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Can you retire using a 60/40 portfolio?

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By Mark Seed, myownadvisor

Special to Financial Independence Hub

I enjoy posting retirement income case studies on this site, so let’s jump right in: can my readers retire using a 60/40 portfolio?

I believe they can. 

Can you retire using a 60/40 portfolio?

As mentioned on this site many times over the years, retirement income planning is a puzzle for some. Not all retirees will have more income generated from their portfolio than what their annual expenses are … although that is probably ideal for some.

That said, it is possible (although rare) to save too much for retirement – if you rely on general assumptions to calculate how much you’ll need.

A good example is your retirement income replacement rate.

The replacement rate is the percentage of the pre-retirement income you need to maintain your standard of living in retirement. I believe overestimating this rate can cause you to save more than what you need for retirement spending.

A general rule shared by some experts is you’ll need between 70-80% of your current income to maintain a comfortable lifestyle in retirement. This is because once saving for retirement is done, and paying off any debt prior to retirement, those pre-retirement expenses drop off.

Other experts cite 50-70% for the necessary income replacement rate. I shared that in this post.

Which one is correct?

Spending 50% of your pre-retirement income is likely a MUCH different number for you and I, vs. 80%.

Retirement rules of thumb are interesting for back-of-the-napkin fun but they have no value in any detailed income planning work. Which makes the following simple but essential IMO in your retirement income planning steps:

Step 1: What are your spending goals?

Step 2: What are your investment savings and income sources to meet those needs?

Step 3: What is the bare minimum lifestyle that you’re ready to live off?

Here is a free retirement income planning playbook. No fee required.

Can you retire using a 60/40 portfolio?

My reader, Olin (name changed) is single and wants to semi-retire this summer at age 55. He has no children or dependants. He’s had a good paying job over the years as a graphic designer but wants to take more of his artistry on the road in the coming years…  He performs at various music gigs during the year for hobby/travel income.

After reading my site, including some MoneySense Best ETFs in Canada editions over the years, he’s landed on a comfortable 60/40 stock/fixed income portfolio across his accounts: that matches his tolerance for investing risk but also seeks to simplify how he invests for his retirement: in a single low-cost all-in-one ETF.

Olin appreciates and respects the dividend income journey by many bloggers but Olin doesn’t have enough money saved up to generate tens of thousands in dividend or distribution income from his portfolio without taking on higher risk bets: so he wants to rely on more of a total-return approach. This should work out well for him based on some historical research and trending.

As a student of market history, Olin is well aware instead of living off dividends or distributions, he could simply sell-off assets as he ages to meet his lifestyle needs. While that approach has some risks as well, depleting your capital over time, Olin is also very confident he could scale-up or scale-down discretionary spending in semi-retirement at will: he will spend more in “good years” and curtail some spending in “bad years.” Being variable with his spending should allow for even greater financial flexibility since he remains out of debt and mortgage-free.

Leveraging some Vanguard research I presented at an Ottawa Share Club meeting in May, 60/40 stock/fixed income portfolios have been very reliable, pension-like constructs for years.

Reference: https://www.vanguard.ca/en/insights/global-6040-portfolio-steady-as-it-goes

While the financial future is always uncertain, there is nothing to suggest a global mix of stocks + a decent weight of fixed income shouldn’t deliver similar results: balancing risk and reward in the decades ahead.

Can my reader Olin retire using a 60/40 portfolio?

Here are Olin’s inputs and assumptions as part of this case study:

  • Olin, single, age 55 later this year – wants to semi-retire summer 2025. He makes $80,000 (gross).
  • He wants to spend > $50,000 after-tax starting this summer.
  • He loves travel, and will take his guitar with him! He has determined he wants some “go-go” spending years between ages 55-79 and will have “slower-go” spending years after age 80.
  • Olin has no workplace pension.
  • He has no debt. He owns his townhome in Ottawa worth about ~ $750,000. Continue Reading…

DIY Investing: Is it really for you?

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Some investors do just fine on their own. But what if that is not you, and you are only realizing it now?

Canva Custom Creation: Lowrie Financial 

By Steve Lowrie, CFA

Special to Financial Independence Hub

Let us get something out of the way upfront.

Many do-it-yourself (DIY) investors do not need an advisor. They enjoy the process. They understand the risks and they successfully meet their needs over time.

Also true: many people who work with an advisor could probably manage their investments on their own but choose not to. They are looking for structure, coaching, planning strategies, process with structure, and a buffer between their emotions and their money.

And then there is a third group. These are investors who began managing their own portfolios, sometimes successfully, sometimes not, but are now questioning whether they are still on the right track. Complexity has crept in. Time is limited. Markets feel more confusing. They are not failing, but they are starting to wonder whether they are optimizing what they are doing and beginning to feel overwhelmed.

There is also a fourth group. These are investors who are managing their own portfolios but do not realize they are making mistakes. They are not actively questioning their approach because they believe everything is fine. Often, they are unaware of the behavioural traps, tax inefficiencies, or investment risks they have unknowingly taken on. It is only when a serious mistake occurs, one that threatens their financial future, that they start to seek advice. Even then, they may not ever realize or fully acknowledge where they went wrong.

