# My parents are about to retire. Advice?



## james4beach (Nov 15, 2012)

My parents have been quite good at managing their investments, asset allocation, and now even use a discount brokerage with ETFs. But they don't really know what to do in preparation for retirement... can forum members offer any advice and first steps?

Issues: taxes and retirement benefits (including academic pension plans), optimization about positioning investments, maybe optimization regarding timing. The academic pensions alone add up to quite a bit.

They've dealt with many mutual fund salespeople, who I think are woefully unqualified to help then in "retirement planning". I think they need a bigger picture, somebody that can help develop a plan involving the pensions, tax efficiency, sustainable withdrawal rate, suitability of annuity for a portion of the plan, etc.

Actual technical steps, like buying index funds and ETFs, are things they already know how to do (or I can help them with). So I'm more concerned with big picture planning like tax effects, SWR, etc.

Thoughts? Are there people who provide this kind of advice, who aren't in the business of selling mutual funds and annuities?


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## humble_pie (Jun 7, 2009)

james4beach said:


> My parents have been quite good at managing their investments, asset allocation, and now even use a discount brokerage with ETFs. But they don't really know what to do in preparation for retirement...
> 
> ... The academic pensions alone add up to quite a bit ...
> 
> I think they need a bigger picture, somebody that can help develop a plan involving the pensions, tax efficiency, sustainable withdrawal rate, suitability of annuity for a portion of the plan, etc.




james4 i do believe you're looking in the right direction but i don't think you'll find too many good suggestions here. Maybe the usual "find fee-based planner" blah blah. As if they - actuary-trained financial planners - grew on trees, haha.

the significant "academic pensions" are the signal. MoneyGal had an excellent reference, but that was a couple years ago. He was a retired actuary who'd spent his career at big insurance companies, then in retirement he clearly was enjoying the business of helping real people for a change. He struck me as not only a capable actuary but also a highly ethical professional.

as i recall, his fee was similar to a top fee-based planner with actuarial experience. IE $3,500 - $5,000. Please do not flinch. All the good advisors charge in this ball park.

the product would be a plan for the married couple that would set course for at least a decade or 2, possibly for the rest of their lives. You should consider here that there are 2 persons involved & although they might be married to each other, nevertheless their pension, savings & investment profiles might look quite different under actuarial analysis.

my guess is that actuaries in private practice are scarce as hens' teeth. You could pmm moneyGal to ask for the name of this gentleman. He's in toronto but might be able to suggest someone in winnipeg. Or - working at the search from the other end - your parents might be able to locate a short list of suitable professionals in winnipeg by checking with colleagues in the Commerce/Business/Finance faculty.

IMHO an actual membership in whatever the professional corporation of actuaries calls itself is not necessary. What is necessary is significant experience at an actuarial firm. By that i mean a few years full time employment, not a week or 2 week quickie internship as part of some fast financial planning course.

one last thing, if i may? félicitations for having chosen such fine parents.


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## heyjude (May 16, 2009)

James, if your parents are academics they should be capable of researching this subject. I recommend this book by Darryl Diamond:

http://www.diamondretirement.com/meet-daryl-diamond/retirement-income-blueprint-book

He runs a retirement planning firm, but only advises on assets under management.


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## Daniel A. (Mar 20, 2011)

An often overlooked issue for those thinking about retirement is what to do with time, I find it interesting that most only think about the financial issue.

For the kind of advice you are asking about look up Assante Wealth Management.


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## agent99 (Sep 11, 2013)

james4beach said:


> My parents have been quite good at managing their investments, asset allocation, and now even use a discount brokerage with ETFs. But they don't really know what to do in preparation for retirement... can forum members offer any advice and first steps?


Sounds to me like they are smart enough to figure this out for themselves. Did they ask for your and our help? 

We are well into retirement, and you can be sure that I did not ask for my kids advice on how to go about it!


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## james4beach (Nov 15, 2012)

Thanks for the ideas about the fee-based planners and actuaries. But would these people know about tax implications? I would think that investment planning and tax consequences are closely linked.

heyjude, thanks for the book recommendation!



> Sounds to me like they are smart enough to figure this out for themselves. Did they ask for your and our help?


Yes, they did ask for my help and pointers to resources. I reached out to my connections and found them material on SWR, as well as a planner who has been recommended by an accountant friend. I consider asking on here an extension of the general request for pointers.

I'm staying out of the decisions, other than encouraging them to minimize fees. They still have a lot of high MER mutual funds.



humble_pie said:


> one last thing, if i may? félicitations for having chosen such fine parents.


Thanks! They are the ones who deserve the thanks of course!


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## james4beach (Nov 15, 2012)

Daniel A. said:


> For the kind of advice you are asking about look up Assante Wealth Management.


