# Help please for 55 year old newbie investor



## Bruins63 (Jan 18, 2018)

Hi folks...I’ve been with an investment firm for 2.5 years now and am averaging 8-9 percent returns 100 percent equities with a 2 year cash wedge....I’m “considering” managing my own portfolio to save on fees and may retire this year or next...to cover my basic retirement expenses I need a return of 3-4 percent return per year and really can’t afford to lose anything...my portfolio consists of Banks, Telcos, Reits, Energy (electric, oil, nat gas, pipelines), essentially 100% Canadian built around dividends...my advisor has a very much buy and hold strategy and the only advice I am getting is increase the cash wedge for the ineveitble downturn...Questions:

1) given I’m on the edge of retiring, and given my need for low returns, is this the right portfolio for me...?If there was a low risk way to make a 3.5 percent return, I think I would be all over it...
2) what is the right portfolio and is it 100 percent CDN centric?

Thanks, I’m sure I’ll have more questions...


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## canew90 (Jul 13, 2016)

Sounds like you got a pretty good advisor, IMO. He/She seems to invested in solid Cdn DG stocks which have provided fair returns. We are retired with 100% Cdn equities with 13 stocks in 4 sectors: Banks, Comm, Utl & Pipelines. No etf's, reit's or mutuals, in our RRIF's TFSA's and non-reg'd accounts,. The question I'd ask is how much Income are your holdings generating and has it been growing each year? If yes, then take over the portfolio and just hold the stocks and invest more in the same stocks.

Others may feel you are not diversified, too concentrated with Cdn only and having higher risk because of it.


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## jargey3000 (Jan 25, 2011)

wish I had averaged 8-9% last few years..
I might be inclined to stay where you're at...


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## Bruins63 (Jan 18, 2018)

canew90 said:


> Sounds like you got a pretty good advisor, IMO. He/She seems to invested in solid Cdn DG stocks which have provided fair returns. We are retired with 100% Cdn equities with 13 stocks in 4 sectors: Banks, Comm, Utl & Pipelines. No etf's, reit's or mutuals, in our RRIF's TFSA's and non-reg'd accounts,. The question I'd ask is how much Income are your holdings generating and has it been growing each year? If yes, then take over the portfolio and just hold the stocks and invest more in the same stocks.
> 
> Others may feel you are not diversified, too concentrated with Cdn only and having higher risk because of it.


You hit the nail on the head with your last sentence...I am concerned about lack of diversification in regards to just equities, just Canadian...feels like it made to be made easy for the advisor when coupled with buy and hold...


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## cainvest (May 1, 2013)

With only a few years to retirement and you're a 100% in equities ... not too many are willing to take that level of risk.

Don't only look at diversification (different stocks in different markets .. US, worldwide,etc) but also asset allocation (stock, bonds, GICs, etc). You'll likely find a nice balance that'll still grab you an average 3-4% return.


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## canew90 (Jul 13, 2016)

cainvest said:


> With only a few years to retirement and you're a 100% in equities ... not too many are willing to take that level of risk.
> 
> Don't only look at diversification (different stocks in different markets .. US, worldwide,etc) but also asset allocation (stock, bonds, GICs, etc). You'll likely find a nice balance that'll still grab you an average 3-4% return.


If you were referring to our portfolio, we've been retired for over 10 years and our dividend income far exceeds our expenses, so we continue to reinvest about 60% of them. No we have no DB pension, just cpp/oas. We don't consider it a risky portfolio, just concentrated in 13 quality stocks with long histories of paying and growing their dividend.


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## cainvest (May 1, 2013)

canew90 said:


> If you were referring to our portfolio, we've been retired for over 10 years and our dividend income far exceeds our expenses, so we continue to reinvest about 60% of them. No we have no DB pension, just cpp/oas. We don't consider it a risky portfolio, just concentrated in 13 quality stocks with long histories of paying and growing their dividend.


Nope, wasn't directed at you, just a general statement. Everyone needs to weight out their own risk factors but I believe it's generally accepted to move out of large equity allocations the closer one gets to retirement. If one has a portfolio that can handle large drawbacks on the markets without losing sleep, all the power to you!


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## Bruins63 (Jan 18, 2018)

cainvest said:


> With only a few years to retirement and you're a 100% in equities ... not too many are willing to take that level of risk.
> 
> Don't only look at diversification (different stocks in different markets .. US, worldwide,etc) but also asset allocation (stock, bonds, GICs, etc). You'll likely find a nice balance that'll still grab you an average 3-4% return.


