# Retired now and worried for diminishing retirement portfolio



## kalie (Jun 19, 2021)

Hi. I’m 65, retired this year and like many others worried about retirement portfolio. I am a conservative and not very experienced investor. And like everyone, I hate seeing my hard earned money losing value by the day.

Today I have approx:
$350,000 in VBAL (split between Cash account, RRIF, and TFSA)
$130,000 in RBC Select conservative mutual fund, Series A which holds approx 53% fixed income and MER of 1.84%.
$370,000 in cash in different HISAs for a car purchase and income to last until 70 when I collect QPP and OAS.

I know cash portion is large and not keeping up with inflation, but neither are investments, which have lost substantially since 2021 

Do I cut my loss and sell mutual fund, (down over $11,000 since Dec 21). Put it into VBAL, or is VBAL still valid at all? Buy more equity? Ladder some GICs with cash holdings?

Any recommendations for peace of mind much appreciated.


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## Beaver101 (Nov 14, 2011)

First question (of too many) - who came up with that asset allocation in your portfolio? Yourself or a financial planner at the bank?

Second, do you not need immediate money to fund your retirement? It seems not if you're able to defer getting OAS and QPP at age 70. In which case, I would leave that AA plan you have to work itself out as if it hasn't been set up that long ago.


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## Thal81 (Sep 5, 2017)

Hi Kalie, you shouldn't stress too much about your portfolio losing money, the stock and bond markets are all down right now and it's been like that for a few months. Your investments are doing just like everyone else's. A financial planner (not the bank one) would be in a better position to help you, but since you're asking the internet, the internet shall answer.

There are two things of concern to me, your RBC mutual fund and your big pile of cash. The RBC fund has been consistently underperforming ETF portfolios with equivalent stock/bond allocations, probably due to the high MER. This is easily sorted out, you could sell it to buy an equivalent index fund ETF like VCNS. Personally I'd move it all to VBAL for simplicity and because I believe VCNS is overly conservative. While you mention being conservative, we can fix that with my next recommendation.

The big pile of cash could be used to build a GIC ladder that covers all your living expenses until you turn 70. From your post history I see you're already familiar with that concept. You don't mention how much you spend per year, but if you don't need the full $370K to build this you could put the difference in VBAL.

Don't sell your funds to "cut your losses". That's the classic mistake done by inexperienced investors and how people end up losing money. Now is the time to buy more, not sell. However, in your case you should just sell the RBC fund to immediately buy VCNS/VBAL, don't stay out of the market.


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## peterk (May 16, 2010)

Since you already know about things like VBAL, HISAs, and that mutual funds have high MERs, I'd say you're way ahead of the curve than most people. Add in that you're comfortable transferring money between accounts and you're all set.

If it were me I'd:


Keep $100k in HISA for emergencies.
Consolidate all other holdings and accounts to just holding VBAL (or equivalent)
Sweep whatever distribution you get from your VBAL portfolio, plus whatever extra RRIF withdrawals are needed, to your chequing account, for spending.
If that is inadequate for your spending level, draw down the HISA to make up for the short fall.
Every couple years, when the HISA hits $80k (or some number) due to the withdrawals, sell a chunk of VBAL, and top up your HISA back to $100k.


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## cainvest (May 1, 2013)

Basically what others have said above, don't sell. 

What is your current HISA returning? Likely better to start pushing over some HISA to shorter term GICs for a little better return.


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## Tostig (Nov 18, 2020)

Don't sell. Buy more.

If you don't mind my asking, what did you do during the covid crash of March 2020 or during the financial crisis crash of August 2008?


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## afulldeck (Mar 28, 2012)

^ this. As tthe market is dropping time to buy more....


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## GreatLaker (Mar 23, 2014)

I agree with what's already been said. Selling when the market is down to cut losses is inevitably a mistake. 10% decline happens often, probably once per year. 20% decline happens every couple of years. 40% drops are not unknown; there was one in 2000 and again in 2008, and both took a while to recover. But the market did recover and go up to new highs.