Thanks! I asked a couple friends of mine and because they're in medicine, their families all used MD Financial Management but that doesn't help us non-medicine people


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## humble_pie (Jun 7, 2009)

agent99 said:


> Did they ask for your and our help?
> 
> We are well into retirement, and you can be sure that I did not ask for my kids advice on how to go about it!



agent99 you're right in most cases. I'd hate to think what my kids suggestions might be. Maybe Try to Sell your Knitting? Bake Sales? or the most lucrative old age financial support idea they could possibly invent: Fix Up some kind of Business selling Wild Berry Jams & Jellies.

but there are all kinds of families. There have been quite a few responsible adult offspring in cmf forum - often oldest sons or daughters - who've visibly been helpful to their parents, without ever being invading or pushy.

(to james) i still think the key will be analyzing the pensions & their options. Tax planning is necessary too, as you say. We hear that some financial planners do have experience in an actuarial firm. I imagine it will take your parents some time to find the right person, which is good because they will be able to cover a great deal of the distance themselves.


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## OnlyMyOpinion (Sep 1, 2013)

Are they inclined to educate themselves and DIY (especially with you as a resource), or are they inclined to write a cheque to someone else to tell them what to do?

In either case it would be good if they know what how much they spend now and what they spend it on; know what non-discretionary income they will need to pay bills in retirement vs their planned discretionary spending; know what their pensions will pay them (are they full or early-reduced?), their expected CPP and OAS incomes. It makes a big difference if their FI-like, annuity-like pensions and CPP readily cover their expected non-discretionary retirement costs. If their remaining assets (RRSP's, TSFA's, non-reg accounts) can provide the rest of their planned income needs based on conservative growth (2% real) and a conservative swr (3%), then they may not need to change much. 
Make sure they understand the pension/financial impact on one if the other was to die young. I'd also encourage them to think about what they'd do if their health or mobility becomes an issue in 10 or 15 years - are they prepared to 'purge' years of stuff (why wait?), sell their house and move into a retirement apartment, etc.


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## james4beach (Nov 15, 2012)

By the way, part of the reason I really care about their planning is that I'm an only child. _I will_ support them if they run out of money. So I also want to make sure they're not getting ripped off.

All of the above are good questions. Right now my mom & dad have no idea how the pension works, so that's got to be one of the first things to figure out. I think that growing old just crept up on them. Working hard, building his/her career and being busy, and then suddenly found themselves at retirement age. They just recently realized they have pensions totalling about half their net worth and don't even know the details of the pension, what it promises, etc.

I don't know whether they'd rather pay an expert, or learn and DIY. Currently they both have the impression that their investments at mutual fund houses (under "advisors") have performed very well over time. So they have the impression that using an advisor has worked well, but I suspect this is only due to the amazing bull market since the 1980s which has masked the enormous fees they've paid to places like Investors Group.


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## My Own Advisor (Sep 24, 2012)

Based on what I've read, sounds like a good tax accountant is what they need...

I would agree with this: "They've dealt with many mutual fund salespeople, who I think are woefully unqualified to help then in "retirement planning"."

Sales does not equal retirement planning.

Have they tried running some numbers themselves? Bucking conventional wisdom, I've learned it can be tax advantageous to start winding down your RRSP before you're forced to at age 71. Again, another Daryl Diamond fan here:
http://www.myownadvisor.ca/daryl-diamond-your-retirement-income-blueprint-review/

If they already know how to buy ETFs, they understand their asset allocation and risk profile, they are well ahead of most Canadians who invest.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Right now my mom & dad have no idea how the pension works, so that's got to be one of the first things to figure out. I think that growing old just crept up on them. Working hard, building his/her career and being busy, and then suddenly found themselves at retirement age.


Merry Christmas & Happy New Year!


To me, this is the starting point.

IMO ... "acacdemic" for the pension is irrelevant. What matters is whether the pension pays a guaranteed payout (i.e. defined benefit) or has a value that is withdrawn (i.e. defined contribution which functions like an RRSP).

This will influence what one does and what one needs to worry about. There are other things like whether one is offered to take a lump sum payout instead of the guaranteed pension and if bridge benefits would come into play.


For the taxable account, where MFs are in the mix ... are any of the corporate variety that lets one switch without a taxable event? This may allow switching to something that provides solely CG to allow one to plan the timing/minimize OAS clawback (if it can be avoided).


Cheers


They just recently re


alized they have pensions totalling about half their net worth and don't even know the details of the pension, what it promises, etc.

I don't know whether they'd rather pay an expert, or learn and DIY. Currently they both have the impression that their investments at mutual fund houses (under "advisors") have performed very well over time. So they have the impression that using an advisor has worked well, but I suspect this is only due to the amazing bull market since the 1980s which has masked the enormous fees they've paid to places like Investors Group.[/QUOTE]


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## sags (May 15, 2010)

My uncle enjoys a stress free retirement with a DB pension and GICs. 

Sometimes keeping it simple is good.