Thanks, that’s the exact advice I would expect my advisor to give me...!!! very reputable firm and reputable advisor...the only advice I’m getting is increase the cash wedge...


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## Bruins63 (Jan 18, 2018)

canew90 said:


> If you were referring to our portfolio, we've been retired for over 10 years and our dividend income far exceeds our expenses, so we continue to reinvest about 60% of them. No we have no DB pension, just cpp/oas. We don't consider it a risky portfolio, just concentrated in 13 quality stocks with long histories of paying and growing their dividend.


That’s the issue...my current divvy income only meets 1/2 of my income requirement...if I was in your position, correct, I wouldn’t change a thing...as mentioned I only need 3-4 percent return on my current nest egg and I’m trying to find the least risky way to achieve that...The current divvy return is in the 3-4 percent zone but comes with the huge equity risk...


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## canew90 (Jul 13, 2016)

Bruins63 said:


> That’s the issue...my current divvy income only meets 1/2 of my income requirement...if I was in your position, correct, I wouldn’t change a thing...as mentioned I only need 3-4 percent return on my current nest egg and I’m trying to find the least risky way to achieve that...The current divvy return is in the 3-4 percent zone but comes with the huge equity risk...


We've been through several market corrections and they all react the same, the price of all investments go down. Its a question of how far, for how long and will your income drop as well. During 2000 and the 2008/2009 our DG income continued to grow, though at a slower pace. Did bonds fair as well? I don't know as I never owned any, but what I do know is that their income never grows and inflation continues to take their bite.


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## Bruins63 (Jan 18, 2018)

canew90 said:


> We've been through several market corrections and they all react the same, the price of all investments go down. Its a question of how far, for how long and will your income drop as well. During 2000 and the 2008/2009 our DG income continued to grow, though at a slower pace. Did bonds fair as well? I don't know as I never owned any, but what I do know is that their income never grows and inflation continues to take their bite.


I think the risk with the current equity strategy is, given my divvy income meets only 1/2 my income requirement, what happens if there is a >5 year market downturn in Canada and I only have a 2-3 yr cash wedge? Gonna lose lotsa sleep, me thinks!


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## canew90 (Jul 13, 2016)

Bruins63 said:


> I think the risk with the current equity strategy is, given my divvy income meets only 1/2 my income requirement, what happens if there is a >5 year market downturn in Canada and I only have a 2-3 yr cash wedge? Gonna lose lotsa sleep, me thinks!


At 55 you've still got time on your side, unless you want to retire now. Then with div's providing only half of your income, you must sell capital for the rest. Will bonds or etf's provide a better option? Bonds will provide less income, but allow you to continue to receive the 1.5% or 2% or whatever their rate is during a down turn. Will that be enough during a down turn? If one embraces the DG strategy and avoids chasing yield, cyclicals and high risk dividend stocks than even during market down turns its likely ones income will continue to grow and if it does grow than the value of the stocks will follow.
We are lucky in that regardless if the market is up or down I care nothing about the value of our holdings, as long as the income continues to rise, but we didn't start out that way. DG takes time and if you are looking at the next year or two I don't think any strategy will give you what you want.


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## Bruins63 (Jan 18, 2018)

canew90 said:


> At 55 you've still got time on your side, unless you want to retire now. Then with div's providing only half of your income, you must sell capital for the rest. Will bonds or etf's provide a better option? Bonds will provide less income, but allow you to continue to receive the 1.5% or 2% or whatever their rate is during a down turn. Will that be enough during a down turn? If one embraces the DG strategy and avoids chasing yield, cyclicals and high risk dividend stocks than even during market down turns its likely ones income will continue to grow and if it does grow than the value of the stocks will follow.
> We are lucky in that regardless if the market is up or down I care nothing about the value of our holdings, as long as the income continues to rise, but we didn't start out that way. DG takes time and if you are looking at the next year or two I don't think any strategy will give you what you want.


Thanks, if I park the DG strategy for a moment, r u suggesting there is no other way to make a fairly risk free 3-4 percent? Sorry, to be clear I want to retire in the very near future, 6-18 months.


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## canew90 (Jul 13, 2016)

Bruins63 said:


> Thanks, if I park the DG strategy for a moment, r u suggesting there is no other way to make a fairly risk free 3-4 percent? Sorry, to be clear I want to retire in the very near future, 6-18 months.