The thing about being retired and having to draw from a portfolio is it can force you to sell distressed equities. VBAL is a good solution because it has a blend of equities and bonds. This is a bad time because both bonds and stocks have declined, but bonds are much more stable than stocks. Consider a GIC ladder which will guarantee you have money maturing each year. I use 5-year GIC ladders that each year enough matures to cover my basic non-discretionary expenses. It will also reduce your stress, knowing that money is available for sure. Start by buying 1 each of 1, 2, 3, 4 and 5 year GICs. Then when the 1 year GIC matures renew it with a 5 year GIC. Eventually you will have one GIC maturing each year, and you always get 5 year rates. If markets are good, then sell some VBAL annually for spending money. If markets are bad, then use the maturing GIC for your annual spending. The cash is not doing you much good, when you could be using GIC ladders.

I did not compare the mutual fund to ETFs like VBAL, but data shows that around 90% of actively managed mutual funds trail their benchmark indices over 5 years. Consider the 1.84% MER. If a conservative balanced portfolio goes up 6% to 8% each year in average, then the MER is taking almost 1/4 to 1/3 of the return. That's a large handicap for any manager to overcome. I did look at its performance on Morningstar and noticed it has good performance since 2018, but before 2018 it was below average. 

For a quick recommendation, consider selling the mutual fund. Put 5 years spending in a GIC ladder then the cash and the rest of the proceeds from the mutual fund into VBAL, or if that is to aggressive for you, consider VCNS instead.

If you don't have any guaranteed income, then deferring CPP/OAS to 70 can be a prudent move to give you more guaranteed, indexed, lifetime income later in life. It protects you from bad investment returns, inflation and just plain outliving your savings.

I am retired with no pension, and not collecting CPP/OAS yet. I keep 5-years of non-discretionary spending in GIC ladders as described above. the rest is in ETFs. I use individual ETFs in an asset allocation similar to VBAL. Each year I sell enough investments for my annual spending and move that to an HISA. I also keep some some cash in an emergency fund. It's an easy strategy to follow and I don't have to worry about guessing where the market or interest rates are going.

Every investor needs to have a long term view and an investment strategy they can stick with no-matter what the markets, economy and interest rates do.


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## londoncalling (Sep 17, 2011)

Agree with what's been provided above. I am not familiar with the RBC Mutual fund as I haven't owned mutual funds since I went to DIY. Before selling you may want to check into and charges or fees in doing so. If there are significant penalties for selling now (early redemption or DSC fees) it may be something that you should do over time.


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## AltaRed (Jun 8, 2009)

londoncalling said:


> Agree with what's been provided above. I am not familiar with the RBC Mutual fund as I haven't owned mutual funds since I went to DIY. Before selling you may want to check into and charges or fees in doing so. If there are significant penalties for selling now (early redemption or DSC fees) it may be something that you should do over time.


I am guessing there are no DSC charges for the RBC fund especially if this is held by an account with a bank but it is worth checking. If the OP provides us with the specific fund code for that fund, we can probably comment. The key takeaway I have from the OP's post is that RBC fund has to go... An MER of that size with such a conservative fund will most definitely under perform. If the OP wants to stay conservative, then XCNS or VCNS (40/60) is an alternative. That all said, I think VBAL all around is best for someone in the OP's situation of OAS/CPP only as annuity income.

In the 5 year period leading up to age 70, at least some of that cash needs to be in better income generation than a 1.5% HISA. I would put at least half of the $370k, if not $250k, into 5 GICs, one each of $50k in a 1, 2, 3, 4, 5 year GIC so that the OP has $50k maturing each year over the next 5 years. If she does not need all of the $50k from the 1 year GIC in 2023, she can roll the residual over to a 5 year GIC or buy more VBAL/XBAL units that will serve her well post age 70. Rinse and repeat for the GICs maturing in 2024 and beyond.....until CPP and OAS kicks in. I assume the OP will be making use of GICs from the likes of Oaken Financial or EQ Bank or the like, or at least through a discount brokerage....and not from the predators at the big banks.

Added: It is normal for a new retiree to feel very vulnerable when that retiree sees a market decline with no employment income as a safety net. The key is to have faith in the system as market declines one year (or two) are followed by market upswings in the next surge of business cycle. Consider talking to a fee only planner for validation of what you are doing or private message a few of the folk here you feel you have an affinity too or can/want to trust.

