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.

Withdrawing from your Retirement Nest Egg

Posted By Financial Independence Hub | May 12, 2016

By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

You’ve been saving all your working life and now that you have entered your retirement phase, it’s time to start drawing from your savings. In some circumstances there will be people who will be able to live off their dividends and interest alone. Most retirees, however, will have to start spending the money they have saved.

Once you have decided on the amount of income you need annually for your retirement lifestyle and determined how much of it will come from your guaranteed pensions, the remainder must be withdrawn from your nest egg.

You may have multiple accounts and both registered and unregistered savings. Your investments could be stocks and bonds, ETFs and/or mutual funds. You might be in a position where you must withdraw a minimum amount from your RRIFs.

This example will show you how you can manage your retirement withdrawals, taking the total of all your accounts as a whole. It assumes dividends and interest will be reinvested, but you can use them as part of your yearly cash allotment if you so choose. You just have to adjust as necessary.

A model for retirement withdrawals

Meet newly retired Rodney and Pamela O’Brien. They have a retirement nest egg totalling $500,000. Continue Reading…

Keep your Fixed-Income Fire Extinguisher within reach

Posted By Financial Independence Hub | May 3, 2016

By James Redpath, CFA

Special to the Financial Independence Hub

Bonds are boring. They’re supposed to be.

In the relatively dry world of finance, one of the valuable functions that bonds (fixed income) provide is to increase the diversification and resilience of balanced portfolios — by serving as a fire extinguisher when times get tough, rather than an accelerant.

They’re designed to make money, but also to manage any potential sparks or flare-ups lit by their flashier equity counterparts. While no one has pulled the alarm in this new realm of negative interest rate policy imposed by certain central banks, it’s still a good idea for fixed-income investors to be aware of their bond holdings; they should check to ensure that, like a fire extinguisher kept in the kitchen, they’re still appropriate and ready to do the job they’re meant to should the need arise.

What’s happening with negative interest rates?

In 2014, the European Central Bank became the first major central bank to shift interest rates into negative territory. The central banks of Sweden, Denmark, Japan and Switzerland followed suit soon after.

Debuting today: my new “Retired Money” blog at MoneySense.ca

Posted By Jonathan Chevreau | May 2, 2016

Today and every two weeks or so, MoneySense.ca will be running a new online column by me they’re calling “Retired Money.” You can find the first instalment by clicking on this highlighted headline: Ways to Pay Less Tax in Retirement.

This first piece looks at some tax credits that working folk will probably be unfamiliar with: The Age Credit for those who are 65 with relatively low incomes, and the Pension Credit.

So what do we mean by “Retired Money?” What happened to Findependence and Victory Lap? Well, those will remain a focus of this website and my forthcoming book with Mike Drak: Victory Lap Retirement. Here’s how MoneySense bills the new column:

Retired Money …. will explore smart ways to draw down income in retirement and semi-retirement.

Here at the Hub, we usually house topics like this under the Decumulate & Downsize section. A typical guest blog will be something from Doug Dahmer, such as Debt is a Four-Letter Word during your drawdown years.

MoneySense Portfolio Event this Saturday

Going back to MoneySense, this coming Saturday morning, May 7th, MoneySense is hosting a special event. Continue Reading…

Life Insurance after Retirement

Posted By Financial Independence Hub | April 29, 2016

Lorne Marr

By Lorne Marr

Special to the Financial Independence Hub

After serving your workplace for years and decades, it’s that time of your life when you can retire in peace and enjoy your retirement years to the fullest. However, does that mean you should ditch your life insurance policy? Think closely before scrapping your life insurance.

Many individuals might think life insurance is required only when they are young, have a family to support and need to pay off their debts. The very first question that comes to their mind is usually “Why do I need a life insurance policy in my retirement?”

Retirement and Insurance

Firstly, you need to know that life insurance is not about you. People buy life insurance in order to protect and secure the future of their loved ones and whoever depends on the insured’s income. It is there to give your family a future that is financially sound and stable.

How to liberate your RRSP losers

Posted By Jonathan Chevreau | April 19, 2016

My latest Financial Post column looks at how to find a silver lining in the losing stocks in your RRSP. See If you’ve got losing stocks in your RRSP, now may be the time to set them free. It’s also in the Wednesday paper.

I have to admit this is a controversial topic and had I not been introduced to it by the unidentified advisor in the piece, it would never have occurred to me. (the firm’s compliance department didn’t want him identified)

Nonetheless, depending on your tax bracket and your desire to start “melting down” your RRSP or RRIF, it could make sense. See also last weekend’s Hub blog by Doug Dahmer, which provides further context to this particular strategy: Debt is more than a four-letter word during your drawdown years.

Bottom line is, and as Dahmer often says, one of the biggest expenses in retirement is tax. By paying a little more tax now than you have to — if you’re in a lower tax bracket — you may be able to avoid paying a lot more tax down the road, which can happen once you reach age 71 and are subject to annual forced RRIF withdrawals that are fully taxable.

Not intuitive, I realize, but as the Fram Filter folk say, “You can pay me now or you can pay me later. “