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.

The Art and Math of RRIF withdrawals

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myownadvisor

By Mark Seed, myownadvisor

Special to Financial Independence Hub

Unlike some financial experts, I’ve long since touted the merits of making RRSP withdrawals before waiting until the age of 71 for RRSP>RRIF conversion to take effect, when minimum RRIF withdrawal rates kick in.

I’m hardly 70. Not even close (since I just left my 40s)!

Rather, I’ve learned these benefits from others:

While personal finance and investing is always personal, I believe, being forced into managing your portfolio in any way is usually the wrong decision. Successful folks have told me so.

Here are two key experiences from others to share related to RRSP/RRIF withdrawals:

  • Unless retirees have very high taxable income already; lots of assets (in the millions) whereby they already stomach paying higher taxes most retirees or semi-retirees should at least consider some RRSP withdrawals in their retirement years to help “smooth out taxation.”
  • Beyond RRSP/RRIF income, should any retiree have a workplace pension and/or who may have other significant income streams in retirement (like non-registered investments that generate healthy dividends) they may find themselves in a higher tax bracket as they age into their 70s and 80s, via forced RRIF withdrawals, potentially losing out on government Old Age Security (OAS) benefits.

One of the inspirations for this week’s theme was from this MoneySense article:

I thought the punchline was spot on for this 80-something (Amy), who has a wealth/tax problem to navigate now:

“In summary, Amy, there is no magic bullet to help with your large RRIF account. You will pay a high rate of tax during your life or upon your death on those withdrawals.”

While any retiree’s cashflow objectives will differ, unless you’re in the extreme minority, most successful early and traditional retirees with whom I chat and engage seem to plan WAY ahead on such matters whereby they consistently choose to make some RRSP withdrawals well ahead of when there are forced to.

In making financial decisions before they are forced to, I’ve observed four key benefits: Continue Reading…

Navigating Short, Medium, and Long-Duration Fixed Income in 2024

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Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Content)

Fixed-income securities are financial instruments that have defined terms between a borrower, or issuer, and a lender, or investor. Bonds are typically issued by a government, corporation, federal agency, or other organization. These financial instruments are released so that the issuing institution can raise capital. The borrower agrees to pay interest on the debt security in exchange for the capital that is raised.

The maturity refers to the date when a bond’s principal is paid with interest to the investor. In the modern era, interest rates tend to fluctuate over long periods of time. Because of this, shorter-duration bonds have predictable rates. The longer investors go down the maturity spectrum, the more volatility they will have to contend with in the realm of interest rates.

On January 16, 2024, Harvest ETFs unveiled its full fixed income suite. That means investors will have access to ETFs on the full maturity spectrum: short, intermediate, and long-duration bonds.

In this piece, I want to explore the qualities, benefits, and potential drawbacks of short-term, medium-term, and long-term bonds. Let’s dive in.

The two types of short-term bonds for investors chasing security

Short-term fixed income tends to refer to maturities that are less than three years. In the realm of short-term fixed income, we should talk about the relationship between money market and short-term bonds.

Money market securities are issued by governments, financial institutions, and large corporations as promises to repay debts, generally, in one year or less. These fixed-income vehicles are considered very secure because of their short maturities and extremely secure when issued by trusted issuers, like the U.S. and Canadian. federal governments. They are often targeted during periods of high volatility. Predictably, money market securities offer lower returns when compared to their higher-duration counterparts due to the liquidity of the money market.

Short-term bonds do have a lot in common with money market securities. A bond is issued by a government or corporate entity as a promise to pay back the principal and interest to the investor. When you purchase a bond, you provide the issuer a loan for a set duration. Like money market securities, short-term bonds typically offer predictable, low-risk income.

The Harvest Canadian T-Bill ETF (TBIL:TSX) , a money market fund, was launched on January 16, 2024. This ETF is designed as a low-risk cash vehicle that pays competitive interest income that comes from investing in Treasury Billds (“T-Bills”) issued by the Government of Canada. It provides a simple and straightforward solution for investors who want to hold a percentage of their portfolio in a cash proxy.

