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The common mistakes made by Retirees

Posted By Financial Independence Hub | October 21, 2025

By Dale Roberts, CutTheCrap Investing, Retirement Club

Special to Financial Independence Hub

We all make mistakes. There is no such thing as the perfect portfolio. In the accumulation stage we usually have time to recover from mistakes and hopefully we’ll learn from those mistakes. Learning from mistakes will usually move us towards a more passive global core index-based portfolio. In retirement, we don’t always get a second chance. It is crucial to be aware and avoid any retirement pot holes. Kyle at the Canadian Financial Summit asked me to discuss and outline some of the key and common retirement mistakes. Of course, they are too many to mention in a 45-minute interview. Below, I will outline more of the common mistakes in retirement.

Here’s an AI outline of the Canadian Financial Summit.

The Canadian Financial Summit is an annual, free, virtual conference for Canadians to learn about personal finance and investing from Canadian experts. It covers topics like retirement planning, tax optimization, and investment strategies, with content tailored specifically for a Canadian audience to address Canadian-specific financial products and regulations. The goal is to provide practical advice to help attendees save money, invest better, and improve their financial literacy.

Canadian Financial Summit Speakers

The Summit begins on October 22 with headliners such as David Chilton (new Wealthy Barber book out in November), Rob Carrick, Jason Heath, Preet Banerjee and more. Here’s the list of speakers and topics.

My segment will air on October 24th. You can register through this Canadian Financial Summit link.

Once again, I am covering common retirement mistakes. Here’s the range of topics I had prepared for my discussion with Kyle. We touched on a few of these.

We have to start in the accumulation stage

Many retirement mistakes are born in the accumulation stage, and in the retirement risk zone.

Too much risk

Most investors take on too much risk. They are not investing within their risk tolerance level. That said, it has not been a problem since 2009: we have not been tested. But retirees and near retirees were certainly burned by the financial crisis and the dot com crash. For too many, their retirement was greatly impaired.

And of course, we can add in not taking on enough risk, for those who are risk averse. We need to take on the risk necessary to achieve our financial goals. All said, we always need to invest within our risk tolerance level.

The accumulation stage is dead simple

Go for growth while investing within your risk tolerance level. More money is “more better.” More money will create more retirement income.

Paying ridiculously high fees

Fire your wealth-destroying high-fee mutual funds and the advisor they rode in on. Ditto for the retirement stage. You can do the research necessary, or look to an advice-only planner who specializes in retirement planning.

Don’t count the dividends

Don’t PADI – Potential Annual Dividend Income.

That’s like watching the oil gauge as you try to make the car go faster.

The dividends do not contribute to wealth creation. Dividends are a removal of value; that’s it. The share price drops by the value of the dividend. If you move the dividends back to your stock or ETF holding to buy more shares you are simply owning more shares at lower prices.

As Yogi Berra would ask: do you want your medium pizza cut into 8 slices or 6 slices?

You still have a medium pizza, no matter how you slice it.

Dividends are a tax drag in taxable accounts. You are paying tax on money you don’t need. You are paying tax on money that creates no value. It’s phantom wealth creation, but with real taxes.

Avoid covered calls and other specialty income

They underperform by design. That fact should be outlined in the prospectus.

Canadian home bias

This can be related to a fascination with Canadian dividends or Canadian Blue Chip stocks in general. For sure, building a portfolio of Canadian Blue Chips is known to greatly outperform the TSX Composite. But we need greater diversification to reduce risk.

A Canadian with severe home bias is putting all of their chips on a few sectors, one country and one currency. It’s not smart.

We should consider a global portfolio, at the very least a Canadian and U.S. portfolio.

Stock portfolios that are too concentrated

It’s common to see portfolios with just a few stocks. We need 15 to 20 stocks to mimic an index. You’re likely best to hold 20 or more.

We create severe company risk with a concentrated portfolio.

Clear your debt

Carrying debt into retirement is a common “mistake.” A recent report suggested that 29% of Canadian retirees will carry a mortgage.