You must really be needing 3-4% above your dividends, because you've said your divs are providing 3% but only half of what you need. If you switched to bonds, etf's, gic's, and/or preferreds you lose the your current dividends and now need to get a secure of 6% to 8% income stream. Certainly there are ways to get that type of return, but not without risks. With bonds and gic's you will not receive the returns you need though they will not suffer as much during a downturn. ETF's may provide 3% but some may be return of capital and they will suffer price drops during market down turns.
So what are your choices? I don't have an answer. Maybe you should look at your holdings in total. Can you draw down rrsp funds to offset your needs, till you get cpp? Would you be working part-time or have other sources of income? The other concern is Inflation and especially if it increases from its current rate. Your current needs of 3-4% may become much higher as time passes. At 55 you could possibly be looking at a 30 to 40 retirement time.


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## cainvest (May 1, 2013)

canew90 said:


> You must really be needing 3-4% above your dividends, because you've said your divs are providing 3% but only half of what you need.


canew90 summary line above definitely paints a different picture, at least for me. Are you sure your current investment strategy gets you there in < 18 months ?


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## Karlhungus (Oct 4, 2013)

This is exactly why people should diversify, not only into bonds into retirement, but also other markets. Canadian market drops 20% one year and you dont want to sell? Maybe the US market only dropped 10%, stayed even, or even went up. The same could be said for the international market. Dont want to sell when Canada has dropped 20%? This is why you rebalance. Sell your Bonds at this point. People will suggest you might get lower returns, but the research says otherwise heading into retirement.


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## Karlhungus (Oct 4, 2013)

You might find this link interesting, https://www.reddit.com/r/financiali..._bill_bengen_and_i_first_proposed_the_4_safe/
This is the man who created the 4% rule. Heres an excerpt: 

"Yes, I still believe bonds should play a significant role in most retirement portfolios. During a stock bear market, interest rates often decline, which causes an increase in the price of bonds. This can offset some of the losses from the stocks. Overall, I believe a 50% equities/50% bonds mixture at the start of retirement is close to ideal. Years ago, I talked to Harry Markowitz, the founder of Modern Portfolio Theory, about this. He used that 50/50 ratio in his personal portfolio, which speaks volumes! Some recent research advocates increasing the fraction of stocks in the portfolio as the retiree ages. I haven't had an opportunity to verify this, but I plan to look into it in the next year. No shortage of intriguing ideas in this field! I think the financial independence movement is great, in part because it means people must educate themselves more in this field so they make good decisions. I have "retired' three times, and am now in my fourth career, as a writer/researcher. But many friends and acquaintances of my generation are still working, even into their late 70's, so I wonder how "early retirement" is succeeding in this environment. Like everything else, if you plan and execute early and well, you will most likely achieve what you want."


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## Bruins63 (Jan 18, 2018)

canew90 said:


> You must really be needing 3-4% above your dividends, because you've said your divs are providing 3% but only half of what you need. If you switched to bonds, etf's, gic's, and/or preferreds you lose the your current dividends and now need to get a secure of 6% to 8% income stream. Certainly there are ways to get that type of return, but not without risks. With bonds and gic's you will not receive the returns you need though they will not suffer as much during a downturn. ETF's may provide 3% but some may be return of capital and they will suffer price drops during market down turns.
> So what are your choices? I don't have an answer. Maybe you should look at your holdings in total. Can you draw down rrsp funds to offset your needs, till you get cpp? Would you be working part-time or have other sources of income? The other concern is Inflation and especially if it increases from its current rate. Your current needs of 3-4% may become much higher as time passes. At 55 you could possibly be looking at a 30 to 40 retirement time.


Sorry, I was unclear and miscommunicated...with my current nest egg and divvy income, assuming my OVERALL return is 3-4 percent, i should be able to eek out a retirement...my concern is I’m 100 percent equities and I’ll lose sleep if there is a prolonged market downturn...since I only need an OVERALL return of 3-4 percent is there a less risky way to make 3-4 percent?

Where I miscommunicated was I mentioned my current divvy income only provides 1/2 my income requirements ASSUMING I don’t want to touch my principle...if I draw down the principle during retirement I only need a total return of 3-4 percent...hope this is more clear...apologies


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## Bruins63 (Jan 18, 2018)

Thanks, That’s the type of advice I’m looking for from my advisor, but I’m not getting it...


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## OnlyMyOpinion (Sep 1, 2013)

It sounds like OP is trying to live off of income generated from their portfolio without touching the capital? But I'm not certain. If that is the case, you need to also consider a drawdown scenario.
Search for example on 'variable percentage withdrawl' and other methods of drawing down your whole portfolio.
Living off the income without touching your capital in your 30yrs or so of retirement requires a much larger nest egg and is not commonly achievable or even desirable for most of us.