Medium-term bonds and their influence on the broader market

When we are talking about intermediate-term bonds, we are typically talking about fixed income vehicles in the 4-10 year maturity range. Indeed, the yield on a 10-year Treasury is often used by analysts as a benchmark that guides other interest rate measures, like mortgage rates. Moreover, as yields increase on intermediate-term bonds so too will the interest rates on longer duration bonds.

Recently, Harvest ETFs portfolio manager, Mike Dragosits, sat down to explore the maturity spectrum and our two new ETFs. You can watch his expert commentary here.

US Treasuries avoided an annual loss in 2023 as bonds rallied in the fourth quarter. These gains were powered by expectations that the US Federal Reserve (the “Fed”) was done with its interest rate tightening cycle. The prevailing wisdom in the investing community is that the Fed will look to pursue at least a handful of rate cuts in 2024. Continue Reading…

Mastering the Art of Podcast Audience Building: A Step-by-Step Guide

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Image courtesy Canada’s Podcast/unsplash royalty free

By Philip Bliss

Special to Financial Independence Hub

Podcasting has become an influential medium for sharing stories, ideas, and expertise. However, creating a successful podcast goes beyond just recording and publishing episodes; it involves building a dedicated audience that will eagerly tune in to your content. In this guide, we’ll break down the process of podcast audience building into manageable tasks, provide realistic timelines, and offer essential summary information to help you maximize your podcast’s reach and impact.

Task 1: Define Your Niche and Target Audience (Week 1-2)

Before diving into podcast production, take the time to identify your niche and target audience. Understanding your audience’s interests and preferences will guide your content creation and set the foundation for effective audience engagement. Use tools like surveys, social media polls, and analytics to gather insights. Once you have a clear understanding, create a listener persona to help tailor your content to their needs.

Task 2: Develop a Consistent Content Schedule (Week 3-4)

Consistency is key in podcasting. Establish a realistic and sustainable content schedule, whether it’s weekly, bi-weekly, or monthly. Stick to a reliable release day and time to build anticipation among your audience. Consistency not only helps retain existing listeners but also attracts new ones who appreciate a reliable source of valuable content.

Task 3: Optimize Your Podcast for Search (Week 5-6)

Boost your podcast’s discoverability by optimizing it for search engines and podcast directories. Craft a compelling podcast title, write a detailed description using relevant keywords, and choose an eye-catching podcast cover art. Submit your podcast to major directories like Apple Podcasts, Spotify, and Google Podcasts. A well-optimized podcast increases the likelihood of reaching new listeners organically.

Task 4: Leverage Social Media Platforms (Week 7-8)

Create a robust social media strategy to promote your podcast across various platforms. Establish a presence on platforms such as Instagram, X [formerly Twitter], Facebook, and LinkedIn. Share engaging content, such as episode highlights, behind-the-scenes glimpses, and interactive polls. Utilize relevant hashtags and collaborate with influencers or other podcasters to expand your reach.

Image courtesy Canada’s Podcast/unsplash royalty free

Task 5: Engage with Your Audience (Week 9-10)

Building a podcast audience is not just about numbers; it’s about fostering a community. Actively engage with your audience by responding to comments, emails, and social media messages. Consider creating a listener feedback segment in your episodes to encourage participation. The more connected your audience feels, the more likely they are to become loyal, long-term listeners.

Task 6: Implement Guest Collaborations (Week 11-12)

Invite relevant guests to your podcast to bring diversity and expertise to your content. Collaborating with influencers or experts in your niche can introduce your podcast to their existing audience, expanding your reach. Plan collaborations strategically to align with your content and appeal to both your guest’s followers and your own. Continue Reading…

MoneySense Retired Money: Should GICs be the bedrock of Canadian retirement portfolios?

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My latest MoneySense Retired Money column, just published, looks at the role Guaranteed Investment Certificates (GICs) should play in the retirement portfolios of Canadians. You can find the full column by going to MoneySense.ca and clicking on the highlighted headline: Are GICs a no-brainer for retirees? 

(If link doesn’t work try this: the latest Retired Money column.)

Now that you can find GICs paying 5% or so (1-year GICs at least), there is an argument they could be the bedrock of the fixed-income portfolios, especially now that the world is embroiled in two major conflicts: Ukraine and Israel/Gaza. Should this embolden China to invade Taiwan, you’re starting to see more talk about a more global conflict, up to an including the much-feared World War 3.

