Decumulate & Downsize

Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.

New to a RRIF? Make sure you have enough cash and consider dialing down risk

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My latest MoneySense Retired Money column has just been published and covers something that was a new experience for me: starting and managing a RRIF or Registered Retirement Income Fund.

You can find the full column by clicking on the highlighted headline: How to make sure you have enough money to fund your RRIF withdrawals. 

At the end of the year you turn 71, those with RRSPs are required either to cash them out  (not recommended from the standpoint of taxes), to to annuitize orto convert it into a RRIF, or Registered Retirement Income Fund. The latter is the most popular action and recommended by experts like The Successful Investor’s Patrick McKeough.

            However,  as I’ve discovered since my own RRIF started up this past January, the sweetness of the RRSP tax deduction over the decades is offset by the sourness of having to pay taxable withdrawals on your new RRIF.

            In my case, I am a DIY investor who uses one of the big-bank discount brokers to self-manage the taxable distributions and to manage the remaining investments, most of them carryovers from the RRSP.  While accumulating funds in an RRSP is a matter of making annual contributions and reinvesting dividends and interest, a RRIF represents a departure from the psychology needed to build an RRSP for the future. Suddenly, regular selling is necessary. The RRIF rules mean that in the first year you’ll have to withdraw something like 5.28% of what your balance was at the start of the year (rising to 5.4% at age 72 and every upwards each passing year).

Payments can quarterly, monthly or any frequency you choose

          If you choose monthly payments, as I did, that means every month you have to have 1/12th of the required annual distribution in the form of ready cash to be whooshed out monthly on whatever date you specify. As most retirees will be getting other pensions near the end of the month, I chose mid-month for the RRIF distribution. You also need to choose the percentage of tax you wish to pay to Canada Revenue Agency: I picked 30%, which automatically leaves your account each month. The remaining 70% transfers out into your main chequing account, ideally at the same financial institution where the RRIF is held: It’s easier that way.

Setting regular tax payments

          You also need to choose the percentage of tax you wish to pay to Canada Revenue Agency: I picked 30%, which automatically leaves your account each month. The remaining 70% transfers out into your main chequing account, ideally at the same financial institution where the RRIF is held: It’s easier that way. Sure, you could set the tax at 10% or 20% but if you have other sources of taxable income, like taxable dividends and other pensions, I’d rather not have the unpleasant surprise of a larger-than-expected tax bill a year from April. Once you have a year of RRIFing under your belt, you may see fit to adjust the 30% upwards or downwards. Continue Reading…

Retirement Club for Canadians 

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By Dale Roberts

Special to Financial Independence Hub

Hi, it’s Dale Roberts here. You know me from Cut The Crap Investing. My blog posts are often shared on Findependence Hub. 

Similar to Jonathan Chevreau I have a keen interest in helping Canadians prepare for retirement and make the most of retirement once they reach that wonderful stage in life. 

Too many Canadians enter retirement with some sense of anxiety. They may fear that they will outlast their money. They might not have created the all important life plan. 

More and more Canadians have self-directed their investment accounts. Now they need a resource that helps them set the course, and keep the course for a successful retirement. 

That’s why we created Retirement Club. Retirement Club for Canadians 

What is Retirement Club? 

Retirement Club is a community of like-minded Canadian retirees and near retirees. 

A successful retirement starts with financial security. Let’s call that fiscal fitness. We cover the financial essentials, in jargon-free plain-speak with clear demonstrations. You’ll learn how to spend down your portfolios in an efficient fashion. You’ll learn how to use free-use retirement calculators that create optimal retirement cash flow plans. That is, how to spend from your investment accounts, working in concert with CPP, OAS, pensions, and other income. 

The retirement portfolio will be discussed in detail. We need to align each account’s risk level to the task at hand: dictated by that retirement cash flow plan. 

As you may know, at Cut The Crap Investing I’ve offered a unique approach to managing risk: using lower volatility and defensive equities (consumer staples, healthcare and utilities) in concert with traditional risk managers such as cash, bonds, GICs, gold, annuities and more. During the volatility of 2025, these defensive assets have been the top performers. 

Of course the financial topics are numerous, from wills and estates, to insurance, tax tips, healthcare costs and more.