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## Bruins63 (Jan 18, 2018)

Thanks, OP here, to clarify, just tying to find a low risk way to make 3-4 percent return...this return, combined with drawing down my principle, will allow me to eek out a retirement...


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## canew90 (Jul 13, 2016)

Bruins63 said:


> Thanks, OP here, to clarify, just tying to find a low risk way to make 3-4 percent return...this return, combined with drawing down my principle, will allow me to eek out a retirement...


Lets assume you have $700k invested which generates 3% in dividends or income (I'll apply no growth of capital). You need $50k per year, inflation remains at 2%/yr and there is no major drop in the market. Your funds should last for 15-17 yrs. If you had $1mil than you probably be good for at least 20 yrs. Change any of the variables, up or down and you will get a good range of how long the funds may last.


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## Bruins63 (Jan 18, 2018)

Thanks, yup, on the same page, so if I want to generate a fairly risk free 3-4 percent per year, I don’t see 100 percent equities as low risk...it sounds more self serving for my advisor, at this point...would you agree?


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## OptsyEagle (Nov 29, 2009)

First. There is no risk free portfolio that provides 3-4 percent per year. Technically, unless you buy an annuity you will always bear risk. Even if you found a Government bond that paid 4%, you don't know that it will continue to offer 4% when it matures. I would consider looking for fixed income investments to offset your equity investments. For example if you found a government bond that paid 2% and equities that paid 4%, 50% in each would give you 3% and it would be much less volatile then 100% equities that paid 3%. 

You can massage percentage allocations to various percentage payouts until you reach your desired requirement. Of course none of it will be fully guaranteed to last your entire life, but it will be less risky then where you are now.

As for anymore advice. You have left out a tremendous amount of information. We don't know your age. We don't know how much money we are talking about or the dollar amount of income you require. We don't know if you are married and we don't know if you have any other dependants to think about and we don't know if you own your own home or rent and if you are saddled with any debts.

With that in mind, everything I have mentioned is very theoretical. Good luck to you.


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## Eclectic12 (Oct 20, 2010)

Agree in general about the lack of info .... I don't see how the age is unknown as "55 year old" is in the title.


Cheers


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## like_to_retire (Oct 9, 2016)

OptsyEagle said:


> You have left out a tremendous amount of information..


We also don't know if your portfolio is in a registered or non-registered account. This can affect the type of investment with respect to tax efficiency.

Also remember, if you drop the advisor, you'll save money.

ltr


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## OptsyEagle (Nov 29, 2009)

Eclectic12 said:


> Agree in general about the lack of info .... I don't see how the age is unknown as "55 year old" is in the title.
> 
> 
> Cheers


OK. That helps. Now I can quote him a life annuity. If he has dependants, these numbers may go down, if he cares about them receiving anything after his death.

At age 55, a life annuity will pay approximately 5% of your capital value for the rest of your life. You will give up your entire portfolio for the security of knowing that you now have this pension. You can invest all of your portfolio, none of your portfolio or any amount you choose.


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## Bruins63 (Jan 18, 2018)

Thanks for the info...I’m not sure a general dump of my parameters is required...I should have said, I’m 55, need a 3-4 percent return on my capital for the rest of my life...right now I’m 100 percent equities and don’t feel comfortable with that buts that’s the only advice my advisor is giving me...doesn’t feel right to me but that’s the only advice I’m getting from my advisor...

Edit: sorry posted this before I saw your annuity advice...BTW, no kids just the “boss” and me and it’s all registered...


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## Bruins63 (Jan 18, 2018)

OptsyEagle said:


> OK. That helps. Now I can quote him a life annuity. If he has dependants, these numbers may go down, if he cares about them receiving anything after his death.
> 
> At age 55, a life annuity will pay approximately 5% of your capital value for the rest of your life. You will give up your entire portfolio for the security of knowing that you now have this pension. You can invest all of your portfolio, none of your portfolio or any amount you choose.


Thanks, 5 percent of my capital value falls short of my income requirements...a 3 to 4 percent return combined with drawing down my principle will meet my income requirements...


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## Eclectic12 (Oct 20, 2010)

I don't follow.

Post #1 said a 3-5% return on capital with no losses worked. The annuity is paying income of 5% of capital with the supplying company guaranteeing the income (i.e. no concern about losses, risk of supplier going bankrupt).