Anecdote: I had a substantial portfolio when I retired in early 2006 but between a divorce (splitting assets in early 2008) and experiencing the 2008-2009 crisis, I chose not to panic and have faith the markets would bounce back. I used a judicious approach to my spending during that period, and it took while until late 2009 before I felt I was back on track.


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## cainvest (May 1, 2013)

I know timing isn't always a good idea but given the "almost certain" rate hike in May would it be a good idea to what for that to buy GICs?


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## kalie (Jun 19, 2021)

Tostig said:


> Don't sell. Buy more.
> 
> If you don't mind my asking, what did you do during the covid crash of March 2020 or during the financial crisis crash of August 2008?


I was living abroad in 2008, only had a small RSP here so couldn’t do anything, and only set up current asset mix 2 years ago. So not used to funds tanking lol.


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## kalie (Jun 19, 2021)

cainvest said:


> I know timing isn't always a good idea but given the "almost certain" rate hike in May would it be a good idea to what for that to buy GICs?


Yes good idea. Although it seems rate hikes might be going on all year?


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## kalie (Jun 19, 2021)

Beaver101 said:


> First question (of too many) - who came up with that asset allocation in your portfolio? Yourself or a financial planner at the bank?
> 
> Second, do you not need immediate money to fund your retirement? It seems not if you're able to defer getting OAS and QPP at age 70. In which case, I would leave that AA plan you have to work itself out as if it hasn't been set up that long ago.


Thanks for your reply. It was a financial planner at bank for mutual fund, and wise people on this and another forum for the VBAL. The cash is what I had left and didn’t do anything with. This cash is what I was counting on to fund at least the next 5 years of retirement.


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## kalie (Jun 19, 2021)

AltaRed said:


> I am guessing there are no DSC charges for the RBC fund especially if this is held by an account with a bank but it is worth checking. If the OP provides us with the specific fund code for that fund, we can probably comment. The key takeaway I have from the OP's post is that RBC fund has to go... An MER of that size with such a conservative fund will most definitely under perform. If the OP wants to stay conservative, then XCNS or VCNS (40/60) is an alternative. That all said, I think VBAL all around is best for someone in the OP's situation of OAS/CPP only as annuity income.
> 
> In the 5 year period leading up to age 70, at least some of that cash needs to be in better income generation than a 1.5% HISA. I would put at least half of the $370k, if not $250k, into 5 GICs, one each of $50k in a 1, 2, 3, 4, 5 year GIC so that the OP has $50k maturing each year over the next 5 years. If she does not need all of the $50k from the 1 year GIC in 2023, she can roll the residual over to a 5 year GIC or buy more VBAL/XBAL units that will serve her well post age 70. Rinse and repeat for the GICs maturing in 2024 and beyond.....until CPP and OAS kicks in. I assume the OP will be making use of GICs from the likes of Oaken Financial or EQ Bank or the like, or at least through a discount brokerage....and not from the predators at the big banks.
> 
> Added: It is normal for a new retiree to feel very vulnerable when that retiree sees a market decline with no employment income as a safety net. The key is to have faith in the system as market declines one year (or two) are followed by market upswings in the next surge of business cycle. Consider talking to a fee only planner for validation of what you are doing or private message a few of the folk here you feel you have an affinity too or can/want to trust.


Thanks so much for your reply. No I don’t believe there will be charges as this MF, RBF 461 with RBC was set up quite a time ago. And it seems general consensus that this fund should be sold, which kind of confirmed what I thought, although was hoping to gain some back before selling but don’t think this is a reality these days. I have an Oaken account so I like your suggestion for the GICs. And I really appreciate your words of encouragement as it is definitely a switch when you no longer have income from employment and feel vulnerable, especially in this climate and for a nervous nellie like me.


