As for RRIF asset allocation, Lovett-Reid “still be a fan of stocks in your portfolio. You can spend a third of your life on retirement and want to maintain purchasing power. If you live too long, will long life last longer? The expected lifespan needs to provide the growth potential of inventory over time.”
She acknowledged that it makes sense to gradually reduce stock holdings to 30% or 40% as you age, depending on health and income requirements. However, she warned retirees to be cautious also Conservative: “You want to maintain purchasing power and consider stocks that pay dividends or low-obligation funds for stability and income.”
I also ask for occasional money contributor Dale Roberts’s idea of dehydration. Roberts, who runs the Cutthecrapinvesting blog, likes the idea of retirees using defensive stocks with bonds, cash and gold. “We could consider using low-volatility ETFs like ZLB-T in Canadian stocks. The defensive sector is a consumer staple food, XST-T, utilities, Zut-T and health care. Given that Canada has no health care sector to speak of, we will choose to us and internationally.” Roberts said that, in general, retirees take too much risk and therefore benefit from “moderate allocation” of annuities.
CaliforniaCut the barrier rate before determining annuity
Matthew Ardrey, a senior financial planner based in Toronto-based Tridelta Private Wealth, also believes annuities may still play a role for some clients. However, after saying nate to RRIF, “I strongly recommend that you complete the analysis to see what the barrier rate is before making a permanent decision, which will affect the rest of your retirement.”
Ardrey defines the barrier rate as “the minimum acceptable rate of return required for an investment or project that is considered worthwhile. It can be used as a benchmark and is generally not considered acceptable if the expected return of an investment is lower than the barrier rate.”
Cashing out 20% to 30% of the RRIF of an annuity is “the amount of material that most Canadians have net worth and it’s worth knowing what they get for it.” You need to check and understand the various options that affect how much they pay per month (i.e. guaranteed payment period, survivor benefits, inflation protection). “Based on the selected option and assumed life expectancy, we can predict future payment flows for retirees. The higher the calculated yield, the better the annuity option, and the lower the yield is lower.”
If Canadian investors only have a 3% barrier rate, Ardrey believes RRIF is a better choice, but if the barrier rate is 8%, an annuity is preferred. “It’s much harder to assume that an average of 3% per year for investors is very reasonable and 8% per year. Even if the investor’s barrier rate reaches 5% to 6%, it can be that RRIF is a better choice. If your portfolio has a return rate of 4%, if your interest and interest are relatively stable, then it’s relatively stable, then it’s relatively stable, and it’s relatively stable. In my mind.”
Like financial situations, it helps to understand the answers to impossible questions about when investors die. “The longer they live, the better the annuity. But if they die prematurely, it is better to keep capital in RRIF.”