The 5% is at the upper range so I am not clear on why there would be a shortfall ... unless the return number is not all the $$ needed.


Cheers


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## cainvest (May 1, 2013)

Bruins63 said:


> Thanks, OP here, to clarify, just tying to find a low risk way to make 3-4 percent return...this return, combined with drawing down my principle, will allow me to eek out a retirement...


Well considering you can get around 3% for 5 year GICs right now, moving a percentage of your portfolio over to that would reduce your risk significantly. Even with some changes, say half of you assets in low(er) risk, could you survive a market downturn that lasts for 2 years right now?


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## Karlhungus (Oct 4, 2013)

How big is your nest egg? Approximately what are your annual expenses?


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## OptsyEagle (Nov 29, 2009)

Bruins63 said:


> Thanks, 5 percent of my capital value falls short of my income requirements...a 3 to 4 percent return combined with drawing down my principle will meet my income requirements...


As I said. and your response proves it, there is no "guaranteed" solution to your problem. The annuity was the last one. You, therefore, need to find a lower risk non-guaranteed solution. 

The lowest risk solution would be to keep working a little longer but perhaps living with the risk is the better solution. That is up to you.

The other thought I have is whether you have incorporated CPP and OAS and probably GIS into your future cash flows. In other words, perhaps you could earn 3% and spend 6%, just until you are 60 or 65, and plan to reduce your portfolio drawdowns as the government benefits kick in. This type of planning takes a little more mathematics but is a more realistic scenario then just taking 4% from your portfolio. If you can live on whatever dollar amount 4% gives, do you really need the extra amount that will come from CPP and OAS/GIS.

This is why I needed your portfolio value to determine if CPP/OAS/GIS are significant in comparison.

Anyway, you want to keep your information from us but want help that is specific to you. You do know that none of us, except maybe the administrators, and only if you told them the truth, knows who you are?


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## Bruins63 (Jan 18, 2018)

cainvest said:


> Well considering you can get around 3% for 5 year GICs right now, moving a percentage of your portfolio over to that would reduce your risk significantly. Even with some changes, say half of you assets in low(er) risk, could you survive a market downturn that lasts for 2 years right now?


Even at 100 percent equities, I could survive a 2-3 year downturn...my concern is I couldn’t survive a 5 year down turn as my cash wedge is not that big...the 3 percent GIC makes sense tho as you mentioned for a portion of my portfolio to lower the risk of 100 percent equities


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## Bruins63 (Jan 18, 2018)

Thanks...I’m having health challenges or I would work a few more years but unfortunately can’t. Yes I have incorporated cpp /oas into my calculations...I’m happy to share more information if it was required...in its simplest form, all I’m asking is for a lower risk way to make 3-4 percent...you could assume I have $1m sheltered, 3 percent would be $30k, and my other $30k/yr would be drawdown from the $1M to support my living expenses of $60k gross annually...


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## Bruins63 (Jan 18, 2018)

Sorry not to be clear...Let’s assume I have $1m and I need $60k gross to live on...a 5% annuity falls short...just looking for a lower risk way than 100 percent equities to make 3-4 percent and when combined with another $30 from capital drawdown, I can meet my living expenses...


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## Nerd Investor (Nov 3, 2015)

So, basically you believe you need to withdraw 6% a year from your portfolio. If your adviser seems suborn, it may be because he feels a 6% withdrawal rate at your age is only achievable via mostly equities + the cash wedge. You could look at a slightly larger GIC ladder in lieu of the cash wedge. Would provide a bit more return on that portion of the portfolio and ensure you don't have to touch your capital in the event of a market correction. 

Annuities probably aren't ideal right now but could be a solution in the future as interest rates rise and as you get older (both of which would boost your return).

Does the adviser/firm you are currently with offer any kind of financial plan? It sounds like you would benefit greatly from some projections and planning.


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## Bruins63 (Jan 18, 2018)

Nerd Investor said:


> So, basically you believe you need to withdraw 6% a year from your portfolio. If your adviser seems suborn, it may be because he feels a 6% withdrawal rate at your age is only achievable via mostly equities + the cash wedge. You could look at a slightly larger GIC ladder in lieu of the cash wedge. Would provide a bit more return on that portion of the portfolio and ensure you don't have to touch your capital in the event of a market correction.
> 
> Annuities probably aren't ideal right now but could be a solution in the future as interest rates rise and as you get older (both of which would boost your return).
> 
> Does the adviser/firm you are currently with offer any kind of financial plan? It sounds like you would benefit greatly from some projections and planning.


