But:

1. As others have said, don't rush. It takes time to destress from the work cycle, and develop other activities. You are only a few days into retirement.
2. Changing from a a 40+ year saver to a (moderate) spender is hard to do overnight. If you worked in computer mainframe support I would assume you know how spreadsheets work. Develop a spreadsheet to forecast your income and expenses ahead 10-15 years to assist in persuading your spouse that yes, we can afford to live a little, and still be financially secure.
3. Actually cost out care. In most provinces Long-term Care (LTC) is cheaper than many people expect, because it is heavily subsidized by the province. Seniors' residences, on the other hand, are expensive (when you can't manage a home anymore, and might need some moderate in-home care, but aren't frail enough to qualify for LTC)
4. You can't be completely ignorant of investing if you have $1M in RRSP and $200K in other savings. But you are right - now is the time to think about how to turn these savings into a reliable income stream. There are many threads here on this subject - it would be premature to start handing out advice to you at this stage.
5. You can't make a happy traveller out of a 40-year homebody overnight. (Who knows? You may decide it's not all it's cracked up to be as well.). Start off with something modest and non-stressful and see how it goes.


----------



## OhGreatGuru (May 24, 2009)

jman123 said:


> ....
> Right now, all I am thinking is opening a small RIF and taking out 4K so I can split this pension with my wife and get the pension income tax credit. Then , I figure, if I'm low on dough (still have monies in cash in savings account both in and out of of TFSAs) I will need to tell my financial advisor/broker to start selling some mutual funds or produce more income within my accounts so I can live on the dividends without selling any of my investments. Or I can make up my monetary needs by using my saving accounts but probably not my TFSAs. All the while looking at which accounts to use and this even income split between the two of us. ...


The pension credit is one thing. But you do realize that RRIF income over age 65 can be split between spouses like pension income? If your RRSP is significantly larger then your wife's, this will enable you to balance your incomes to the best tax advantage.


----------



## AltaRed (Jun 8, 2009)

I agree that VPW just says what you can withdraw and use. As someone said earlier, minimum RRIF withdrawals essentially are the same thing, i.e. they must be withdrawn but do not have to be spent, i.e. some of it can re-routed to funding TFSA contributions each year.

I use VPW as a guidepost of what I can withdraw and spend, but I have rarely hit those numbers. Only a few times with $35k vacations. The key is that it is annually variable taking into account portfolio performance and one's asset allocation. The old 4% SWR rule is completely outdated and useless other than a rule of thumb when one was accumulating a portfolio, e.g. save 25 times your spend rate to have an adequate retirement portfolio. Many financial advisors still use this and it is egregious that they do. It is inflexible, subject to sequence of returns risk and doesn't take into account what markets may do in the future (looking in the rear view mirror all the time doesn't bode well for staying on the road). Some FAs modify it by saying withdraw 4% of one's portfolio at the beginning of each year, which does accommodate portfolio performance of the past year, but that one will likely result in an excessive residual amount in one's estate. Bottom line is there are better tools available than the old 4% SWR methodology.

I worry about an FA who says s/he can set up a monthly income for you. WTF does that really mean? I'd ask for a detailed explanation.

Lastly, it is quite normal for one to be conservative with a withdrawal plan going into retirement. There is a normal human fear of overspending after a lifetime of working hard to build that portfolio. So be conservative at first with perhaps a draw only on pensions and investment income. After 2-5 years, you will find a rhythm AND you will find the overall value of that portfolio could well be growing due to capital appreciation rather than depleting. 

Anecdote: I retired in 2006, got a divorce in 2008 and weathered the financial crisis of 2008/2009. Quite the roller coaster as you might imagine and I was a conservative spender those first 3-5 years after retirement. However, by 2011, I had found a comfortable withdrawal rate based on how my portfolio was doing year after year. My spend rate the last 3-4 years is about 2.5 times what I was spending back in 2008/2009 and is based on VPW providing me with the boundary conditions. The crystal ball going forward is 'very clear' from a financial perspective.


----------



## james4beach (Nov 15, 2012)

AltaRed said:


> I worry about an FA who says s/he can set up a monthly income for you. WTF does that really mean? I'd ask for a detailed explanation.