Retirement by design

Next comes the life plan. Each of us will decide on our level of travel and entertainment, family time, leisure and living life full of purpose. We’ll provide and share lifestyle inspiration. We’re doing it right when financial security enables a rich and rewarding lifestyle. We need to retire with vitality and purpose. How do we replace the ‘good stuff’ we got out of our working years? 

How do we learn and connect? 

At a minimum we’ll have …  

  • A monthly one hour Zoom presentation (the next one is April 25th at noon).
  • A monthly newsletter 

The Zoom presentations are lively and interactive. They start with a learning session but move on with Clubbers asking questions and taking part in break out sessions. We end with a 15 minute ‘after party.’ It’s a Club environment. 

Our Community Captain, Brent Schmidt of Strategic Fuel, l creates an engaging club experience.  Continue Reading…

Surviving a “Bear Scare” in or just before Retirement

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Deposit Photos

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to Financial Independence Hub

It’s everyone’s nightmare: watching retirement assets vanish in a bear market, especially in or just before retirement.

Many of you will remember the severe market downturn of 2000-2002, the Dot Com Bubble, when the Standard & Poor’s 500 Index fell 37%.

We’d be lying to say that this declining market didn’t affect us. Our finances dropped about the same as most others on a percentage basis. As retirees, with no regular paycheck coming in on Friday, this event could have spelled disaster for our future plans of maintaining our financial independence.

Then there was the 2007-2009 “Great Recession” where the market fell by almost 50% lasting 17 months, testing our courage.

The 2020 Covid scare shook the market’s foundation, earning the title of the “shortest bear market” in the S&P 500 history lasting only 33 days.

And now here we are again in 2025 where the market is almost in the grip of a bear. How much longer will this last? How low will we go?

What should we do? How do we cope?

First, we’ve learned from past bear markets the importance of some cash flow. Having aged a bit and now receiving social security we have adjusted our portfolio to a more balanced one adding DVY, iShares Select Dividend ETF as a dividend-producing asset as well as increasing our cash holdings.

Then, there are regular chats about our finances and the state they are in, in hopes of averting a possible worst-case meltdown. We have discussed the fiscal facts and tried to extrapolate them out into the future.

One obvious problem: No one can predict the future.

Friend asks “Billy, why are you investing now? You know the market is crashing, right?” Same friend 10 years later: “Hey Billy I heard you retired early. How did you do that?”

Using history as a guide

Researching bear markets, we take heart from the knowledge that past downturns always ended.

Retiring is definitely easier when markets are rising as compared to when they are falling. But how do you know if you are in a rising or falling market? That depends on your starting point and there has been no 20-year rolling negative returns.

Another question to ask: is this is a good time to buy equities? For every buyer there is a seller and they both think they are right. Maybe the cure for cancer will be announced tomorrow or the global economy will collapse. We just don’t know.

That’s the point.

This is why you need to create the mental confidence to ride out these fluctuations and not panic out of the market. Continue Reading…

Canadians’ quest for Financial Independence

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An RBC poll finds Canadians believe they’ll need almost $850,000 to ensure an independent financial future

By Craig Bannon, CFP, MBA, TEP

(Special to Findependence Hub)

For many Canadians, Financial Independence is the ultimate goal: a future where they can live comfortably, support themselves and their families and enjoy their desired lifestyle without the constant stress of striving to make ends meet.

However, with ongoing market fluctuations, a higher cost of living, and overall economic uncertainty, reaching that milestone may feel more challenging than ever before. Many individuals find themselves trying to navigate a complex financial landscape, where saving for retirement and other financial goals requires careful planning and informed decision-making.

Findings from the recent RBC Financial Independence Poll indicate that Canadians believe they need an average of $846,437 to ensure an independent financial future : which they variously described as “having a nest egg large enough to enjoy my retirement,” “not living paycheque to paycheque” and being “debt free.”  In some regions, that number is even higher: respondents in the Prairies, for example, estimate they’ll need an average of $958,535. Among generations, Gen X (aged 45 to 60) anticipates needing over a million dollars to achieve Financial Independence.

 

Investing a Key Strategy for Growth

With such ambitious targets, investing has become a crucial strategy for many Canadians. Nearly half (49%) of poll respondents say they invested in 2024, with Gen X and Millennials participating at similar rates. But concerns linger, with nearly half of all respondents (48%) calling out market volatility and investment performance as a key worry, with this concern jumping to over half (54%) for Millennials.