Thanks, yes the reason I know I only need a 3-4 percent return is the firm ran projections for me...


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## Mookie (Feb 29, 2012)

Bruins63, you say you’re planning to retire within the next year or so for health reasons, and you also say that you need 3-4% guaranteed return to “eke out” a retirement. Sounds like you’re cutting it pretty close by retiring so early. I don’t know the nature of your health issues, but if there was a way to work a few more years, that would be the single best way to lower your financial risk in retirement.

It also sounds to me like your risk tolerance is not aligned with what your advisor is doing for you. You should remind him of this so he can align your portfolio to your risk tolerance, however consider the following for a moment before you decide where your risk tolerance really is, or should be…

If you’re only 55, you should be planning for a 30+ year time horizon for your investments. Maybe it's just me, but it doesn’t make sense when I hear people say that they are about to retire so they need all their investments to be 100% safe now. Definitely you need a portion of your portfolio in something safe / guaranteed, but for the parts that you don't need for 10, 15, 25 years or more, why not keep that portion in equities? Over longer time periods, you will almost always be ahead by going with equities. If you go 100% safe now, the only thing guaranteed over the next 30+ years is that you’ll be foregoing a large amount of future investment returns. Of course, if you can’t take a few ups and downs, then that’s the price you pay for so called smooth sailing.


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## Eclectic12 (Oct 20, 2010)

Bruins63 said:


> ... my portfolio consists of Banks, Telcos, Reits, Energy (electric, oil, nat gas, pipelines), essentially 100% Canadian built around dividends... the 3 percent GIC makes sense tho as you mentioned for a portion of my portfolio to lower the risk of 100 percent equities ...


Keep in mind that with 100% of the portfolio dividends coming from Canadian companies ... I would bet they are eligible dividends. 

If they are, where:
1) the account is taxable
2) the total dividends are less than $50K 
3) there are no other sources of income

The full $$$ received can be spent as when filling one's tax return - there will be no tax due, when filing one's annual tax return.
http://business.financialpost.com/p...idends-but-theres-a-catch-you-cant-have-a-job

Switching some of the portfolio over to a GIC in a taxable account means when filing one's tax return a tax bill of 20% or greater on the GIC earnings.
Or worst case, should one buy a multi-year GIC that pays the interest at end of term - one may have to pay the tax on what the annual interest was *before* receiving the interest income at the end.
https://www.comparemyrates.ca/gic-taxation/
http://www.mmtcpa.ca/resources/tax-tips/taxation-of-interest-income/


If you have TFSA contribution room where the GIC can be held Canadian tax free ... then it is a better situation.


The key here is that one needs to be careful to know the after-tax $$ needed plus what changing the assets does, from a tax perspective. Otherwise, one may end up with less equity risk but also a bigger tax bill, resulting in needing more income than before.


Cheers


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## Bruins63 (Jan 18, 2018)

Eclectic12 said:


> Keep in mind that with 100% of the portfolio dividends coming from Canadian companies ... I would bet they are eligible dividends.
> 
> If they are, where:
> 1) the account is taxable
> ...


Thanks, all my $$ are in registered accounts...if I read the article correctly, then I would NOT be eligible for tax free dividend income?


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## Bruins63 (Jan 18, 2018)

Mookie said:


> Bruins63, you say you’re planning to retire within the next year or so for health reasons, and you also say that you need 3-4% guaranteed return to “eke out” a retirement. Sounds like you’re cutting it pretty close by retiring so early. I don’t know the nature of your health issues, but if there was a way to work a few more years, that would be the single best way to lower your financial risk in retirement.
> 
> It also sounds to me like your risk tolerance is not aligned with what your advisor is doing for you. You should remind him of this so he can align your portfolio to your risk tolerance, however consider the following for a moment before you decide where your risk tolerance really is, or should be…
> 
> If you’re only 55, you should be planning for a 30+ year time horizon for your investments. Maybe it's just me, but it doesn’t make sense when I hear people say that they are about to retire so they need all their investments to be 100% safe now. Definitely you need a portion of your portfolio in something safe / guaranteed, but for the parts that you don't need for 10, 15, 25 years or more, why not keep that portion in equities? Over longer time periods, you will almost always be ahead by going with equities. If you go 100% safe now, the only thing guaranteed over the next 30+ years is that you’ll be foregoing a large amount of future investment returns. Of course, if you can’t take a few ups and downs, then that’s the price you pay for so called smooth sailing.