Same here, and don't rush into anything. Watch out for an advisor who is trying to steer you into some kind of product which generates a regular monthly income. Most of these packaged and "convenient" methods of generating regularly monthly income come along with high fees and caveats. You should do tons of research into any suggestion they come up with. Go and investigate it yourself, learn the caveats and downsides. Ask at the forum here, etc.

I agree that it's great to start conservative with all of this. It's absolutely a good idea to withdraw very little initially.



jman123 said:


> "A simple way to make this point is to show interest-obsessed clients how many zero coupon bonds have better yield to maturities than corresponding traditional bonds. If they get that, they may understand the bigger picture quicker."
> 
> maybe someone can explain this to me?


Here's what I think the article is saying. He's trying to demonstrate that "total return" is the key thing. Compare two different 5 year bonds you might buy:
Bond A, buy for $20 K and it pays a coupon of 5% = $1,000 a year, with a yield to maturity of 2.0%
Bond B, buy for $20 K which pays zero coupon ($0 a year), with a yield to maturity of 2.1%

The numbers are fake but here's the point: both bonds cost the same amount today. Many people prefer bond A due to the "income" it provides and the regular 1K it pays out each year. With bond A, the total dollars you end up with at the end are $22,082. With bond B, there is no regular income throughout the years but it has a higher yield and you end up with a total of $22,190 in the end. So you're better off with bond B because it provides a higher total return, even though it paid $0 regular income.


----------



## AltaRed (Jun 8, 2009)

I think Bond B is actually a strip bond, bought at a discount to $20k but provides 2.1% yield to maturity ($20k in your example). That said, the effect is the same as per your example which is how a compound GIC works. All bonds are best in a registered account, but especially strip bonds because accrued interest must be declared on taxes each year even though nothing is paid out until maturity (like a compound GIC).


----------



## AltaRed (Jun 8, 2009)

james4beach said:


> Same here, and don't rush into anything. Watch out for an advisor who is trying to steer you into some kind of product which generates a regular monthly income. Most of these packaged and "convenient" methods of generating regularly monthly income come along with high fees and caveats. You should do tons of research into any suggestion they come up with. Go and investigate it yourself, learn the caveats and downsides. Ask at the forum here, etc.


FWIW, a relative of mine is into an 'RBC Managed Portfolio' with an RBC FA which pays out a monthly income for him and I believe he pays over 1% MER for that. That said, he knows he needs that hand holding since he has tried DIY and it didn't work for him. RBC no longer offers that particular product, i.e. not the same as those Managed Portfolio Solutions they peddle with MERs in the 1.8% range or so. 

I agree with James. Get some feedback from here first before signing up to anything of that sort. With $1 million to work with, % of AUM (all in, including fund MERs) shouldn't exceed 0.75% or so (that is already $7500 in annual fees). You could do much better than that with a robo-advisor like WealthSimple.


----------



## james4beach (Nov 15, 2012)

AltaRed said:


> I think Bond B is actually a strip bond . . . bonds are best in a registered account, but especially strip bonds


Right, and I did not mean to imply you should run out and buy strips or zeros (they must only go into registered accts) but was just pointing out that the total return is more important than the immediate income it produces. The message generalizes to other investments.

Here's a real world example, with covered call ETFs. Compare these two BMO funds:
ZUT, equal weight utilities index ETF, distribution yield 4.3% (income)
ZWU, covered call utilities ETF, distribution yield 6.2% (income)

ZWU appeals to a lot of people because of the massive distribution yield. And it really does pay out that much cash, so there is very strong cashflow. At first glance it might appear to be the superior investment for a retiree. However, look at the total return:

ZUT returned 7.77% annually over 5 years
ZWU returned 4.47% annually over 5 years

^ this is overall % return, adding distributed cash + share price

This illustrates that an investor shouldn't get hung up on that distribution yield (or dividend yield). The overall performance of ZUT is far superior, meaning stronger growth = stronger preservation of capital. The investor who got attracted to the high income of ZWU is worse off in terms of preservation & growth of capital and has lost money, in comparison.


----------



## AltaRed (Jun 8, 2009)

Indeed. That is the risk of 'running' to yield with blinders on. Always has been that way.