If the third or fourth groups sound familiar, read on because this blog is for you.

When Smart Investors Recognize the Limits of Going it Alone

Some of my best clients have at one point self-managed a portion or all their investments. Many had built portfolios that were perfectly reasonable. Some described their results as poor, some average, others felt they had done well. But all of them eventually reached a point where they realized something was missing. They were spending too much time second-guessing decisions. They were reacting to market news more than they cared to admit. And they began to realize they craved the structure and behavioural coaching that professional advice can provide.

What makes DIY Investing so hard?

Dr. William Bernstein, a neurologist turned financial theorist and author, has written extensively about the challenges of investing, particularly for individuals managing their own portfolios. Bernstein is best known for books such as The Four Pillars of Investing and The Investor’s Manifesto and is widely respected for his clear thinking on asset allocation, market history, and investor behaviour.

In his view, only a very small percentage of the population is truly equipped to succeed as DIY investors over the long term. To do so, he argues, you need to possess four rare qualities:

  1. An interest in the investment process. Not just in the outcomes, but in the work itself. Like how a gardener must enjoy digging in the dirt.
  2. Sufficient mathematical skill. This does not mean advanced calculus, but it does require comfort with probability, statistics, and the often-counterintuitive nature of compounding and risk.
  3. A strong grasp of financial history. Understanding past market cycles and common behavioural traps helps prevent repeated mistakes.
  4. Emotional discipline. The ability to remain committed to your strategy even when markets are volatile or unsettling.

Bernstein estimates that only a tiny fraction of people possesses all four. Not because people are not smart or motivated, but because successful investing is as much about temperament and consistency as it is about knowledge. It is no wonder that so many capable individuals eventually seek professional guidance. Not because they cannot do it, but because they realize the cost of getting it wrong can far exceed the cost of getting help.

Personally, I believe Bernstein misses an important point. In my experience, even when someone does check all four of Bernstein’s boxes, the biggest limiting factor is often time, energy, and focus. Personally, many of my clients are highly capable individuals who could manage their portfolios themselves. But they choose not to. Not because they are unable, but because they would rather devote their time and energy to running their business, pursuing their careers, or enjoying other priorities in life. Delegating the day-to-day investment work and high-level financial planning is a strategic decision that allows them to stay focused on what matters most to them.

Most Investors do not get the Returns of the Funds they own

In your day-to-day life, you get feedback quickly. You make a decision, and usually that decision, especially if it is a business decision, you see results right away. You work hard in your career and earn recognition. But investing plays by different rules. You can make the right decision and still lose money. Or the wrong decision and still come out ahead. The feedback is delayed, noisy, and often misleading.

That is what makes investing such fertile ground for overconfidence bias. Most people believe they are better-than-average investors, just as most drivers believe they are better-than-average drivers. But that math does not add up.

In reality, most investors underperform the very investments they hold. Morningstar has tracked this phenomenon for years, as referenced in The Big Picture’s Mind the Gap article. Investors in mutual funds and ETFs often earn significantly less than the funds themselves deliver. The problem is not the products. It is the behaviour. Investors buy when markets feel good and sell when they feel scary. Put another way, they get caught in investment fads in up markets, and panic in a down markets.  Either way, they let emotions and behavioural biases interfere with execution. Even when they pick good investments, they struggle to stick with them.

The result is a silent drag on performance. Not from bad investments, but from poorly timed decisions.

Revisiting Hidden Costs of DIY Investing

In my earlier post, The Hidden Costs of DIY Financial Planning, I discussed how emotional decisions and inefficient implementation, whether through poorly chosen products or tax mistakes, can quietly erode long-term results. Those risks remain very real. Continue Reading…

Ways to increase your Home Value before Reselling

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If you plan to relocate in your golden years, consider these thoughtful upgrades to increase your home’s value before reselling your property.

Image courtesy of Adobe Stock/Lightfield Studios

By Dan Coconate

Special to Financial Independence Hub

For many homeowners, the approach of retirement brings a pivotal opportunity to unlock the substantial equity built up in their property over decades.

Selling your home can be a powerful strategic move, converting your largest asset into a significant financial windfall that can serve as the foundation for your retirement years. This capital can provide the Financial Independence needed to cover living expenses, pursue passions, and ensure peace of mind.

However, maximizing this return isn’t a passive process that begins with a phone call. The key to “fetching the max amount” lies in diligent preparation before you engage with real estate agents. Proactively investing in your property’s appeal can dramatically increase its market value and reduce its time on the market. This preparatory phase isn’t necessarily about undertaking massive, expensive renovations, but rather focusing on strategic improvements that offer the highest return on investment.

Consider improvements from a buyer’s perspective. Simple, cost-effective updates like applying a fresh coat of neutral paint, modernizing light fixtures, or updating cabinet hardware can transform a space from dated to desirable.

Enhancing curb appeal with fresh landscaping, a power-washed exterior, and a welcoming entryway creates a powerful first impression and is just one way to increase your home value before reselling. Furthermore, addressing the small but noticeable deferred maintenance — such as a leaky faucet, a sticky door, or cracked tile — demonstrates that the home has been well-cared-for. By tackling these tasks beforehand, you present agents with a polished, move-in-ready product, empowering them to suggest a higher, more competitive listing price from the outset and ultimately putting more money back in your wallet for the next chapter of your life.

