Retired: $82,000/Year Income with DB Pension - Joe and Tanya's Story


Joe and Tanya

Sources of income:

  1. Joe's defined benefit (DB) pension: $50,000/year
  2. Joe's government pensions: $15,000/year
  3. Tanya's government pensions: $5,000/year
  4. Tanya's RRIF withdrawals: $12,000/year

Investment portfolio value: $250,000.

Investments are currently invested in conservative-balanced funds and term deposits.

Strategy

Portfolio Builder: Low-cost, retirement income portfolio funds.

Why?

  • The DB pension and Joe and Tanya’s government pensions provide a safe and ongoing source for most of their retirement income.
  • The investment portfolio is for their “extras” and to help out the children. Withdrawals can be modified if a market downturn occurs.
  • The current portfolio is not designed to achieve a rate of return greater than inflation
  • Adding equities would increase the long-term return. Using a well-diversified, balanced (60% equities) portfolio designed specifically for retirees should control the risk.

Advantages of Retirement Portfolio Income Funds

  • Highly diversified across asset classes and between geographic regions.
  • Designed for retirees; the funds pay out the investment income and are more tax efficient.
  • No day-to-day oversight is required:
    • Funds are automatically rebalanced.

Avoid buying units in funds with back-end loads or deferred sales charges, which charge fees in registered accounts that may require you to make annual withdrawals. If you sell any units too soon, the fund company will charge you a redemption fee.

Tips

  • Keep fund fees low. Consider passively managed (index) funds or exchange-traded funds (ETFs) with reduced fees.
  • 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 is available, including funds designed to generate retirement income.

To see tips and recommendations for Joe and Tanya after their annual portfolio assessment, go to Retired ($82,000/Year Income): Self-Managed Portfolio - Joe and Tanya's Assessment.