However, while markets fluctuate, one constant remains: the value of having a strong financial plan based on one’s goals, with a long-term investing strategy to implement, to help investors stay the course through market ups and downs. The encouraging news: 51% of Canadians say they have a financial plan, either formal or informal. Those with a plan report feeling more confident (42%) and reassured (30%) about their financial future.

Staying the Course and Seeking Professional Guidance

For those hesitant to re-start – or begin – investing, waiting for the ‘perfect’ moment to invest may mean missing out on valuable growth opportunities. Time in the market, rather than timing the market, is important. The sooner you can invest and the longer you can be invested, the greater the opportunity to potentially benefit from the gradual growth that markets and economies can experience over the long term. Continue Reading…

Navigating Volatility with Asset Allocation ETFs

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Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

The S&P 500 was down 3.53% in the year-to-date period as of mid-afternoon trading on Wednesday, March 19, 2025. Markets in the United States and across the globe have been hit with turbulence while the threat of tariffs has ramped up trade policy tensions. Earlier this month, we’d suggested that investors might consider taking it back to the basics.

In this piece, I want to explore why striking a defensive posture and pursuing diversification in your portfolio could provide peace of mind going forward.

The macroeconomic environment today

There are elevated risks that have led to uncertainty in the markets today. We are now two full months into Donald Trump’s second Presidential term. It already feels much longer than that to many Canadians. Investors may want to prepare for elevated volatility in the near to mid-term as there appears to be no immediate relief in sight when it comes to prickly trade tensions between allies and adversaries alike in the geopolitical sphere. Global trade policy uncertainty, a measurable index that quantifies policy risks, is the highest it has been since Trump’s first term.

Valuation concerns have been added to the risks and uncertainty. This is particularly true in the U.S. with regards to big tech. Investors have started to question the pace of earnings growth, as well as the strength and confidence of the consumer. A March report from the University of Michigan Consumer Sentiment Index showed it falling to 57.9. That is the lowest level since November 2022. It also represents a 10.5% drop from the same time in February 2025. Consumer sentiment had declined by 27.1% – or 21.5 points – in the year-over-year period. That is the largest annual decline since May 2022.

Between tariffs, geopolitics, valuations, and the economy, investors are being presented with an increasingly challenging and noisy backdrop.

Advantages of Asset Allocation funds

The biggest advantage that Asset Allocation funds offer investors is diversification. Diversification, it has been said, is the only “free lunch” in investing. Diversification does not eliminate risk, but it does spread out risk broadly. That has the potential to create more robust portfolios.

Asset Allocation exchange-traded funds (ETFs) help investors better diversify their holdings. These ETFs also provide the discipline to stay invested in the market to help manage the market gyrations that all investors inevitability experience. Staying invested in markets, especially in times of heightened volatility, is historically what sets investors up for long-term investing success. Moreover, asset allocation strategies offer investors the benefit of the package. While many investors may tweak exposures through individual ETF holdings, many can benefit from the “one-ticket approach” offered by asset allocation ETFs.

Asset allocation strategies in 2025

The Harvest Diversified Equity Income ETF (HRIF:TSX) allocates to other Harvest Equity Income ETFs – which overlay an active covered call strategy on a portfolio of sector-focused equities – to generate attractive equity income across a well-diversified sector mix.

Meanwhile, the Harvest Diversified Monthly Income ETF (HDIF:TSX) represents the same portfolio of Harvest Equity Income ETFs. However, HDIF employs modest leverage at approximately 25% to amplify returns and income.

Notable sectors in these ETFs include defensives like health care, utilities, real estate investment trusts (REITs), and it is complemented by growth sectors such as technology and industrials. The use of the covered call writing strategy transforms market volatility into higher levels of cashflow. These ETFs are one-ticket globally diversified equity income exposures, offering attractive overall yields.

A traditional balanced asset allocation portfolio

The traditional “balanced” investment portfolio is composed of 60% equities and 40% bonds. In 2024, Harvest launched the Harvest Balanced Income & Growth ETF (HBIG:TSX) and the Harvest Balanced Income & Growth Enhanced ETF (HBIE:TSX). These ETFs incorporate Fixed Income ETFs into the mix, aiming to replicate that 60/40 asset allocation. These Fixed Income ETFs include intermediate and long duration US Treasuries. Continue Reading…