Consider the tax burden that it takes to create the income to pay the mortgage. Every extra dollar is at the top marginal rate. It’s a mortgage payment plus tax on top. A $3,000 monthly mortgage payment might cost you $4,000 or more when you consider taxes. It could also contribute to OAS claw back.

Consider the car payment as well. Try to enter retirement with a paid-off vehicle.

Not using spousal RRSP accounts

Use RRSP spousal accounts for tax advantaged income splitting in retirement.

This allows us to ‘split income’ before the age of 65. At age 65 we can then split income from your RRIF.

Ditto for setting up joint taxable accounts. Pay attention to attribution rules for taxable accounts.

The Retirement Risk Zone

Not preparing the portfolio (de-risking) for retirement before retirement is a common mistake. We enter the retirement risk zone several years before retirement. That was our topic last year for the Financial Summit.

Mistakes in Retirement

Not running a retirement cash flow calculator

This is a must for every retiree. A retirement calculator will help you discover the most optimal (and tax efficient) order of account harvesting. That is when, and how much, to remove from your RRSP / RRIF, Taxable accounts, and TFSAs, working in concert with pensions, other amounts plus, CPP and OAS. It can help us create tax efficiency and manage OAS claw backs.

Most Canadians will benefit from the RRSP / RRIF meltdown strategy. It involves delaying CPP and OAS for the massive increases in pension-like, inflation-adjusted income.

Check out Retirement Club for Canadians

From age 65 to 70, CPP increases by 42%, OAS increases by 36%.

To delay CPP and OAS we often use the RRSP / RRIF accounts (and at times a slice of TFSA or Taxable) to bridge the gap during those years. That is, we spend more heavily from the RRSP / RRIF while we wait for increased CPP and perhaps OAS.

It’s different for everyone, the retirement cash flow calculators will help you uncover the right approach for you. Only the software knows.

There are many retirement calculator options that are free use, or available at a very low fee. We are reviewing many of them at Retirement Club.

Examples: MayRetire, Milestones, Adviice, Perc-Pro from Frederick Vettese, optiml.ca, PWL Capital also offers a retirement calculator.

Not spending, not enjoying their money

We might embrace a U-shaped spending plan. We spend more in the early years: the go-go years. It might dip in the slow-go years, and then increase again in the later no-go years as health care cost, living in place, or retirement home plus assisted living costs increase greatly.

We might call that a ‘you-shaped’ spending plan. Continue Reading…

When is the right time for Retirees to Consider Annuities?

Posted By Financial Independence Hub | October 17, 2025

Retirement planning experts suggest current market conditions may present an opportune moment for retirees to consider annuities. With potentially higher yields available in today’s interest rate environment, strategic approaches like partial annuitization and laddered purchases offer ways to enhance retirement security. Financial advisors emphasize the importance of weighing tax implications and long-term income stability before making decisions about annuities in a changing economic landscape.

Ladder Annuity Purchases to Capture Peak Rates
Favorable Market Creates Opportunity for Retirement Security
Strategic Timing for Annuities in High Rates
Consider Tax Implications before Rushing to Annuitize
Tax Strategy matters more than Current Rates
Lock in Higher Yields while Maintaining Diversification
Balance Security and Flexibility with Partial Annuitization
Act Now before Rate Cuts Lower Lifetime Income

Ladder Annuity Purchases to Capture Peak Rates

Through my work with United Advisor Group helping advisors serve elite clients, I’m seeing a critical window right now for partial annuitization that most people are missing. The current 5-6% immediate annuity rates are the highest we’ve seen in over a decade, but here’s what’s different from typical advice.

I’m recommending clients ladder their annuity purchases over 12-18 months rather than going all-in immediately. We’re working with carriers like Lincoln Financial where a Phoenix client recently locked in 5.4% on a $300K immediate annuity in January, then waited until rates hit 5.8% in March for another $200k portion. This staging approach captures rising rates while securing baseline income.