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## kalie (Jun 19, 2021)

GreatLaker said:


> I agree with what's already been said. Selling when the market is down to cut losses is inevitably a mistake. 10% decline happens often, probably once per year. 20% decline happens every couple of years. 40% drops are not unknown; there was one in 2000 and again in 2008, and both took a while to recover. But the market did recover and go up to new highs.
> 
> The thing about being retired and having to draw from a portfolio is it can force you to sell distressed equities. VBAL is a good solution because it has a blend of equities and bonds. This is a bad time because both bonds and stocks have declined, but bonds are much more stable than stocks. Consider a GIC ladder which will guarantee you have money maturing each year. I use 5-year GIC ladders that each year enough matures to cover my basic non-discretionary expenses. It will also reduce your stress, knowing that money is available for sure. Start by buying 1 each of 1, 2, 3, 4 and 5 year GICs. Then when the 1 year GIC matures renew it with a 5 year GIC. Eventually you will have one GIC maturing each year, and you always get 5 year rates. If markets are good, then sell some VBAL annually for spending money. If markets are bad, then use the maturing GIC for your annual spending. The cash is not doing you much good, when you could be using GIC ladders.
> 
> ...


Thanks so much for your input. Everything you have said makes sense and gives me direction. I don’t expect that I will have to sell VBAL for some time as I should have enough from the cash portion going into GICS for income, as well as RRIF withdrawals.
I love this forum, everyone is so helpful. Makes one feel like they are not alone trying to figure things out.


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## kalie (Jun 19, 2021)

peterk said:


> Since you already know about things like VBAL, HISAs, and that mutual funds have high MERs, I'd say you're way ahead of the curve than most people. Add in that you're comfortable transferring money between accounts and you're all set.
> 
> If it were me I'd:
> 
> ...


 Thanks much for your input. I like your thinking and it makes total sense to me, although I think I have a higher comfort level doing some GICs for regular income as some here have suggested. Cheers for the encouragement!


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## kalie (Jun 19, 2021)

Thal81 said:


> Hi Kalie, you shouldn't stress too much about your portfolio losing money, the stock and bond markets are all down right now and it's been like that for a few months. Your investments are doing just like everyone else's. A financial planner (not the bank one) would be in a better position to help you, but since you're asking the internet, the internet shall answer.
> 
> There are two things of concern to me, your RBC mutual fund and your big pile of cash. The RBC fund has been consistently underperforming ETF portfolios with equivalent stock/bond allocations, probably due to the high MER. This is easily sorted out, you could sell it to buy an equivalent index fund ETF like VCNS. Personally I'd move it all to VBAL for simplicity and because I believe VCNS is overly conservative. While you mention being conservative, we can fix that with my next recommendation.
> 
> ...


Thanks so much. I am glad I asked “the Internet”, because it is made up of wise and helpful people like yourself. I am on board with what you have suggested, and you have eased my mind about what I should do. I can do this  Cheers.


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## kalie (Jun 19, 2021)

cainvest said:


> Basically what others have said above, don't sell.
> 
> What is your current HISA returning? Likely better to start pushing over some HISA to shorter term GICs for a little better return.


Thanks for your input. And yes I have confidence now that is what I am going to do


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## cainvest (May 1, 2013)

kalie said:


> Yes good idea. Although it seems rate hikes might be going on all year?


And that's he catch with timing things. 

While rates are likely to up for a while you are current losing to existing GIC rates while you wait. I could check tomorrow but I think even one year GIC are near 2.8% now, likely much higher than your HISA. There might be a better strategy to building a 5 yr ladder with rising interest rates, not sure how much extra you'd make though.


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## GreatLaker (Mar 23, 2014)

kalie said:


> Thanks so much for your input. Everything you have said makes sense and gives me direction. I don’t expect that I will have to sell VBAL for some time as I should have enough from the cash portion going into GICS for income, as well as RRIF withdrawals.
> I love this forum, everyone is so helpful. Makes one feel like they are not alone trying to figure things out.


You are most welcome!

I consider my GICs a safety net. Most years my spending money comes from equities since they usually go up the most. If there is a bad market crash I would use GICs for cash until the market started to recover. That's a normal retirement spending strategy.

Here are some good learning resources if you are in a reading mood.

This is a great overview of indexing and the Couch Potato strategy:
Getting Started | Canadian Couch Potato 

This is a bit more advanced and somewhat irreverent. Especially recommended are Part 2 The Market Always Goes Up, Part 3 Most People Lose Money in the Market and Part 8 The 4% Rule.
Stock Series - JLCollinsnh 

This is a great illustration of how volatile markets can be, yet how much investors can make if they just stay the course. As Jack Bogle, the founder of Vanguard is known to have said: "Don't just do something, stand there.", meaning investors need to resist the temptation to change strategies or tweak their portfolio.
Keep in Mind, Stocks Rose 1,100-fold During This Period


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## TomB16 (Jun 8, 2014)

Your portfolio looks solid to me. You've done a good job to position yourself well.