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## Plugging Along (Jan 3, 2011)

I will also recommend a good tax accountant that your family trusts. My parents though very smart with their money, being not from this country needed help in the retirement and estate planning. Fortunately my oldest siblings are wizzez at this, and had a plan that included a lawyer, tax accountant and financial planner. Before retiring my older siblings met with them all and did all the calculations and did a plan. It has given my family a lot more confidence that my parents would retire comfortable. 

We kids are also the back up plan.


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## fraser (May 15, 2010)

We did a number of things prior to retirement.

Several years prior we engaged a good accountant, a CA. We had some potential issues that we wanted resolved prior to retirement. As it turned out we were in reasonably good shape with CRA but the accountant did assist with going forward tax planning. Our bill for the review and re-filings was $3K. We got just over $10K in refunds by re-filing back by as much as six years.
The real win was knowing that we would not have the taxman knocking on our door plus the annual review questions that we get from our accountant that touch on a number of key personal and financial planning issues.

I read a number of books including several of Gordon Pape's and also Pensionize Your Nestegg. Not all the data was relevant but I always learned something and took away a few gems.

We did a complete analysis of what our real banking and investment costs were. We were unhappy with our broker and with the financial advisors at our bank.

I asked a number of people that I knew how they dealt with investments, advisers they used etc. Surprisingly, not one that I spoke to was happy with their advisor to bank service. We started looking for a new fee for service advisor. It took six/nine months to select one that we were comfortable with. One goal was to get an advisor that my spouse was completely comfortable with in the unlikely event of my early demise. Prior to this she had not been an active participant in the long term financial planning details. This has now changed.

Three plus years later we are very happy with our decision. We pay less fees and get a much higher and a much more comprehensive level of service that we received from either our former bank advisor or stock broker. Our financial advisor happens to be a CA with a tax specialty so this meshed well with our accountant's services.

We reviewed our life insurance and cancelled same. Did this based purely on the numbers. 

We reviewed/updated our will a few years prior to retirement. We will be doing this again next year.

Finally, we decided to change our lifestyle whilst we had the ability to do so. We sold our home and travelled for six/seven months. We downsized to a rental condo. Renting, after 35 years of home ownership, took some getting used to especially for my spouse. I liked it straight out of the gate. We had the intention of buying something but this is no longer at the top of our to do list. Now we travel about five months per year. We expect this to change at some point to some sort of longer term stay in one location during the winter months-either ownership or rental.

We got in shape. Lost weight, walk much more, and eat more fruit, veg- less meat, and seldom buy any prepared foods. We feel much better for doing this. Cannot imagine going back to our old habits. No use planning for retirement if we do not have the health to enjoy it and do the things that we have dreamed about or planned whilst we were working.


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## OnlyMyOpinion (Sep 1, 2013)

james4beach said:


> ... Currently they both have the impression that their investments at mutual fund houses (under "advisors") have performed very well over time. So they have the impression that using an advisor has worked well, but I suspect this is only due to the amazing bull market since the 1980s which has masked the enormous fees they've paid to places like Investors Group.


This could be the gnarly issue. They need to find out what their returns have actually been and what fees they are actually paying. They could be substantially impacting the longevity of their assets once they are in withdrawl mode. They may also be uncomfortable making whole scale transfers/changes - you will need to be understanding here. I would personally run quickly from an IG-type outfit but that may not be realistic here. 
It is a good thing that half of their value is in their pensions - make sure they don't get talked into taking the cash value for their pensions and investing them elsewhere - keep the pensions for their annuity-like income!


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## Eder (Feb 16, 2011)

Encourage your parents that which ever path they choose to fund their retirement it should be well within their risk tolerance and therefore stress free. The most important decision any new retiree should be required to make is whether to buy the Sportster or the Electra Glide.


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## humble_pie (Jun 7, 2009)

fraser said:


> We did a number of things prior to retirement ...
> 
> [insert entire text above]
> 
> ... do the things that we have dreamed about or planned whilst we were working.



what a fabulous, first-rate retirement planning story. It really is the skeleton for a book!


i especially admire this part:



> One goal was to get an advisor that my spouse was completely comfortable with in the unlikely event of my early demise. Prior to this she had not been an active participant in the long term financial planning details. This has now changed.



hope you live forever, fraser. You & madam fraser are one helluva good model.


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## agent99 (Sep 11, 2013)

humble_pie said:


> agent99 you're right in most cases. I'd hate to think what my kids suggestions might be. Maybe Try to Sell your Knitting? Bake Sales? or the most lucrative old age financial support idea they could possibly invent: Fix Up some kind of Business selling Wild Berry Jams & Jellies.
> 
> but there are all kinds of families. There have been quite a few responsible adult offspring in cmf forum - often oldest sons or daughters - who've visibly been helpful to their parents, without ever being invading or pushy.


You are of course right. I was being a bit cynical. Actually, my older brother who has a business/accounting background looked after my parents retirement finances. Mostly pension income, but suggested affordable expenditures that could make their retirement more comfortable. And we do know families where the offspring are better qualified than their parents to handle the parents investments and finances. 