The sweet spot I’m seeing is 30-40% annuitization for near-retirees, not the 20% most advisors suggest. With our four-custodian structure at UAG, we’re tracking how this higher allocation actually reduces overall portfolio risk more than expected. A Scottsdale couple we work with annuitized 35% at current rates and can now be more aggressive with their remaining assets.

What makes this timing unique is the Federal Reserve’s clear signalling about holding higher rates through 2024. Unlike previous cycles where advisors played wait-and-see, the current economic indicators we track suggest these annuity rates have more staying power, making the decision timeline less pressured than typical rate environments. — Ray Gettins, Director, United Advisor Group

Favorable Market creates Opportunity for Retirement Security

Annuities aren’t flashy: but in today’s rate environment, they’re finally getting their moment.” With interest rates at multi-year highs, this is one of the most favorable environments we have seen in a long time for retirees to consider annuitizing or partially annuitizing. Higher rates mean better payout terms, especially for fixed annuities, giving retirees more predictable income in retirement. But timing is still very important. The decision to annuitize should still be in line with your personal retirement goals, risk tolerance & need for guaranteed income. Partial annuitization provides a great balance for retirees, allowing them to create a stable income stream to cover essential expenses and still have portfolios flexible enough for legacy planning and growth. It’s much more than a response to market conditions. It’s a calculated move towards peace of mind.

— Harold Wenger Jr., Partner and Wealth Manager, Kingsview Partners

Strategic Timing for Annuities in High Rates

Now might be the smartest time in 15 years to consider annuitizing.

It’s actually quite a favorable time for retirees to annuitize, partially or fully, considering the interest rates today that are at their highest levels since before the Great Financial Crisis. Higher interest rates essentially mean stronger payouts than what we have seen over the past decades. This makes them a more attractive option for those looking for a guaranteed lifetime income. Having said that, I still recommend retirees to think of annuitization the same way they think about diversification, strategically, not emotionally. While having a steady stream of income for essential expenses can provide peace of mind, I would never recommend anyone to put all their eggs in one basket.

Employing a blended approach — one that combines annuities with passive real estate investing or dividend-generating assets — can be a much smarter way to go. It’s the right time now to explore annuities as part of a broader retirement strategy. Just make sure that it aligns with your lifestyle goals, risk tolerance, and legacy planning. — Lon Welsh, Founder, Ironton Capital

Consider Tax Implications before Rushing to Annuitize

After working with retirees for 19 years through my accounting firm, I see this timing question differently than most financial advisors. The real issue isn’t just interest rates: it’s the massive tax implications that nobody talks about.

I had a client couple from North Carolina who were considering annuitizing $300K of their retirement savings when rates hit 5.8% last year. Before they pulled the trigger, we ran the numbers on their overall tax strategy. That annuity income would have pushed them into a higher bracket and made 85% of their Social Security taxable instead of 50%.

Instead, we structured a business strategy where they started a simple consulting venture based on his 40 years of manufacturing experience. Now they’re deferring some retirement income, writing off business expenses that were previously personal costs, and timing their annuitization for when they can control their tax bracket more effectively.

The current rate environment is tempting, but I’m seeing retirees lock themselves into higher lifetime tax bills. Run the tax projections first: sometimes waiting 2-3 years while implementing proper business structures saves more money than chasing today’s rates. — Courtney Epps, Owner, OTB Tax

Tax Strategy Matters more than Current Rates

I believe the decision to annuitize in today’s higher-rate environment is more complex than most retirees are told. The bigger question isn’t just the interest rate, it’s how the IRS will tax that income stream over time. Continue Reading…

Why Canadians Love Real Estate as an Investment Vehicle (Even When the Numbers Do Not Add Up)

Posted By Financial Independence Hub | October 16, 2025

The Hard Truth about Canada’s most Popular Investment Myth: Why your “Sure Thing” Real Estate Strategy could be Costing you Hundreds of Thousands

Lowrie Financial: Canva Custom Creation

By Steve Lowrie, CFA

Special to Financial Independence Hub

It is hard to go to a Canadian dinner party without someone talking about real estate. Someone’s cottage has doubled in value. A friend just bought a second downtown investment condo. A neighbour is considering a rental property “for the kids.”

