The Retirement Withdrawal Strategy That Eliminates Market Risk
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- เผยแพร่เมื่อ 4 มิ.ย. 2024
- In this video, we'll go through how to plan for market corrections in retirement, and how you can essentially eliminate them by properly structuring your portfolio.
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OUTLINE
0:00 - Intro
0:51 - How To Prepare Portfolio
4:23 - Bad Portfolio Structure Example
9:39 - Integrating Investments With Plan
This presentation is intended for information purposes only and does not constitute an offer to buy or sell our products or services nor is it intended as investment and/or financial advice on any subject matter. Every effort has been made to ensure the accuracy of its contents. Certain of the statements made may contain forward-looking statements, which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Returns are not guaranteed and past performance may not be repeated.
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
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You are right on with having a plan. The first part of our plan is keeping track of every cent we spend every year. That gives us a base line of our needs and also what would be the lowest amount we need every year, next we deduct our OAS/ ccp income using 60% of it, in case of one of us passing. Next we keep cash, not bonds or GIC's to cover two years of needs. As we are over 80 we have mandatory with-drawls from our RRSP. We withdraw cash from our TFSA's at the the end of the year year and then replace it with the money or stock from our RRSP withdrawl. You can transfer stocks without selling them so if they are down it allows more to be transfered into the TFSA. We keep about 90% in dividend stocks and 10% in short term bonds. The TFSA's are a great plan as they will transfer without tax to your spouse or kids. We have been retired 14 years and spent winters in Florida or Arizona, during that time our net worth has increased over 50% Two things, have no debts before retirement and know how much you are spending. Happy retirement......
Hi Adam and Brett, great advise. 👍 Happy Easter 🐣. Frohe Ostern.
Hi Brett and Adam, happy Easter and great to see Brett on here. We have to reach out and tweak our plan soon. Thanks for the video.
Hi Adam and Brett, great video, and great advice. Unfortunately a very important subject that not too many financial adivisers, to my knowledge, focus on.
Great video! It is so important to start thinking and planning for retirement well in advance.
Appreciate the work you guys pour in. I've mentioned the channels a few times to friends. It is really good to have access to Canadian content.
Much appreciated!
Good info and advice. Thanks
Shout out to Brett, we had our meeting with him this week and he was great; very easy to understand, patient and clearly answers all questions - highly recommend!
Great to hear Paula.
Solid advice - we call that “protecting ourselves from down markets” method the “bucket strategy” in the US. Some retirees implement three buckets: 1)the market for long term growth and protection from inflation, 2) mid term, perhaps 5-7 years out, and 3) cash/near cash for your next 2-5 year’s expenses.
Many folks simplify that to two buckets - long term and near term. Spend from the near term bucket, even down to zero when the market is down… and refill the near term bucket from the long term bucket when the market is up.
As to your individual risk tolerance, you can do a ratio of the buckets to see your exposure (cash/near cash bucket is like fixed return instruments like bonds).
I've picked my date... Guess it's time to start making calls to firm up a plan. Thanks to these videos I'm much more educated than I would be otherwise.
More great advice gentleman, thank you.
My challenge is fighting greed. It's difficult to sell a growing stock/etf to create the safe-cash. Selling units that are down, even during decent overall market performance, can be a mistake if it's just out of favour.
I absolutely love your videos. It would be great to see a video discussing asset allocation while in retirement. Should we for for the 100 minus age calculation for stock percentage or are there better guideline?
Excellent advice as usual! For those who retire early and have a spouse with a much lower income, I would also plan for the tax savings that comes from income splitting at 65 by drawing down more from non-registered accounts until then.
Great advice and understood that you have to have that liquid cash or liquid investments available to deal with the dips in the market. It’s basic stuff my buddies dad told us when we were kids, buy low and sell high. There are just completed my economics degree in one sentence.
I would also think about diversifying to be ready for the day after the final day.
My uncle passed in 2022 during the dip and his portfolio took a huge hit. My cousin has had a hard time keeping up with condo fees and property taxes. He owns several properties, but he is cash poor.
Why not five years before your retirement start keeping your RRSP contributions in some safe fund or GIC. Still getting tax savings advantage. Plus as you mentioned dividend income to work with once retired. This will be very convenient without worrying about the market fluctuations. Nice discussion👍
Not all investment advisors are interested in their client's best interests...think banks...many other larger firms are interested in selling products for which they get kick backs and bonuses.