Of course, trying to time the market — especially in relation to catastrophes like global war and armageddon — generally proves to be a mug’s game, so we certainly maintain just as much exposure to the equity side of our portfolios.

I don’t think retirees need to apologize for sheltering between 40 and 60% of their portfolios in such safe guaranteed vehicles. Certainly, my wife and I are glad that the lion’s share of our fixed-income investments have been in GICs rather than money-losing bond ETFs: the latter, and Asset Allocation ETFs with heavy bond exposure, were as most are aware, badly hit in 2022. But not GICs; thanks to a prescient financial advisor we have long used (he used to be quoted but now he’s semi-retired chooses to be anonymous), we had in recent years been sheltering that portion of our RRSPs and TFSAs in laddered 2-year GICs. Since rates have soared in 2023, we have gradually been reinvesting our GICs into 5-year GICs, albeit still laddered.

The MoneySense column describes a recent survey by the site about “Bad Money advice,” which touched in part on GICs. Almost 900 readers were polled about what financial trends they had “bought into” at some point. The list included AI, crypto, meme stocks, side hustles, tech and Magnificent 7 stocks and GICs. Perhaps it speaks well of our readers that the single most-cited response was the 49% who said “none of the above.” The next most cited was the 16% who cited a “heavier allocation to GICs.” You can read the full overview here but I did find a couple of other findings to be worthy of note for the retirees and would-be retirees who read this column: Not surprisingly, tech stocks (FANG, MAMAA. etc. were the first runnerup to GICs, receiving 13.24% of the responses. Not far behind were the 10.55% who plumped for crypto and NFTs (Non-fungible tokens). AI was cited by 3.7%: less than I might have predicted; and meme stocks were only 2.81%.

As I said to executive editor Lisa Hannam in her insightful article on the 50 worst pieces of financial advice, GICs are at the opposite end of the spectrum from such dubious investments as meme stocks and crypto. (I’d put Tech stocks and A.I. in the middle).

GICs won’t grow Wealth for younger investors, aren’t tax-efficient in non-registered accounts

The GIC column passes on the thoughts of several influential financial advisors. One is Allan Small, a Toronto-based advisor who occasionally writes MoneySense’s popular weekly Making Sense of the Markets column. He is among GIC skeptics. He told me his problem with GIC is that they “don’t grow wealth. They can act as a parking lot for money for some people but over time there have been very few years in which people have made money with GICs, factoring in inflation and taxation.” Continue Reading…

2024 Canadian Retirement Income Guide: 10 potential sources of income

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By Ted Rechtshaffen, CFP

Special to Financial Independence Hub

Over the years, we have received thousands of questions from clients related to a wide range of financial and planning issues.  Without doubt, the highest volume of questions relate to how to manage the transitions from working to retirement.

To help address many of these questions, we have put together the 2024 Canadian Retirement Income Guide.  This can be found on the link here: Canadian Retirement Income Guide – TriDelta Private Wealth.

The Guide highlights ten different sources of retirement income.  Some range from the very common, Canada Pension Plan, to those that may only apply to some – life insurance, corporations, or home equity. The Guide is free and doesn’t require any input to get it (such as name or email.)

Perhaps the most common question is whether to take CPP at age 60 or 65 or even 70.  The thoughts around a potential answer are discussed in the Guide as well as providing a link to a CPP calculator (CPP Calculator – TriDelta Private Wealth) and guidance on how to work with Service Canada.  Similar discussions and links relate to Old Age Security (OAS), ranging from taking it at 65 to age 70, and also factors that might help you to avoid any clawbacks.

Other factors that need to be considered include minimizing taxes, not just for one year, but over the entire post-work period.  One of the reasons for looking at every possible source of retirement income is that this can be the key to planning out the lowest tax retirement.

Some strategies discussed that could lower taxes could include:

  • Delaying OAS and CPP to age 70, but drawing down RRSPs between retirement and age 70 – if you are healthy. The lower income drawdown of RRSPs will result in lower taxes, while helping to maximize government pensions and potentially maintaining full OAS payments.
  • Using a balance of non-registered assets or a home equity line of credit, to keep taxable RRIF income a little lower. Continue Reading…