----------



## like_to_retire (Oct 9, 2016)

james4beach said:


> This illustrates that an investor shouldn't get hung up on that distribution yield (or dividend yield). The overall performance of ZUT is far superior, meaning stronger growth = stronger preservation of capital. The investor who got attracted to the high income of ZWU is worse off in terms of preservation & growth of capital and has lost money, in comparison.


Sure, but I'll add a thought to the opposite argument.

The overall total return of an investment never takes into consideration the share price volatility over the period measured. A low dividend yield stock, where the owner has to continually sell shares to match the income of the alternative high dividend stock may have to sell copious quantities if the share price is low when the income is required. The end result after a few years may indeed favour the high dividend situation as no shares required selling.

Just saying. 

ltr


----------



## AltaRed (Jun 8, 2009)

Okay, but one has more than a few holdings in a portfolio to avoid "having to" tap into that one stock or two. With a proper AA and number of holdings, these things tend to take care of themselves. This is the principle behind VBAL or MAW104 for example. You do that with your own portfolio with your 50/50 allocation and 24 stocks or so.

It is total return that propels you overall portfolio, not yield.


----------



## OhGreatGuru (May 24, 2009)

According to my calculations you are on or about 70, so you are going to have to RRIF all your RRSP (or convert it to annuities) within a year or 2 anyway. Why bother with a partial RRIF? Why not do it all now? You still have the option of taking out more then the minimum annual withdrawals if you want to take the tax hit, and put the money to other uses. If the income exceeds your outgo you can put more into TFSA's and non-registered investments.

PS. There is no financial advantage in deferring your OAS until after age 70. If you were collecting CPP they would start it automatically. But with QPP you may have to apply separately for OAS. And they advise you to apply up to 11 months before you want it to start, so there is no delay in processing it.


----------



## OnlyMyOpinion (Sep 1, 2013)

james4beach said:


> Right, and I did not mean to imply you should run out and buy strips or zeros (*they must only go into registered accts*)...


Is this a fact - or an opinion?


----------



## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> Is this a fact - or an opinion?


LOL..... desirable obviously, but must?


----------



## james4beach (Nov 15, 2012)

AltaRed said:


> LOL..... desirable obviously, but must?


Yeah, that was hastily written. My mistake. You can put strips into non-reg and then do an accompanying calculation where you calculate virtual interest on them. I used to do that, just involves extra work.


----------



## OnlyMyOpinion (Sep 1, 2013)

james4beach said:


> Yeah, that was hastily written. My mistake. You can put strips into non-reg and then do an accompanying calculation where you calculate virtual interest on them. I used to do that, just involves extra work.


Thanks for clarifying James. I recognize that interest income in a non-reg acc suffers on an aftertax basis
If you are referring to tracking the annual accrued interest for tax purposes, TDDI had to start tracking and reporting it in the 2015 tax year. So it is reported in box 13 of the TDW T5 slip now.


----------



## ian (Jun 18, 2016)

Keep in mind that any mandatory age 71 draw downs are based on either your age OR you spouses age. My spouse is two years younger, hence my mandatory registered fund draw downs to not occur until I am 73.


----------



## AltaRed (Jun 8, 2009)

ian said:


> Keep in mind that any mandatory age 71 draw downs are based on either your age OR you spouses age. My spouse is two years younger, hence my mandatory registered fund draw downs to not occur until I am 73.


Huh? As I understand it, the minimum withdrawals must begin in the year you turn 72, but the percentage would be based on spouse's age.


----------



## OnlyMyOpinion (Sep 1, 2013)

ian said:


> Keep in mind that any mandatory age 71 draw downs are based on either your age OR you spouses age. My spouse is two years younger, hence my mandatory registered fund draw downs to not occur until I am 73.


Ian, you need to convert your RRSP(s) to a RRIF before the end of the year you turn 71, and start taking income the following year. Yes, if your spouse is younger, you can use their age to establish the prescribed withdrawl percentage that you take in that 72nd and following years.


----------



## ian (Jun 18, 2016)

IF I am 71 and my spouse is 68, what age do I have to start drawing down my RRSP?