We hear it every day from clients. The idea of investing in real estate feels safe, powerful, and smart.

There is a cultural pull here that is almost irresistible:

Tangibility: You can touch it, walk through it, and renovate it.
Familiarity: Almost everyone you know owns a home.
Status: Whether it is a condo downtown, a cottage up north, or a rental property, real estate is a visible symbol of success.

That emotional resonance is powerful and real. But subtlety matters. Let us explore why the emotional weight is so strong, when it outpaces the facts, and why personal homes and even second properties should often be treated as lifestyle decisions rather than wise investment decisions.

Why Real Estate Investment feels Safe and Smart to Canadian Investors

Real estate triggers deeply comforting emotions.

You can see it, unlike stocks that live only on a statement. You can improve it, rent it, or decorate it, which gives you a sense of control. In markets such as Toronto and Vancouver, decades of rising prices reinforce the belief that it is a sure bet.

And of course, there are the stories. Everyone seems to know someone who made a fortune in property. Stories resonate far more than data.

It is like the comfort of holding cash. Cash feels safer than stocks, even though the evidence tells a different story.

Real Estate vs Stock Market Returns: The Data Reveals a Different Story

Here is where the evidence helps keep perspective in check. If you are considering purchasing direct real estate as an investment, the data suggests alternative approaches may deliver better long-term outcomes.

Canadian Stock Market vs Canadian Real Estate Performance

From 1990 to 2023, average Canadian home prices grew about 6.3 percent annually. Once we adjust for maintenance, property taxes, insurance, and transaction costs, which we can reasonably estimate at 2 percent of market value each year, the actual net return drops to about 4.5 percent annually. Meanwhile, the S&P/TSX Composite Index returned roughly 8 percent per year, compounded annually over the same period. Even within Canada, equities have historically outperformed housing as an investment.

Global Diversified Portfolio vs Canadian Real Estate Returns

A globally diversified equity portfolio, such as the MSCI World Index, has historically delivered around 8 percent annually (consistent with Canadian market returns) over long time horizons. This not only outpaces Canadian housing returns but also provides diversification across thousands of companies in dozens of countries. Canadian housing, by contrast, is concentrated in one country and one asset.

Sneaky Hidden Costs and Investment Risks of Direct Real Estate Ownership

Even beyond the headline numbers, direct real estate ownership brings additional challenges:

Concentration risk: One property, in one city, on one street, is hardly diversified.
Illiquidity: Selling in a downturn can be difficult and slow.
Carrying costs: Maintenance, property taxes, insurance, and fees all erode returns.
Leverage risk: Mortgages magnify both gains and losses.

The Cap Rate Crisis: Why Canadian Investment Properties are Failing

Another critical but often overlooked factor in real estate investing is the capitalization rate, or cap rate. This measures the cash flow you receive from a property after expenses, expressed as a percentage of its value.

Historically, investors earned returns from two sources: cash flow (rental income) and appreciation (price gains). But as property prices have risen much faster than rents over the past few years, cap rates have fallen dramatically. Many condos and residential investment properties now have cap rates that are very low, even close to zero. In some cases, especially when using leverage on a direct residential investment property, you get the pleasure of having negative monthly cash flow. Who wants an investment that requires you to put in more of your own money each month to keep it afloat?

That means the only way to make money is if the underlying property continues to appreciate. For a long time, that worked. But as Canadians have seen in recent years, property values can and do fall. Relying solely on appreciation is not a proper investment strategy. It is a gamble.

Real Estate as Lifestyle Choice vs Investment Strategy

There is an important distinction to be made here. Owning your personal home, or even a second property, is rarely a pure investment decision. It is primarily a lifestyle choice.