But if retirees have some smarts, maybe looking after their investments and finances could be a challenging and satisfying retirement occupation? For us, it was even although at first I was disinterested. But I realize that is not for everyone.


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## kcowan (Jul 1, 2010)

James

Since you are the only heir, have you tried the strategy of justifying your involvement so that their financial resources provide them with a long and happy retirement?

We did this with MIL and, after I had been retired for 4 years, I took over her portfolio and gave her simple statements showing investment growth and costs. We gradually moved her nestegg from her portfolio manager to TDW. It was set up jointly with DW and, when she eventually passed on at age 93, it flipped to DW seamlessly. She was involved in every step of the process so that she maintained confidence in me.

Don't rush. Every decision must be made by your parents when they are ready.


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## fraser (May 15, 2010)

Agree completely. As my parents aged they took steps to ensure that they had POA's in place. They wanted to do it while they were both in good health and of sound mind. They did not want a situation occurring where one or both were suddenly incapacitated and unable to either manage their finances or set up a POA. These POA's unfortunately were vital in their final days and years respectively. They made management of their health, financial, pension, and DVA benefits much easier and much less complicated.

The second thing they did was structure their finances so that as much as possible in the event of their death would pass with a little as possible probate tax being payable. As well as making the process seamless and simple for their loved ones.

After my mother passed I had an interesting discussion with a family lawyer that we consulted on another issue. He related to us how few seniors actually get around to doing this and how much stress and mental anguish it can cause to a surviving spouse or siblings. Not to mention legal fees.


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## OhGreatGuru (May 24, 2009)

Suggest they find out if their employer/former employer offers/recommends retirement planning seminars.


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## WilliamJohnson (Jan 18, 2016)

You can check out the collective agreements for the field they were working for. Like the convention collective automobile licenciement mentions the same for automotive industry.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... Right now my mom & dad have no idea how the pension works, so that's got to be one of the first things to figure out. I think that growing old just crept up on them.


Unfortunately this common ... most view retirement as "way off", get into a rut of living/career and then start thinking about it when they are living it.

My dad was fortunate to notice those taking fill in work to round out their living in retirement so he was a bit better. He was investigating and planning.

Learning from him and starting my career with an insurance company where learning about such stuff was viewed as an asset to be rewarded by the company ... I'm even more proactive.


Cheers


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## Eclectic12 (Oct 20, 2010)

WilliamJohnson said:


> You can check out the collective agreements for the field they were working for ...


If there is a collective agreement, it will help.

For a lot of fields, there is no agreement based on the field so a small change such as changing employment from one company to another can drastically change what the pension will be. 

As an example, the merger of companies I moved to meant that I as an employee pre-merger had a DB pension where those starting at the same level one month later, not only had no DB pension - they had no pension at all.


Cheers


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## james4beach (Nov 15, 2012)

Thanks again for this earlier help, everyone. Good news is that my parents have really gotten organized with this and taken a lot of steps. I'm really happy with how it's shaping up for them. Their retirement is imminent.

They've been consulting with an independent planner -- not a fund salesman -- and the guy seems really on the ball. I've been reviewing the info he's given them, and he's touched on all the things I hoped for -- withdrawal strategy, consideration of pension/CPP/OAS, tax optimization, time horizons and adjustment over time. They also seem to be having some discussions on tax prep assistance, which I'm happy to hear.

Their planner recommended Mawer Balanced, and I agree... did my own research and am happy with Mawer Balanced as a good global fund and I agree that it's worth the 0.97% fees.

My parents finally agreed to liberate money out of very high fee mutual funds. All that money will be going to Mawer. At the same time they are going to retain the discount brokerage ETF account I prepared for them and continue to advise on, as its performance has also been very good and hitting new all time highs daily  So they'll have diversification with Mawer, plus their own ETF portfolio at a separate institution.

For those who are curious, that ETF portfolio is:

33% XIU and XIC - Canadian index
10% XSP - S&P 500, _plan to switch to ZSP unhedged_
20% BRK.B - Berkshire, broad US market
12% CEF.A - gold & silver bullion
25% ZDB - tax efficient bond fund, good for non-reg

The 10 year performance to Oct 31, 2016 (idealized assuming ZDB=XBB) is 6.0% annual which is pretty good. The allocation is very similar to Argo's overall allocation plan.


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## james4beach (Nov 15, 2012)

A question regarding risk and diversification between institutions. My parents are consolidating money from several institutions, and plan to put all their (non-real estate) wealth into three institutions:

70% goes into Mawer, directly with them
20% in a big bank discount brokerage
10% in their day-to-day bank

Thinking about risks such as major fraud (as remote as it may be), do you think 70% is too much concentration at one institution? If you include real estate among assets, then the Mawer concentration drops to 60% of all their assets.


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## ian (Jun 18, 2016)

I just re-visted these posting.

Lots of good financial, tax, lifestyle, and estate comments.