Fortunately there's a channel where the clients come first...this one. When clients do well, the company does too.
Thanks Garth!
i call one of mine as a financial product saleman
There are both advisers, and advisors at play.
Clients only come first in lump sum financial services. Assets under management is clients come last.
Wrong or Right here's what I have learned from this channel: 1. be insured for what you need as long as you need it
2. have an emergency fund for 3 months and start increasing the # of months covered as you get older
3. Have a mixed basket of investment products in place as you near retirement
4. Make good use of your RRSP and TFSAs.
5. Talk to more than one advisor and do your research before deciding on the plan that works best for your family.
6. Consider what happens to your assets/liabilities when you are gone (aside from a will, how are the various costs, taxes, etc covered.)
Making a good plan for every decade of your life SHOULD make life easier for your family moving forward
Good summary indeed!
Found this video helpful!
Glad it was helpful!
This is all market timing. Any cash you have is effectively selling your portfolio to that cash value at any point in time.
Hi. I want to let you know that there is another TH-camr using your content almost word for word and passing this information as his original content. The channel is Joe Macek. Video is what is the average income in retirement ?
My dividends will be around $8800 a month at a 4% return with 5 more years left to work. If I cannot live on $8800 a month I’m doing something very wrong. I plan on having $500K in cash and $1.4 million in my RRSP/TFSA in 5 years and I have zero debt. I will be retiring at 60. I’m a big proponent of having a big pile of cash handy, not in the hand of investments or the banks 😎😎 been thru a lot of ups and downs and even being a conservative investor, I’m still apprehensive when the market fluctuates negatively 🤷♂️🤷♂️🤷♂️
Wow. 🎉 congrats man. How did you accumulate a small fortune?
Is Dwight talking about the beet market?
I kept a lot of cash in the bank when I decided to retire. The stocks and ETFs that I have all pay a lot in dividends. I never plan to sell my stocks . I take a distribution from the cash and supplement it with the dividends from the stocks . I should be good for the next 5 years until I turn 70 and start Social Security.
In my LIF, dividends provide 75% of cash flow, HISA and maturing bonds provided the wedge. With all things being equal, I do not have to sell anything for 6 or 7 years, if the market is bad.
How big is your LIF?
@@liverpool3469 size is irrelevant. You want safer investments to cover the period of lower markets, to allow stocks to recover.
Thanks gents.
You bet
Too many acronyms for me to understand this video. Also, I didn't hear any withdrawal strategy other than have cash for bad times, though at the very end it sounded like recommending having dividend stocks to provide half the needs and a bond ladder to provide the other half in bad times. If the bond ladder is in the taxable account, what is the strategy to restore the rungs of the ladder after they got used up while the market was down (can they be restored without having a big capital gains tax bill)?
Hi Adam, I really enjoy your channel. My wife and I are retiring in the next few years. You cover many topics that we are trying to sort out. We have an interesting twist to our retirement that may be a relatively common problem, and might make an interesting video. We are Canadian and have worked in Canada for 25 years, so we have small DB pensions, considerable RRSPs and have maxed out our TFSA. However, we lived overseas in Australia for 11 years and have $AUD 700,000 in Australian superannuation. Our CPP/OAS are reduced due to the years abroad. The Superannuation comes with a 35% withholding tax, some of which we get a Canadian tax credit for. The challenge is, do we do a Superannuation meltdown before the RRSP meltdown, or do we do them concurrently? Any comments on the most tax efficient approach. Thanks.
@@user-rd2em4zw1s uh, many immigrants who have come to Canada and have pension plans from their home countries. I think it’s a great topic for a video.
Parallel Wealth is a FEE for SERVICE firm. I'd encourage you to fill out the form, make the payment and look forward to the answer to your complex situation. They did a great job for us.
Lucky you both are to have participated in the Australian CPP. CPP in Canada is a rip off as when you die they keep all your contributions where as in Australia it's all yours.
Keep in mind also that having a cash component means that portion of the portfolio will not benefit from any capital appreciation during all the years where the market does not crash.
it is part of the total return. High Interest savings pay 4.75% at my brokerage. Individual bonds maturing is also part of my cash strategy .
@@rb239rtrfor now, but it’s difficult to forecast when we return to
How many years would you suggest you place into a less risky investment when in retirement. Does a downturn typically last 1 year?