Your Primary Residence: A Home, Not an Investment Vehicle

Your home provides stability, belonging, and a sense of place. You live in it, you personalize it, and you may even raise a family in it. Its financial appreciation is a by-product, not the primary purpose.

Second Properties and Vacation Homes: When Lifestyle Meets Investment Confusion

Cottages, ski condos, or vacation homes can bring joy, relaxation, and family memories. When acquired with lifestyle purposes in mind, they can be meaningful. But if purchased purely for financial returns, they blur the line between lifestyle and investment and often fall short on performance expectations.

Investment Property Evaluation Framework: The Big Bet Test

Here is a simple framework to evaluate real estate as an investment:

Diversification: Does this spread risk or concentrate it?
Liquidity: Can you access your money if needed?
Scalability: Can you expand without disproportionate risk?
Taxation: Are the benefits what you expect?

A single rental property often fails on diversification, liquidity, and scalability. It is like putting half your portfolio into one stock, in one city, on one street.

REITs: The Smart Alternative to Direct Real Estate Investment

If you want exposure to real estate without its emotional and structural pitfalls, publicly traded Real Estate Investment Trusts (REITs) are an excellent alternative. Continue Reading…

Should investors be more concerned about the ongoing US Shutdown?

Posted By Financial Independence Hub | October 13, 2025

By John De Goey, CFP, CIM

Special to Financial Independence Hub

[Editor’s Note: this piece was written shortly before Friday’s meltdown of U.S. stocks following Trump’s announcement of still-higher Tariffs on China.]

One evening at midnight, as September turned to October, various elements of the U.S. government were shut down. This has happened before, most recently in 2018 under the same President, but this time, everything feels more ominous.

In fairness, markets were indifferent to the news and have even reached new highs since the announcement. My view is that this turn of events is yet another canary in the coal mine where authoritarianism is lurking just around the corner. The question for many investors is: “What does this mean for my portfolio”? So far, the answer is, “nothing at all.”

Worrisome that investors don’t seem worried

It has been said that financial markets climb a wall of worry. I have said on multiple occasions that one of my biggest worries is that people don’t seem worried: that optimism bias has led to lazy complacency. Stated differently, my perception is that there’s a degree of casual acceptance of macro-level circumstances that has taken hold among investors throughout the western world.

My concern about valuations has been reiterated on multiple occasions for many quarters, if not years. What I have not said explicitly until now is that there is a considerable political risk that is proceeding apace: concurrent with the valuation risk.

To my mind, this is a double uncertainty. The first question is when the bubble of multiple asset classes hitting all-time highs will burst. The second question is when Donald Trump will drop the mask and all pretense of adherence to democratic principles. He was elected a year ago next month. In the nine and a half months since he has taken office, the destruction of centuries-old political norms has proceeded at a breakneck pace. Continue Reading…

Safe Retirement Withdrawal Rate Strategies in Canada

Posted By Financial Independence Hub | October 10, 2025

By Kyle Prevost

Special to Financial Independence Hub

The concept of a safe withdrawal rate (and the 4% rule) is a key planning tool for Canadians of all ages. After all, if you don’t have a general withdrawal plan, how can you know how much you need to save in the first place?

If you have been reading MDJ for years, you already have an idea of how to use a Canadian online broker account to DIY-invest your way to a solid nest egg.

Now you’re planning for retirement (whether it’s 20+ years away or next year) and you’re wondering how to take money out of that nest egg. Perhaps hoping that there is a rule for how much you can take out each year in retirement, and never go broke. That concept is generally referred to as a safe withdrawal rate, and we’ll go into detail on how this works in just a second.

We’ll even look at how to incorporate multiple accounts, such as your TFSA, RRSP, and a non-registered account into your safe withdrawal rate – as well tax rules surrounding the withdrawal of investments from those accounts.

And finally, we’ll seek to answer the question you probably really want answered: How do I turn my nest egg into a usable stream of money that I can depend on and spend as I look forward to retirement?