Revamp your Curb Appeal

Tidying up the garden, repainting the front door, and adding outdoor lighting can make your property more inviting. Many buyers will see your home’s exterior first, so making this area clean and organized will leave a great impression. Trim bushes, plant flowers, and pressure wash the driveway for a polished look.

Refresh your Paint

A fresh coat of paint is a low-cost way to make your home look brighter and more modern. Stick to neutral tones like beige, white, or light gray to make rooms feel larger and allow potential buyers to imagine their own decor in the space. Also, consider adding accent walls in the bathroom and bedrooms.

Upgrade the Kitchen

Many homeowners will frequently use their kitchen, so make sure yours looks and operates its best. No need for a complete overhaul here; simple updates like replacing outdated cabinet hardware, adding a stylish backsplash, or upgrading old appliances can catch the attention of future buyers.

Modernize Bathrooms

Along with the kitchen, upgrading your bathrooms will make your home feel more modern to future buyers. Swapping out an old vanity, updating the showerhead, and installing new fixtures can improve the layout of your home and improve lingering issues with your plumbing systems. Consider upgrading the tile work or even adding a double sink for an added touch of luxury. Continue Reading…

September may be Crunch Time for investors

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Deposit Photos

By John De Goey, CFP, CIM

Financial Independence Hub

In the eight months since Donald Trump was reinstalled as the American President, monetary policy south of the border has been subjected to political interference at an unprecedented level. Most observers are of the opinion that Jerome Powell has performed his duties honourably and that the monetary stance taken has been broadly reflective of overall macro circumstances.

Given how relentlessly Trump has berated Powell throughout the year, any move to ease rates could be interpreted as a form of capitulation. Of course, if the economy is weakening and inflation remains benign, a move to lower rates would be entirely justified. Observers need to be careful not to imply political causation when the rationale behind such a decision is properly based on economics.

Now August is over and a September interest rate decision looms. For months now, I have been warning that the American economy (and by extension, the global economy) may be heading for a bout of stagflation. The current circumstances are delicate, and few people envy the task in front of central bankers around the western world.

The challenge is especially acute in the United States, not only because the stakes are highest because of the size of the economy, but also because the objective metrics for the economy continue to flash red. No one wants to make a policy error, but when you’re already walking on a knife edge, even the slightest miscalculation can be devastating.

Tariffs a curious case of mistiming

This may lead to a curious case of cause-and-effect mistiming. It appears the tariffs that have belatedly been imposed by Donald Trump have caused employment numbers to suffer somewhat, while giving importers time to make band-aid adjustments. The delays in implementation have allowed importers to stockpile inventories in anticipation of the tariffs ultimately being imposed in the ensuing months. It is against this backdrop that the central bank needs to weigh its options. There are numerous commentators who believe inflation will manifest once those inventories are drawn down, which seems imminent. Continue Reading…

The Abnormal returns for Canadian Asset Allocation ETFs

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 By Dale Roberts

Special to Financial Independence Hub

I recently updated the returns for the Canadian asset allocation ETFs. The returns over the last year and three years can be described as abnormal returns. So much so that I had to double-check the performance for the equity markets that fuelled this incredible run. How did they do it?

Over the last three years equity markets have delivered average annual returns that are 60% to 100% greater than historical averages. The U.S. has delivered outsized returns over the last five years and beyond. In fact, coming out of the financial crisis U.S. equity returns are nothing short of spectacular.

Here’s the Canadian asset allocation ETF page that shows the returns for the major Canadian asset allocation ETF providers. You’ll also see a ranking by risk level.

And here’s an overview of the assets that drove the returns for the (wonderful) managed all-in-one global ETF portfolios. Also, bonds stopped being a portfolio anchor over the last three years, as inflation is under control (for now).

U.S. stocks XUS-T

International stocks XEF-T

Canadian stocks XIC-T

Canadian bonds XBB-T

U.S. bonds (in U.S. Dollars) AGG

A look at iShares asset allocation ETFs

Here’s an example of the returns for iShares asset allocation ETFs.

The returns are incredible, especially over the last year and three years. Five-year returns are abnormally generous as well.

Here’s an example of the asset allocation and holdings of iShares XGRO, with a target of 80% equities to 20% bonds.

How do your returns stack up?

Everyone should benchmark their personal returns. Of course, if you have an advisor and are invested in high-fee mutual funds your returns are likely waaaaay behind. Remember:  Canadians should avoid most mutual funds.

The shift to ETFs and asset allocation ETFs can be a life-changing move. Consider it. High fees are a wealth destroyer. Use the Contact Dale form on this page if you want to know how to make that happen. And if you want low-fee global ETF portfolios, advice and financial planning …

If you’re a self-directed investor you should also benchmark (compare) your accounts to the asset allocation ETFs of the same risk level. That is, you will match the equity to bond ratios. If you’re underperforming you can discover why. Continue Reading…