You are probably going through an initial retirement phase known as, "I've just retired, don't have a job for the first time in 45 years, and am having a hard time shifting from a lifelong mindset of growing my nest egg to spending it."

Welcome to this phase. This is where I am at, as well. I worked part time for the last three years of my career. I thought that would make it easier but it does not seem to have. This just seems to be something most or all of us have to get through.

Given the solid nature of your portfolio, I encourage you to be patient and long considered, before making changes to your portfolio. You could well improve it and there are a couple of excellent ideas in this thread but your house is not on fire so there is no need to rush into anything or maybe do anything at all. Be patient with yourself.

Above all, please accept my warm congratulations on both your retirement and also for doing a good job of setting yourself up. You have made it.


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## londoncalling (Sep 17, 2011)

kalie said:


> general consensus that this fund should be sold, which kind of confirmed what I thought, although was hoping to gain some back before selling but don’t think this is a reality these days. I


Waiting for the RBC to regain some of its value is a moot point if you are going to invest the proceeds right away into a lower MER all in one ETF such as VBAL. Although the future returns won't be exact the cost savings will more than make up the difference if there is any slippage in the interim. 

Welcome to the forum. Like many others here I am sure you will enjoy taking control of your investments as part of your retirement.


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## Retired Peasant (Apr 22, 2013)

It isn't clear from the OP if the mutual fund is in registered or non-registered. If non-registered and you sell, there may be tax consequences (capital gains), given that you have held it for quite some time. Not that this is a reason to hang on to it, but just another consideration on the timing and quantity you sell at one time. If it is in RSP/tfsa, then no issue.


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## Mechanic (Oct 29, 2013)

Might be better taking CPP and OAS now, as opposed to waiting till 70 ?


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## kalie (Jun 19, 2021)

TomB16 said:


> Your portfolio looks solid to me. You've done a good job to position yourself well.
> 
> You are probably going through an initial retirement phase known as, "I've just retired, don't have a job for the first time in 45 years, and am having a hard time shifting from a lifelong mindset of growing my nest egg to spending it."
> 
> ...


Thanks so much. You are right, retirement is a wake-up call and adjustment for sure. I really appreciate your words that I am in fairly good shape entering this phase - I should try to stop worrying now.


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## kalie (Jun 19, 2021)

Retired Peasant said:


> It isn't clear from the OP if the mutual fund is in registered or non-registered. If non-registered and you sell, there may be tax consequences (capital gains), given that you have held it for quite some time. Not that this is a reason to hang on to it, but just another consideration on the timing and quantity you sell at one time. If it is in RSP/tfsa, then no issue.


The MF is non-registered. Yes, probably capital gains but income will be low this year so better now than later methinks.


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## kalie (Jun 19, 2021)

Mechanic said:


> Might be better taking CPP and OAS now, as opposed to waiting till 70 ?


Thanks, but my reasoning for deferring is that I have enough cash to last me until then and I will get an increased amount. Also since I lived out of the country for many years I have a chance to maximise OAS.


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## kalie (Jun 19, 2021)

londoncalling said:


> Waiting for the RBC to regain some of its value is a moot point if you are going to invest the proceeds right away into a lower MER all in one ETF such as VBAL. Although the future returns won't be exact the cost savings will more than make up the difference if there is any slippage in the interim.
> 
> Welcome to the forum. Like many others here I am sure you will enjoy taking control of your investments as part of your retirement.


Thanks, that is a very good point. Just have to make sure I invest it right away and not get scared off because of the market state LOL.


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## kalie (Jun 19, 2021)

GreatLaker said:


> Here are some good learning resources if you are in a reading mood.
> 
> This is a great overview of indexing and the Couch Potato strategy:
> Getting Started | Canadian Couch Potato
> ...


Thanks for the reading resources, I will check them out. I do find being a DIY investor a learning curve and always more to learn.


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