My one last comment after four years of retirement to anyone would be to keep your options open. Retirement is a blank page. Your perception of what you want or how it will be may differ entirely from your reality two or three years later. So I would recommend against going out immediately and buying that retirement condo, RV, home whatever. Take your time, get into the groove, and keep your options wide open. 

Looking back, the very best thing that we did after selling our home and downsizing was not to lumber ourselves down with another piece of real estate. We may buy however our wants and desires with regard to a home have changed considerably over the past five years and indeed we may end up moving to another locale. Not certain yet. However, because we decided not to buy immediately after downsizing our options are limitless.

One final difference. Instead of thinking why, we are always on the 'why not' side of ledger. I think that this goes hand in hand with the glass half full attitude or the making lemonade out of lemons approach to life.


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## AltaRed (Jun 8, 2009)

james4beach said:


> A question regarding risk and diversification between institutions. My parents are consolidating money from several institutions, and plan to put all their (non-real estate) wealth into three institutions:
> 
> 70% goes into Mawer, directly with them
> 20% in a big bank discount brokerage
> ...


I know a number of people 100% in one institution, and I am 80% in one institution. It is simply not an issue if one is with the big 5.

Added: By the time one counts CDIC insurance in a bank, and $1million CIPF in brokerage accounts, and separate? coverage for registered accounts, especially RRIF/RRSP, it is almost impossible to think there is any residual risk. Even Mawer itself as a fund company (trust) has significant regulatory oversight, it is inconceivable there could be any fraud there.


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## james4beach (Nov 15, 2012)

You've convinced me that the accounts are probably safe, and have enough coverage and oversight.

I think they'd hold a number of accounts at Mawer but possibly may hold Mawer Balanced in each account. This means 70% of their money in the hands of one fund manager/team. Well actually, it's a fund of funds and so multiple managers are involved.

The core question: does putting 70% of one's wealth in Mawer Balanced Fund seem like a reasonable thing to do?


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## AltaRed (Jun 8, 2009)

From my perspective, it is not an unreasonable thing to do. None of the individual funds are likely at risk and even if one fund out of the fund of funds underperformed and went sideways or lost AUM, the assets would be consolidated into yet another surviving fund. 

The biggest risk is the survival of Mawer itself and/or its 'high performance' management team. IF Mawer decided to fold, it would really just sell its AUM to another fund company and it is then an investor decision to stay (or not). That decision can be made at that time.

Added: I wouldn't do this personally simply because I have a lot more expertise to divy up my portfolio. But that said, the vast majority of my ex-Canada holdings are Vanguard USA ETFs. That is thus all in one basket. Another person I advise has been consolidating her portfolio in about 7 ETFs, almost all being BlackRock iShares or Vanguard USA. I see no more risk in Mawer than I would in Vanguard or BlackRock.


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## james4beach (Nov 15, 2012)

Thanks for the thoughts, AltaRed. I agree that the biggest risk is the management team... there's real human skill there.

Good point about the similar risk with those ETFs. Mawer has about $40 billion under management, which is a respectable number and very comparable to Blackrock Canada ETFs (XIU, XSP, etc) which have about $50 billion.


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## My Own Advisor (Sep 24, 2012)

Mawer won't go under, *knocking on wood*, it has huge AUM and a long track record of proven success.


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## AltaRed (Jun 8, 2009)

My Own Advisor said:


> Mawer won't go under, *knocking on wood*, it has huge AUM and a long track record of proven success.


Totally agree but that is one of the flags someone considering a major investment would likely think about.


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## james4beach (Nov 15, 2012)

james4beach said:


> For those who are curious, that ETF portfolio is:
> 
> 33% XIU and XIC - Canadian index
> 10% XSP - S&P 500, _plan to switch to ZSP unhedged_
> ...


I was helping my folks review their accounts, and hadn't seen the performance for this one recently. Just bragging for a second; the account is up 13.1% YTD, significantly better than MAW104 and slightly shy of MAW106. Risk profile of the ETF portfolio is somewhere in between so that looks about right.


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## ryankul (Dec 21, 2016)

*Mink Capital Family Offices Service*

Hi there,

I would definitely recommend working with Mink Capital. It's a private equity company. They provide unique family offices service, which helps families to find the best options to invest in.


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## james4beach (Nov 15, 2012)

ryankul, are you affiliated with that company? I noticed that you just joined this forum today so it's a bit suspicious when someone appears out of nowhere and pitches an exotic investment.

Private equity is a whole different can of worms than ETFs and mutual funds which hold public shares and regular bonds. Most people would treat private equity as a completely different category of investment.


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> Private equity is a whole different can of worms than ETFs and mutual funds which hold public shares and regular bonds. Most people would treat private equity as a completely different category of investment.


Totally agree.


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## OnlyMyOpinion (Sep 1, 2013)

James, It looks like your folks should be quite pleased with the year overall. I too see my MAW104 underperforming my own holdings this year. As I said elsewhere though, I'm lucky not smart so I'll keep the fund. Their weightings don't always catch the latest wave.