Surprisingly, when it comes to discussing Canadian safe retirement withdrawal rates, and talking to folks who have retired at all ages, spending their retirement savings represents a massive mental strain for them. I guess (as someone who has never retired or sold investments to pay for retirement) that I always thought that saving for retirement would be the hard part.

Isn’t spending supposed to be more fun than squirreling away?

It turns out that once you get into that savings mindset, it can be hard to flip the switch back to enjoying spending the fruits of your labour. This is especially true for folks who are looking at retirement withdrawal strategies for an early retirement because they are much more likely to have been super-aggressive savers during their time in the workforce.

I didn’t go into the topic of safe withdrawal rates for retirement expecting the topic to be so deep and full of variables! After all, the concept seems simple enough, right?

How much can I take out of my investment portfolio each year, if I need that nest egg to last for 30, 35, 40, or even 50 years?

Is your Retirement Savings on Track?

Each year BMO does a retirement survey that asks Canadians a wide range of questions.

The problem is that most Canadians don’t really understand how their income and expenses will interact in retirement. Are you saving enough? Find out for sure with the first online course for Canadian retirees (click here for more details).

The 4% Retirement Withdrawal Rule

Ok, so let’s maybe start with the rule of thumb that advisors have used when looking at retirement drawdown plans for a while now.

Back in 1994 a financial advisor named William Bengen looked at the last 80 or so years of markets and retirement, did a bunch of math, and arrived at a concept we now call “The 4% rule.”

The basic idea of the 4% retirement withdrawal plan is that someone could safely withdraw 4% of their investment/savings portfolio each year and – assuming a 60/40 or 50/50 split of bonds/stocks in their portfolio – they would never run out of money.

This idea of withdrawing a certain percentage of your portfolio to fund your retirement is called the Safe Withdrawal Rate (SWR). The math behind this magic 4% figure means that if you have the nice round $1 Million investment portfolio that we all dream of, you could safely pull out $40,000 the first year, and then adjust for inflation and withdraw 4% plus inflation after that. (So if there was 2% inflation between year one and year two, you could now withdraw $40,800.)

Bengen, and another highly influential study took their rule and retroactively applied it to retirees from every single year from 1926 to 1994. They found that nearly 100% of the time (depending on what was in the investment portfolio) people could retire, and withdraw 4% of their portfolio for 30 years of retirement: and not run out of money.

In fact, over half of the time, if retirees followed the 4% rule, they not only didn’t run out of money, they finished life with more money than when they started retirement!

Keep in mind, these authors didn’t worry about OAS or C P P, or a workplace pension, or even the tax implications of different types of withdrawals. They were simply trying to come up with a useful rule of thumb for how much a person could safely withdraw from their retirement portfolio.

What the 4% Rule Means for your Magic Retirement Portfolio Number

If you can safely withdraw 4% of your portfolio to fund your retirement, then the simple math tells us that if you can accumulate 25x your annual retirement budget, you no longer have to work.

Here’s the breakdown:

Jane looks at her budget and realizes that once she retires she will have a lot less spending demands. She carefully weighs the numbers and believes she’ll need $40,000 per year to quit her 9-to-5.
Consequently, Jane needs the magical “4% of her portfolio” to equal $40,000 per year.
For a 4% withdrawal to equal $40,000, Jane will need a $1,000,000 portfolio.
If Jane reassesses and realizes she needs $60,000 per year in retirement, Jane would need 25 times $60,000 (because 4% goes into 100% twenty-five times) which is $1.5 Million.
Jane might not need anywhere close to $1.5M if she intends to do a little part-time work in retirement, and is willing to use some math + research strategies to help herself out a bit when it comes to managing her nest egg! But more on that later…

4% Safe Withdrawal Rate for Retirement: Potential Problems

Up until the 4% rule became a thing, when financial advisors were asked about safe withdrawal rates, the only thing they could really say is, “it depends.” Continue Reading…