Retired: $60,000/Year Income - Binita and Vijay's Story


Binita and Vijay

Sources of income:

  1. Government pensions: $20,000/year
  2. Investment portfolio withdrawals: $40,000/year

Investment portfolio value: $1 million

Strategy

Portfolio builder: Professionally managed portfolio.

Why?

Binita and Vijay’s personal portfolio is large enough to be allocated into low-fee, institutional investment funds. Employing one professional investment management firm (investment counselling firm) consolidates all their assets and accounts into one portfolio.

Advantages of a Professionally Managed Portfolio

  • Preparation and implementation of an investment policy statement (IPS):
    • Analyzed risk tolerance and return objectives, spending priorities and constraints.
    • Higher level of accountability and recourse available if not followed.
    • Stress tests the portfolio to establish an optimal retirement income withdrawal strategy.
  • Access to specialized institutional money managers for more in-depth diversification by style, size, and so on.
  • Minimal day-to-day management.
  • Tax-efficient strategies are incorporated, where possible and warranted.
  • Annual review and rebalancing done by professionals.

Portfolio Building Blocks

Binita and Vijay could create a customized portfolio using a combination of specialty funds such as:

By Asset Class

By Management Style

By Size

By Other Characteristics

Fixed income

Active vs. passive

Government vs. corporate

Credit rating: high-yield

Canadian equities

Location: global vs Canada

U.S. equities

Large/mid/small cap

Style: core/ growth/ value/ deep value

International equities

Emerging markets

Alternative Strategy

Use self-managed, low-cost institutional funds and pay a financial planner for planning services.

  • At departure, accounts in your employer’s plans may be transferred into a group plan available through the plan administrator (such as Sun Life or Morneau):
    • A wide choice of investment funds are available, including funds designed to generate retirement income.
  • Check the fees. Fees may be higher than in your employer’s group plans, but should be lower than retail. No one-on-one advice is available.
  • Consider using a fee-based planner and pay by the hour for those services (for example, tax, investment and financial planning):
    • Comprehensive professional money management fees may be greater or less, depending on the additional planning services provided (for example, tax and financial).

Notify your investment counsellor of any investments held outside the managed portfolio to ensure the portfolio is managed to complement any privately held investments.

To see tips and recommendations for Binita and Vijay after their annual portfolio assessment, go to Retired ($60,000/Year Income): Managed by a Pro Portfolio - Binita and Vijay's Assessment.