As for ryankul, I sometimes wonder what planet people posting on CMF come from. The company they recommend as far as I can tell provides services to private wealth firms (family offices) who in turn have high net worth individuls/families as their clients. I have to assume that they don't work for the company because they are offering such inept advice here. I can't see a company allowing such poor representation as this person.


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## Davis (Nov 11, 2014)

james4beach said:


> ryankul, are you affiliated with that company? I noticed that you just joined this forum today so it's a bit suspicious when someone appears out of nowhere and pitches an exotic investment.
> 
> Private equity is a whole different can of worms than ETFs and mutual funds which hold public shares and regular bonds. Most people would treat private equity as a completely different category of investment.


Indeed, James's parents do not seem to be sophisticated investors - they were invested in mutual funds, and only recently have graduated to index funds. Someone recommending that they jump into private equity should set off alarm bells that Mink Capital could be a scam designed to rip off unsuspecting seniors. I don't know that it is, but these sort of tactics suggest that it may not be legit.


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## james4beach (Nov 15, 2012)

Today I got the chance to look at the paperwork from their fee-only planner: retirement plan, tax strategy, withdrawal schedule, etc. I'm really happy with what I saw... the numbers work, and the overall result (sustainable net after tax income) matches my own rough calculations based on a 3% withdrawal rate out of capital.

Seems very doable for them and the key factor is my dad's pension. Really makes me wonder - as a 35 year old - what I'm going to do without a pension.

When I run with the assumptions shown in their own financial plan (assuming similar taxes and CPP/OAS) it tells me that I need $2 million in savings to retire. It looks like I won't be retirement for a looong time!


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## My Own Advisor (Sep 24, 2012)

Good news James....re: parents.

As for you, $2 M in the bank today will churn out at least $60-80k per year for life, inflation adjusted. That's very good. That excludes government benefits such as CPP and OAS. This you know, you know your math...

I think any senior with no debt, >$1 M in the bank and with CPP and OAS, they'll be fine in retirement unless they are spending loads of money.


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## heyjude (May 16, 2009)

james4beach said:


> Seems very doable for them and the key factor is my dad's pension. Really makes me wonder - as a 35 year old - what I'm going to do without a pension.
> 
> When I run with the assumptions shown in their own financial plan (assuming similar taxes and CPP/OAS) it tells me that I need $2 million in savings to retire. It looks like I won't be retirement for a looong time!


I'm glad things are working out for your parents, James. People with pensions are fortunate. They are a shrinking group. Like you, I have no pension. I was fortunate to have an inheritance, but the majority of my net worth has come from working very hard in a high income profession, living way, way below my means, and learning how to invest. You already do many of these things. Stay the course and it will all work out.


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## My Own Advisor (Sep 24, 2012)

heyjude said:


> I'm glad things are working out for your parents, James. People with pensions are fortunate. They are a shrinking group. Like you, I have no pension. I was fortunate to have an inheritance, but the majority of my net worth has come from working very hard in a high income profession, living way, way below my means, and learning how to invest. You already do many of these things. Stay the course and it will all work out.


+1


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## james4beach (Nov 15, 2012)

Thanks for the words of encouragement, My Own Advisor and heyjude.


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## canew90 (Jul 13, 2016)

james4beach said:


> Issues: taxes and retirement benefits (including academic pension plans), optimization about positioning investments, maybe optimization regarding timing. The academic pensions alone add up to quite a bit.
> 
> They've dealt with many mutual fund salespeople, who I think are woefully unqualified to help then in "retirement planning". I think they need a bigger picture, somebody that can help develop a plan involving the pensions, tax efficiency, sustainable withdrawal rate, suitability of annuity for a portion of the plan, etc.
> 
> ...


Sounds like their DB Pensions will cover most of their expenses so they will not need to sell capital, correct? If, so, there should be no problem, continue with the investment plan they have been following and happy with. When they get closer to 70 it's time to consider the effect of converting their rrsp's to rrif's and withdrawal rates. Certainly a Tax advisor would be the one to consult. 

As we switched to 100% DG investing before we retired and concentrated on Income generation from our investments, nothing changed for us. Market value or total return was never a concern. During our retirement our income continued to grow, as did the capital, but now our income exceeds our rrif withdrawal rates. No fees or advisors, just reinvestment of excess income (and we don't have a $2 Mil portfolio).


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> Good news James....re: parents.


Thanks, and I think what helped is that they waited until age 70 to retire.



My Own Advisor said:


> As for you, $2 M in the bank today will churn out at least $60-80k per year for life, inflation adjusted. That's very good. That excludes government benefits such as CPP and OAS.


That's before taxes though, right? i.e. $60k gross income coming from investments turns into something like 45k-50k net income?


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## Spudd (Oct 11, 2011)

james4beach said:


> Thanks, and I think what helped is that they waited until age 70 to retire.
> 
> 
> 
> That's before taxes though, right? i.e. $60k gross income coming from investments turns into something like 45k-50k net income?