----------



## OnlyMyOpinion (Sep 1, 2013)

ian said:


> IF I am 71 and my spouse is 68, what age do I have to start drawing down my RRSP?


You'll need to convert your RRSP to a RRIF before the end of this year (71), and take your first payment before the end of next year (72). The prescribed withdrawl for age 72 is 5.40%, but you can choose to base it on your younger spouse's age (69) which is 4.76%.


----------



## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> You'll need to convert your RRSP to a RRIF before the end of this year (71), and take your first payment before the end of next year (72). The prescribed withdrawl for age 72 is 5.40%, but you can choose to base it on your younger spouse's age (69) which is 4.76%.


And if Ian had turned 71 in 2018, he is already off-side... BUT FIs are not supposed to let that happen, i.e. they will remind the annuitant in the year they turn 71 to convert, and I think I have read that they might force a conversion to a RRIF anyway. 

Disclosure: My spouse has turned 71 and she now has her application in to RBC DI to convert her RRSP to a RRIF. She has applied to have her withdrawals based on my age, since I am younger by one year.


----------



## Longtimeago (Aug 8, 2018)

I really hope the OP is off enjoying his first month of retirement and not reading all this crap. You guys need to 'get a room'. :tongue:


----------



## OnlyMyOpinion (Sep 1, 2013)

Longtimeago said:


> I really hope the OP is off enjoying his first month of retirement and not reading all this crap. You guys need to 'get a room'. :tongue:


I'm not quite sure where you are coming from LTA. 
Ian posted a question and it was answered. I didn't construe it as 'crap'. 
I'm not sure if he is reading it but clearly you are, and replying as well (albeit perhaps one of your shortest posts ).
Just waiting for family to arrive for Sunday afternoon visit and dinner here.
You have a great day too!


----------



## OhGreatGuru (May 24, 2009)

I wouldn't describe any of it as crap. But some of it seems to be far from what OP asked for. But then OP was not terribly clear about what help he needed or wanted. It does appear (to me anyway) that he has left his financial planning a little bit late (I think he is about 70). This may have caused some posters to throw in extra advice because of a concern that he may not have thought far enough ahead about the RSP/RRIF conversion deadline.


----------



## jman123 (Jan 28, 2015)

OhGreatGuru said:


> I wouldn't describe any of it as crap. But some of it seems to be far from what OP asked for. But then OP was not terribly clear about what help he needed or wanted. It does appear (to me anyway) that he has left his financial planning a little bit late (I think he is about 70). This may have caused some posters to throw in extra advice because of a concern that he may not have thought far enough ahead about the RSP/RRIF conversion deadline.


Actually, I'll be turning 66 years old next month. 

I sent an e-mail to my FA this morning asking him to explain how he can arrange this monthly income stream he talked about at our last meeting. 

I thought I would like to share with you what mutual funds I have with him. They are :

BMO Tactical Balanced ETF Fund Series F	GGF95222
Fidelity Canadian Large Cap Fund Series F FID631
FID Special Situations Series F FID1698
PMO Monthly Income F	PMO205
Manulife Strategic Income Fund Class F	MMF659
Norrep Global Income Growth Class Series F	NRP1000
BMO Growth ETF Portfolio F	GGF95704
Manulife World Investment Cl F	MMF8621
Fidelity Multi Sector Bond Series A FID5721
FID Global Innovators Class A	FID5964
FID Canadian Large Cap Class F	FID469
FID Special Situations Class Series F	FID1688

To be honest, I am not that terribly pleased with his performance and it seems strange that since I started with him on November 2017 hardly any changes took place. I changed to him when I thought that going with a fee based adviser might be better. My previous guy was with ScotiaBank then he moved to Royal Bank and basically I felt he wasn't listening to me and also I started looking at the high MERs so I shopped around for a new guy. 

I'm a little bit embarrassed to admit this but this guy charges 1% of my portfolio.Actually, a little less , but it's a bit complicated to explain right now. I figured well if I do well he will do well as opposed to my RBC guy who seem to be interested in churning my funds. Plus he's supposed to give me tax/insurance advice, etc... but I'm not terribly impressed here as well. I think I've come to the realization that everyone has their speciality and if you need tax or insurance advice you go to someone who does that exclusively. 