Thanks, if I’m able to do any work st all, it may come thru part time self employment...good point on the keeping a portion in equities...I just don’t agree with my advisors approach right now...


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## Mechanic (Oct 29, 2013)

I retired at 55 too. Didn`t know anything about investing, other than what my advisor told me. Then I started to learn and started to keep all the money he was making off me.


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## Bruins63 (Jan 18, 2018)

Mechanic said:


> I retired at 55 too. Didn`t know anything about investing, other than what my advisor told me. Then I started to learn and started to keep all the money he was making off me.


Awesome! For me, need about $3500/math after tax, no kids, just my wife and I...may try to make a couple bucks on the side selling mood rings :joyous:, eventually...


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## Eclectic12 (Oct 20, 2010)

Bruins63 said:


> Thanks, all my $$ are in registered accounts...if I read the article correctly, then I would NOT be eligible for tax free dividend income?


For the tax free income from < $50K eligible dividends - one needs to have stock in a taxable account. Having everything in registered accounts rules this out.

The TFSA is the next best or better thing ... depending on one's situation. It is Canadian tax free so there is no tax to pay. The limit for the TFSA is the contribution room and how well the investments have done. If one can generate $60K the withdrawn the $$, the full $60K will be tax free.

RRSP withdrawals are being taxed the same as employment income, regardless of whether it was a capital gain, eligible dividends, interest that produced the $$. At an income level where the employment income/RRSP withdrawal may be taxed at 29%, the eligible dividend income would have been taxed at 6% and capital gains taxed at 15%. This all varies by how much income, type of income and tax justification (likely province).

Hopefully being able to use the full $1 to invest (the TFSA has tax sliced off it so may be $0.70 to invest) plus being in at a lower income level than when working as the RRSP withdrawal happens helps adjust for the "one size fits all" tax rate.


How much of your expenses have you been able to take tax free out of the TFSA, if you don't mind?


Cheers


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## Bruins63 (Jan 18, 2018)

Eclectic12 said:


> The TFSA is still Canadian tax free so there is no taxes to report on your tax return (the Canadian corp has already been taxed on it's part).
> There is no dividend tax credit to give the eligible dividends a better tax rate but no tax at all means this does not matter that much.
> 
> RRSP withdrawals are being taxed the same as employment income. So at an income level where the employment income/RRSP withdrawal may be taxed at 29%, the eligible dividend income would have been taxed at 6% and capital gains taxed at 15%. This all varies by how much income, type of income and tax juristication (likely province).
> ...


Thanks, so I am clear, if all my funds are in RRSP’s, and are generating divvy income, im NOT eligible for the divvy tax break?


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## Eclectic12 (Oct 20, 2010)

RRSP withdrawals are reported as income only, with no credits like the dividend tax credit to reduce the tax bill. 

Eligible dividends from investments in a taxable account qualify for the dividend tax credit, which reduces the taxes. The upside in a taxable account is the credit nets out to a better tax rate. The down sides are that the share/unit price gains (i.e. capital gains) are taxable and when the OAS income test kicks in, $1 of eligible dividend income counts as something like $1.38 of income. It does not look like you are close to the threshold but I thought I would mention it in case it is important in the future. 

I re-worded the post so take a look as it may be clearer with the added details/re-arrangement. If not, feel free to ask questions.


Cheers


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## Bruins63 (Jan 18, 2018)

Thank you, very helpful


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## canew90 (Jul 13, 2016)

Get funds into a TFSA and max it out! Your currently can move $57,500 or double if you set one up for your wife as well. Then the income is tax free. If you have the tfsa with the same broker, you can transfer In Kind your rrsp withdrawals. You'll still have to pay tax on the rrsp but once it's in the tfsa all gains are tax free.


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## fireseeker (Jul 24, 2017)

canew90 said:


> Get funds into a TFSA and max it out! Your currently can move $57,500 or double if you set one up for your wife as well. Then the income is tax free. If you have the tfsa with the same broker, you can transfer In Kind your rrsp withdrawals. You'll still have to pay tax on the rrsp but once it's in the tfsa all gains are tax free.