Depends on your province of residence and whether it's Canadian dividends, foreign dividends, or capital gains. In Ontario I think you can make up to like 66k tax free in Canadian dividends. And of course if you're withdrawing from an RRSP that's counted as regular income. So yeah, you'd need to do some tax calculations on the makeup of your potential portfolio to be able to know exactly.


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## My Own Advisor (Sep 24, 2012)

james4beach said:


> Thanks, and I think what helped is that they waited until age 70 to retire.
> 
> 
> 
> That's before taxes though, right? i.e. $60k gross income coming from investments turns into something like 45k-50k net income?


Like Spudd referred to, depending upon the province, you can earn some $50K + in Ontario, in a non-reg. account, and pay _zero tax on that income_ without any other income thanks to the dividend tax credit. 
http://www.taxtips.ca/dtc/enhanceddtc.htm

http://www.myownadvisor.ca/dividend-tax-credit-101/

This you already know I believe.

So, simple and quick math, you've got $2 M non-reg in one of your favourites (XIU) with 3% yield - there's your $60k with almost zero tax paid.

I don't think it's a stretch to earn 3-4% yield (or up to 5% if you include withdrawals because you can't take it with you) on your portfolio and have very, very little risk of running out of money. 

Steve on here can run your assumptions with his software but here's a site I visit now and again, free calculator.
http://www.myownadvisor.ca/helpful-sites/

http://www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-calculator.htm

Put $1 M into the RRSP/RRIF value and play with some numbers, starting around age 55. With 5% growth/return you can't run out of money by even withdrawing $50k _per year_ until your early 90s. Again, no CPP or OAS here. 

I don't know all the details of your financial plan but I think most Gen Xers that have:

1) a $1 M portfolio (or slightly more) at time of retirement (age 55 or 60 or even 65 or whatever), with
2) a paid off home, and
3) no debt, AND finally,
4) who take advantage of CPP and OAS when they kick in - should be fine in retirement as long as their expenses aren't all over the place. 

Worse case with that set-up you have a seasonal part-time job to supplement your income that brings in a few hundred per month.


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## mordko (Jan 23, 2016)

Someone who is retiring at 55 can easily live for another 35 years. That raises the risk of things going wrong with inflation, the stock market, taxes and a whole lot of other relevant factors. If we think back, life was quite different in 1980 and the assumptions made then wouldn't be valid today.

One has to be a bit careful when claiming that someone retiring at 55 with 1M will be able to easily live off his investments while maintaining a consistent lifestyle.


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## Spudd (Oct 11, 2011)

mordko said:


> Someone who is retiring at 55 can easily live for another 35 years. That raises the risk of things going wrong with inflation, the stock market, taxes and a whole lot of other relevant factors. If we think back, life was quite different in 1980 and the assumptions made then wouldn't be valid today.
> 
> One has to be a bit careful when claiming that someone retiring at 55 with 1M will be able to easily live off his investments while maintaining a consistent lifestyle.


It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.


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## AltaRed (Jun 8, 2009)

Spudd said:


> It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.


Indeed. I'd suggest the vast majority of senior couples have less than $50k of annual cash flow expenses. Full CPP (if applicable) and OAS alone for each of both individuals could provide more than $42k of pre-tax income. In reality, few sensior couples today actually earned enough to qualify for full CPP (each) so CPP and OAS is likely closer to $25-30k. Regardless, it doesn't take all that much in additional capital assets to provide a total of $50k in annual income.


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## mordko (Jan 23, 2016)

Spudd said:


> It all depends on what their expenses are. If they spend 25k/year they're only withdrawing 2.5% of their portfolio. If they spend 100k a year they are withdrawing 10%. One of these situations is safer than the other.


Indeed. The point is that risk is substantially higher for someone retiring with 1M who is 55 vs 70.


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## My Own Advisor (Sep 24, 2012)

Whether you are retiring, you need money to live from or you are working today, you need money to live from. 

For the most part, it all comes back to how you want to live and your expenses for that lifestyle.

You can work and live cheap. You can work and live large. You can retire and live cheap. You can retire and live large. The choice is yours.


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## james4beach (Nov 15, 2012)

Thanks for all these great replies. Retirement is a long way off for me, but you never know... maybe my next business venture will work out great and I can hit my 2M mark earlier than planned.



My Own Advisor said:


> So, simple and quick math, you've got $2 M non-reg in one of your favourites (XIU) with 3% yield - there's your $60k with almost zero tax paid.


Something like that was in my head. The nearly pure eligible dividends off XIU are attractive for exactly this reason -- surely nothing can beat the tax efficiency of that. But I also see your point about more aspects of flexibility including dipping into capital, plus of course the CPP & OAS (assuming these still exist when I retire).