I think I posted about this a little ways back and to those DIYers out there I guess I appeared nuts to them. My wife was not keen on me handling all the finances. I had an unfortunate experience when I got involved in a Ponzi scheme ("Mount Real") and decided to borrow $100K to invest in that. So I made a "little" mistake. I first get into it through my first financial adviser who did great for me with the usual Fidelity, Mackenzie, AIG, etc... mutual funds but suggested I get involved with Mount Real. I can't remember the exact details but I purchased a promissory note for 5 years that paid about 8.5% annually. I got greedy after that and I thought, hey, if I borrow $100K and pay 4% interest on that (which was tax deductible since it was non-reg) but get 9% interest what can go wrong? Dumb, dumb, dumb. This FA , I heard many years ago is now driving a truck. It took 10 years to get some of my monies back. My $50K inheritance from my parents was used to cover part of the loan and I spent a few years aggressively paying back the remaining $50K. Jeez, I think I would probably be at the $2M level if I hadn't made that stupid move (and no more borrowing to invest). 

Anyways, you can see why my wife was a little hesitant on me doing this myself. But, I'll never do that again. 

So , reading the Moneysense magazine and educating myself I decided to go the "Couch Potato Portfolio" route. Made sense to me so I went in with the following:

BMO AGGREGATE BOND INDEX ETF	ZAG
ISHARES CORE MSCI ALL CTRY WORLD EX CDA INDEX ETF UNIT	XAW
VANGUARD FTSE CDA ALL CAP INDEX ETF TR UNIT	VCN
ISHARES CORE S&P U S TOTAL MKT ETF UNIT XUU 

As well as Tangerine Balanced Funds.

Then I started on this "dividend" paying route so I invested a bit in the following for my TFSAs

Bank of Nova Scotia	BNS
CIBC	CM
Genworth MI Canada	MIC
Great-West Lifeco	GWO

Plus I put cash away every week in Peoples Trust and/or Tangerine. 

Again, probably based on some Moneysense articles I read plus all the chatter from friends and others about living off of dividends, not touching capital, etc... 

All in all, doing comparable to my new FA. Once a year , I re-balance (60/40 or 70/30 split) and use any cash within the fund for more purchases within the account.
Probably, I'm a bit of fool not being more conservative. Maybe I'm (still) greedy. 

So, I guess, if I deaccumulate my $200K RRSP I'm not exactly sure the route I go. Do I just do the reverse of what I did? Sell each the same amount from each fund so the proportion is the same? 

As a saver that will hurt and I will probably wait to see what and how my FA is going to do it with the 800K I've entrusted to him. After all he is supposed to be the expert. 

We will see.


----------



## fireseeker (Jul 24, 2017)

jman123 said:


> I thought I would like to share with you what mutual funds I have with him. They are :
> 
> BMO Tactical Balanced ETF Fund Series F	GGF95222
> Fidelity Canadian Large Cap Fund Series F FID631
> ...


Some observations:
-Perhaps it's a typo, but there are two Class A funds in that list. Class A funds include a trailer. The MER for MMF 8621 is 2.46%. No one should be paying another 1% on top of that.
-There are three income funds.
-There is a balanced fund -- and also equity funds and bond funds, which taken together also balance.
-There are two Canadian large cap funds. The Fidelity Cdn Large Cap is only 60% in Canada. And it's top holding (as of last Sept) was cash at 13.4%. All this for an MER of 1.16%, plus what you're paying the adviser. 

I like your list of choices much better.


----------



## AltaRed (Jun 8, 2009)

I like the OP's list a whole lot better as well but I don't believe in mixing stock picking 5 Cdn stocks when the OP already would have VCN. If you are going to stock pick a geographical region, stock pick it and skip the ETF. Being half-pregnant doesn't seem to make any sense to me.

Even if the OP stayed with the FA, there is excessive proliferation of funds, and I'd agree A series are not acceptable. 