Of course, you don't want to shift cash or in-kind holdings from an RRSP to a TFSA while you're still working -- doing so will trigger a significant and needless tax bill.
Once you stop working, you can try to optimize RRSP/RRIF withdrawals based on tax rates to put some of it in a TFSA. But given that the OP needs the funds to live on (at least until beginning CPP and OAS) it sounds like that will be hard to do.
Bruins, it must be tempting to fire your advisor, which could save you $5,000 a year on a $500,000 portfolio if you're paying him/her 1%. But some of your questions suggest that more education will be helpful for you.
This is an excellent Canadian resource:
http://www.finiki.org/wiki/Main_Page


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## Bruins63 (Jan 18, 2018)

fireseeker said:


> Of course, you don't want to shift cash or in-kind holdings from an RRSP to a TFSA while you're still working -- doing so will trigger a significant and needless tax bill.
> Once you stop working, you can try to optimize RRSP/RRIF withdrawals based on tax rates to put some of it in a TFSA. But given that the OP needs the funds to live on (at least until beginning CPP and OAS) it sounds like that will be hard to do.
> Bruins, it must be tempting to fire your advisor, which could save you $5,000 a year on a $500,000 portfolio if you're paying him/her 1%. But some of your questions suggest that more education will be helpful for you.
> This is an excellent Canadian resource:
> http://www.finiki.org/wiki/Main_Page


Thank you for the link...I will read and BTW my fees are more like $10-$12k/yr, a lot of $$ for a buy and hold strategy with a small cash wedge! Here is a link to the type of advice I think I should be getting https://www.youtube.com/watch?v=E1kloe4F94k


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## Benting (Dec 21, 2016)

8-9% a yr is pretty good. If you think your adviser absolutely just buy and hold and no other action, then I do not see why you cannot DIY, save you some money. As for your planned retirement timing, like other said you should reconsider if you feel there is a risk you need to take. Don't know about your health issue, would you consider a 'stretched' retirement. I was at the same scenario quite a few years back. Although I really enjoy working but all these yrs of long grinding days. I felt really burnt out. I could retire if I wanted to, but the money is tight. So I went for plan B. Took extended days off, 4 weeks paid and 8 weeks no pay leave. I felt 4 weeks a yr vecation would not cut it. Because you take a few days to get ready before you go somewhere. After you come back, you have only a few days to get ready and head back to work. Mentally I feel better but physically is just not ready. With the extended leave, after travelling, I have 8 weeks or so to rest. Fool around in town and do absolutely nothing. By the end I was looking forward to get back to work. This went on for quite a few years. The income for those few yrs went to build up my nest egg. I finally retired more than 10 yrs ago when I felt I could without worrying running out of money. Of course it all depends of your health and whether you can take this extended leave for a few yrs. As for the investment, before I retire, I had 2 yrs expense in cash and the rest 100% DIY Canadian equity, no bond, no GIC, no MF and no ETF. Setup a 5 yrs GIC ladder and 2 yrs expense in cash, 100% same equity for the rest. Although I broke every rung of the ladder after 2 yrs due to low interest rate (or you can say greed !) It turned out to be a great move. After I converted to RRIF and LIF, I have 3 yrs cash for expense beginning of the year is the only difference. I sell stocks within couple weeks before withdrawal date every yr without timed when to sell. Well, when I tell others about my equity explosure after retired, just about everybody told me I am taking a huge risk. May be I am lucky, my RRIF I set to withdraw min have actully grow quite a bit despite the forced withdrawal. My LIF I set to withdraw max it has only depleted slightly. Half of the time for these yr I can withdraw more than I was allowed because the gain in the account was more than the allowed in previous yr. Anyway, in the down yr, you may need to sell low, but don't forget you would only have to sell part of it. The rest is still there. Granted, you might meet prolonged down years. If you can survive those yrs you will be ok. Usually those DG stocks will be the first come out in flying colour when it is going up. I strongly diagree we should looking back the history of market more than 50 yrs. Those days are long gone. These day the government constantly monitor the market. Adjust the interest rate to make sure it would not happen.

One thing everybody read this should know. You can say I don't know about investment. All these terms such as XIRR money weighted returns etc make me really confused. Don't know options, long, short etc. I buy and sell is always '@ market'.
Well, this is my personal experience and point of view only. Sorry for the loooong post.


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## Benting (Dec 21, 2016)

Well, after I posted this I think I should give a little bit of my background to paint a better picture. First of all I do not have DB pension. Other than that, I have hard assets, house and others. I can sell them if I need to and retired before the 'stretched retirement'. I prefer not to unless it is absolutely required. If you consider this factor, 100% equity is not too risky as other would think.


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## Bruins63 (Jan 18, 2018)

Thanks for the post!! Are you able to share approx how much your nest egg was at retirement and what age you retired? Thanks again


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