Still, I can't get my mind off the beautiful simplicity of a massive amount in just XIU. And for the dividend-growth'ers out there, it's got that too:


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## james4beach (Nov 15, 2012)

An update ... I think my parents have set things up nicely for their retirement. They are using MAW104 (Mawer Balanced) and MAW105 (Mawer Tax Effective Balanced) as their core holdings. They consolidated the amounts from three other places, and nearly all investment assets went to Mawer. Separate from this they have accounts at a Big Five bank where they hold savings accounts and GICs.

Here I see there is some difference of opinion between mom & dad. My mom strongly believes in "don't put all your eggs in one basket". She doesn't really know who these Mawer people are, and she's very uneasy about suddenly seeing all their retirement savings (about 85%) with that firm. I completely understand her anxiety. They haven't even received a statement from Mawer yet... it feels like wiring away all your savings that you worked hard for into an unknown place.

Dad on the other hand doesn't want too much unproductive money so he's against the idea of keeping too much cash-like amounts at the bank. He wants to send even more of the bank's allocation to Mawer, maybe pushing that towards 90%.

This is something they are having disputes about. I can see both sides of the argument and they both have shown excellent money management instincts over the decades. And it's hard for two people to agree with everything about money decisions... that would be unheard of.


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## CalgaryPotato (Mar 7, 2015)

james4beach said:


> Today I got the chance to look at the paperwork from their fee-only planner: retirement plan, tax strategy, withdrawal schedule, etc. I'm really happy with what I saw... the numbers work, and the overall result (sustainable net after tax income) matches my own rough calculations based on a 3% withdrawal rate out of capital.
> 
> Seems very doable for them and the key factor is my dad's pension. Really makes me wonder - as a 35 year old - what I'm going to do without a pension.
> 
> When I run with the assumptions shown in their own financial plan (assuming similar taxes and CPP/OAS) it tells me that I need $2 million in savings to retire. It looks like I won't be retirement for a looong time!


Again it all depends on costs though. Look at it like this, if you are 30 years old, have a mortgage and are supporting a young family of 4, paying taxes, EI, CPP and putting away additional money towards retirement even a solid salary like $100K a year doesn't leave you a lot of breathing room. (unless you are living an extreme frugal lifestyle) 

But then 30 years down the road, when you are looking at retirement. The house is payed off, you are no longer paying into CPP & EI, and instead collecting the CPP. You are no longer paying an additional 10-20% of your earnings into savings. All of the sudden 50K of income is pretty close to the 100K you were getting at 30. (I'm ignoring inflation)

From what I've seen in my experience there are 2 types of people when it comes to retirement. Those who do absolutely no planning for it. Those people are in trouble, for obvious reasons. And those that do, and honestly, all of the people I've seen make any attempt to save for retirement ended up with more than they needed, because they underestimated what a huge percentage of your working income goes to CPP, EI, RRSP & Taxes. (the latter obviously doesn't completely go away)


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## My Own Advisor (Sep 24, 2012)

"Again it all depends on costs though. Look at it like this, if you are 30 years old, have a mortgage and are supporting a young family of 4, paying taxes, EI, CPP and putting away additional money towards retirement even a solid salary like $100K a year doesn't leave you a lot of breathing room. (unless you are living an extreme frugal lifestyle) "

Agreed. $100k salary is really just over $60k net or $5,000 per month. Good money but after mortgage/rent/home insurance = $2,000; food and household supplies = $1,000; cars and car expenses = $1,000; _maybe_ $1,000 per month to save and invest. That will still leave most couple's with a great nest egg at age 60 if they save $1,000 per month every year for ~30 years.

"...The house is payed off, you are no longer paying into CPP & EI, and instead collecting the CPP. You are no longer paying an additional 10-20% of your earnings into savings."

$60k net in retirement is a great sum of money I think. You don't have to save anymore (you spend) and you've kill debt (mortgage is likely gone, ideally). 

Back to James, well done with Mawer. They have some great balanced products. I would go with some XIU and some VYM or HDV myself and a cash wedge. Less $$ in fees and solid yield + capital gains as well.


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## james4beach (Nov 15, 2012)

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?


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## My Own Advisor (Sep 24, 2012)

Well, I'm not "there" yet but I've decided a one-year cash wedge is good to ride out markets and will give me time to adjust if I really need to ramp up any fixed income. I figure $50k cash on hand at time of retirement is good enough.

Otherwise, it's spending dividends and distributions paid early in retirement. The capital invested should churn out 3-4% yield. You can't get 3-4% yield from bonds let alone any price appreciation from bonds. I simply don't see it for the foreseeable future and actuaries are saying it might be 30+ years until there is another bull bond market. Have you read _The Essential Retirement Guide_ by F. Vettese? A good book to buck many retirement myths.


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## GreatLaker (Mar 23, 2014)

james4beach said:


> 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:

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.
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.
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.
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.
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.) 
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.
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.


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## james4beach (Nov 15, 2012)

Thanks, this is great stuff


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## leoc2 (Dec 28, 2010)

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.


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## TomB16 (Jun 8, 2014)

james4beach said:


> 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! irate:


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