As for decumulation, I'd suggest the OP take a look at https://www.finiki.org/wiki/Variable_percentage_withdrawal for a methodology to draw down a portfolio over time. The concept of 'living off the dividends and not touching capital' is not a bright idea. It sounds nice, and it is easy, and comfortable but it constrains one's ability to spend as freely as they can/should in their retirement years, and dies the richest person in the funeral home.


----------



## My Own Advisor (Sep 24, 2012)

Very fair point:

"The concept of 'living off the dividends and not touching capital' is not a bright idea. It sounds nice, and it is easy, and comfortable but it constrains one's ability to spend as freely as they can/should in their retirement years, and dies the richest person in the funeral home."

For me, it's a mindset to help me save but I know I will start eating the capital in my 50s and 60s. 

*Congrats to jman123 on the retirement.* Based on what I read above though, are you considering consolidating some assets in retirement?


----------



## AltaRed (Jun 8, 2009)

I recognize it is a mindset, just like someone saying 4% SWR or saving 25 times annual cash flow for a retirement stash. Hopefully few actually do it though, at least after a few years of actually being in retirement. Would be better to gift and donate funds along the way and enjoy the journey than 'simply living off the dividends'.


----------



## OnlyMyOpinion (Sep 1, 2013)

ian:
IF I am 71 and my spouse is 68 said:


> OnlyMyOpinion said:
> 
> 
> > You'll need to convert your RRSP to a RRIF before the end of this year (71), and take your first payment before the end of next year (72). The prescribed withdrawl for age 72 is 5.40%, but you can choose to base it on your younger spouse's age (69) which is 4.76%.


Ian, my comment above is very likely wrong: 
You can base your withdrawl on the age of your younger spouse at the start of the year. So if she is 68 now and 68 at the start of next year (i.e. her birthday is sometime later in the year), your withdrawl would be based on her age 68 and would be 4.5455% (not 4.7619%).
Sorry about that.


----------



## jman123 (Jan 28, 2015)

fireseeker said:


> Some observations:
> -Perhaps it's a typo, but there are two Class A funds in that list. Class A funds include a trailer. The MER for MMF 8621 is 2.46%. No one should be paying another 1% on top of that.
> -There are three income funds.
> -There is a balanced fund -- and also equity funds and bond funds, which taken together also balance.
> ...


Yes, I realize there are 2 Class A funds in the list. This is my "fault". When I went from FA #1 to FA #2 and also when I went from FA #2 to my latest financial adviser it always seems that what I had previously was "crap". So, let's sell what you had before and buy new stuff. Well, a lot of the funds I had before had deferred sales charges (DSC). 

I was tolerant of this when I went to my latest financial adviser because he was going to go from high MER funds to lower ones (Class F he mentioned) and some of the DSCs were not too bad. However, there was one Fidelity fund (can't remember the name) that had a large DSC and I just didn't want to sell it. I believe it was doing quite well. 

My philosophy at the time was that if a mutual fund had a large MER but was doing quite well then maybe it was worth holding onto. Also, to be honest, I was a little pissed off when he wanted to sell off all my previous funds (this after he told me that he would review each and every one and that if any were good he would leave those). 

I guess there are no great mutual funds with high MERs, right?

So, maybe right or wrong I told him not to sell this Fidelity fund but since I was within the Fidelity "family" that I could convert this fund into the two just mentioned by you without an actual sell and buy and I wouldn't have this DSC. Those two were his recommendations. 

Maybe by now, the DSCs for those two are low and maybe something should be done about them. Sometime in the future I'll bring it up with him. 

Thanks for the heads up on MMF8621 . I think my FA mentioned something about this in the past but will look into it.


----------



## jman123 (Jan 28, 2015)

My Own Advisor said:


> Very fair point:
> 
> "The concept of 'living off the dividends and not touching capital' is not a bright idea. It sounds nice, and it is easy, and comfortable but it constrains one's ability to spend as freely as they can/should in their retirement years, and dies the richest person in the funeral home."
> 
> ...


Thanks for the congrats. I have consolidated somewhat but there's not much more I can do unless I give my FA the RRSPs,LIRA and TFSAs I have outside his control. He told me that the advisory compensation would be 0.85% if my assets with him would be $1.25M , not the 1% it is now. I don't know. Maybe if he had much better results.


----------