3 years is ideal. But some of that could come from dividends etc. So actual cash could be 12-24 months depending on type of investment and cashflow it produces
Funny... good at accumulation, and not good at de-cumulation! Or good for both; or not good for both! LoL. I think that is a very good point to consider on the guy/gal you are working with... on financial planning! :D
Can you comment on the option to use HELOC to cover living expenses if (when) the market drops significantly, leaving investments alone, and when the market recovers, sell and pay off HELOC? Basically, it would only cost you the interest of the loan, which should be low. Thanks
I would do this but add one additional element…take from heloc then buy investments with it in down market…so you can deduct the interest on your taxes and effectively pay 40% less on the interest rate…then from a different retirement account take out money to live off…that way if you get audited you can show clear paper trail that money borrowed was used for investments…this strategy you need two different investment accounts from different institutions ideally
@@adventuresonvancouverislan3875 That works if you assume some investments are low risk, and not tied to the market to draw from. I agree that using a HELOC might be a great thing to use in a down market for purchasing low-cost shares. Perhaps a combination of the two concepts might be best.
@@adventuresonvancouverislan3875 --- I have done this in the past however with HELOC interest rates currently going above the 7% threshold, I don't think it is a good idea in current environment. I get it when HELOC interest rates are in the 2-4% range it made sense but current rates are way to high to use this strategy for me especially in open unregistered investments.
That’s debt. It would be better to have cash like they talked about.
@@amy2284 Having debt is not always a bad thing.
So I ha e a wedge of 10%. If the market is down 10% would I take my income from my equities or wedge.
After all the market could go down more before it comes back?
Thank you for producing such valuable content! In this video you mention bonds, I have been laying out my portfolio somewhat similarly to your structure but in Canada I can't find where and how to buy bonds. GIC's are easy but bonds not so much. Any insight?
Very tough to do. I let the pros buy the bonds for me
Was that BCV asset management?
Yes
Go 100% equities at all times. The good years will cover the bad.
wouldn’t a high interest RRIF work
One approach is to have a diversified dividend paying component of your portfolio to fund your essentials. In a severe market downturn, focus on spending on essentials only and live off the dividends while minimizing forced selling shares at discounted prices. Easy peasy.
Agree, dividends are a viable approach to reliable income. However, dividends are not guaranteed if faced with a dividend cut in a down economy. Good dividend stocks choices must consider payout ratio, increasing dividends, consistent and positive revenue and EPS.
Hi Adam and Brett! Great discussion with very valuable advice. Also, great to see Brett on a video. Take care.
“We all fear?” Speak for yourself.
The idea that you keep near term withdrawal funds in a cash a/c or such doesn't really make sense. As there are always going to be times in retirement when you have to sell long term investments, eg stocks, into ready cash. Sure if you put $50,000 of stocks into cash at the start of the year and then use that cash for your living expenses during the year you won't have to sell any stocks until the start of the next year, so can weather any market dips in that year. But who is to say the sale of the $50K at the start of the year wasn't during a market dip. Or that the sale of the next year's $50K at the end of the current year won't be during a market dip.
So what to do? The investor has to time the market? Not sell in a dip? How does he or she know the market won't fall further? Or sell $50K at a perceived market high? Then what if the market keeps going higher? Either way too much stress and guesswork.
Better to keep a constant cash buffer of say $30K and sell off small amounts of capital (eg $5K worth) when the buffer drops below $30K. Top the buffer up with dividends and interest, as you are not accumulating any longer (for those over 70). If the market does have a sustained dip then try to reduce your spending so you don't have to sell stocks at a lower price. Chances are, for a long term portfolio, the sale price even in a dip will be higher than the historical buy price.
I work for a bank…..I have stock in the bank in an investment account that pays $18,000 a year in dividends. I bought the stock with a loan…..currently the dividend covers interest and principal. My plan is to pay the loan before I retire with a year end bonus. I love the $18K a year
That sounds like a load of BS.
@@markwalters7498 whatever you think
@@markwalters7498 WOW - think what you like.
@@markwalters7498 WOW - believe what you want
louder please .... I'm a 'senior' .. LOL
Your using all these acronyms that make this video very confusing. "RRSP,RRIF you need to explain what they are for the average person.
Your positive outlook is inspiring. Thanks for making the internet a better place!