Category: Planning to Retire Soon

A “two-fund” method for retirement investing

RobHLeave a comment

I read a lot of different financial blogs from a bunch of different sources. Last week, this article from “boomer&echo” caught my eye.

In it, they propose a “two fund” solution for how to invest in retirement:

They suggest funding your day to day spending needs from the HISA ETFs. Replenishing the HISA ETF comes courtesy dividends from the all-in-one equity ETF, and selling units “during up markets…or on a regular annual schedule”.

There are some things to like about this method, and some things not to like. I’ll break them down for you.

Like: It’s really simple

Two funds, and two percentages to remember. That’s simplicity. In a perfect world, my holdings would look similar, but would instead look something like

  • 75% in XGRO (an 80/20 ETF)
  • 20% in XEQT
  • 5% in ZMMK

This breakdown would give me the 80% equity, 15% bonds, 5% cash that I strive for in my asset allocation targets.

Like: It’s broadly diversified (mostly)

Holding an all-in-one equity fund seems like you’re putting all your eggs in one basket, but as I discussed over here concerning XEQT, it’s actually a great way to make sure you have your investment spread out across many companies in many geographies. My one mild objection to this approach is that there are no bonds5 in the boomer&echo portfolio, but it’s a minor point.

Like: It recommends keeping cash in the retirement holdings

Having cash on hand is a good way to smooth out the gyrations of the market. It’s a fundamental part of my own withdrawal strategy.

Dislike: The approach is likely to get emotional

The approach to refilling the cash portion of the boomer&echo portfolio is left a bit vague in the linked article. “During up markets” is almost guaranteed to encourage daily agonizing over whether it’s really the “right” time to sell. “On a regular annual schedule” is better advice, but that’s a big trade to execute on a single day, and the temptation to delay this trade would be rather large, I expect.

Dislike: It may not be practical

In theory, it’s really nice to have a super-simple portfolio. In practice, it’s much harder to pull off when you have substantial non-registered investments. Making trades in your non-registered accounts to simplify your holdings may attract unwanted capital gains, which of course may attract unwanted taxes. Add to this my dubious practice of holding substantial USD assets, and you quickly go from an ideal to what a real retiree’s portfolio actually looks like. In any case, it’s always good to try to simplify wherever you can, like I did.

My approach: similar, but different

My approach to portfolio maintenance in retirement is similar to the boomer&echo approach, with a few key differences:

  • Withdrawals are done monthly, without fail, and selling parts of my equity portfolio happen every month. No emotion, and I sell in up or down markets, on the same day every month.
  • The 80/15/5 mix between equity, bonds, and cash is maintained at all times, plus or minus a percentage point. My multi-asset tracker spreadsheet helps with that. Extra trades might be needed in a given month to keep the mix correct.
  • The cash portion of my portfolio is divided between a 6 month non-registered cash cushion that is part of the VPW methodology, and everything else. “Everything else” is largely in registered accounts so as to not generate unnecessary (and taxable) interest income.

What do you think about the boomer&echo two-fund approach? Anyone out there using it? Let me know at comments@moneyengineer.ca.

  1. The article in question mentions VEQT, but its MER is 0.24%, and the others are 0.20% or less. I hold XEQT myself. ↩︎
  2. Elsewhere in the article they characterize the HISA bucket as “12 months of withdrawals”, which is not at all the same as “10%”. ↩︎
  3. These kinds of ETFs invest in a variety of HISAs, like the ones I talk about here. ↩︎
  4. I use ZMMK in this role which is a bit riskier but with a bit higher return. Writing this article makes me wonder if I should head back to HISA ETFs instead. ↩︎
  5. Some research indicates that holding no bonds is in fact the best strategy. ↩︎

RRIF and RRSP coexistence

RobHLeave a comment

Summary: It’s possible for you to collect income from a RRIF at the same time as contributing to (and taking deductions from) an RRSP.

If you’re new to world of RRIFs, or think that they only come into play once you turn 71, then you might want to give Demystifying RRIFs a read.

In my case, I worked until the end of 2024, having opened RRIF accounts and funding them with my RRSP holdings1 in the last quarter of 20242. Unsurprisingly, my Notice of Assessment for the 2024 tax year included the usual “new” RRSP contribution room based on salary earned during the 2024 tax year.

But what to do with that RRSP room? And if I use it, when should I take the deductions?

Can I even take advantage of it?

Answer: yes, as long as i do it before I turn 71.

The CRA rules are pretty clear on this topic. You can make and deduct contributions up until the year you turn 71, even if you’re retired.

Ok, but then there’s the problem of coming up with the money to MAKE the contributions.

Making contributions to the RRSP in retirement

One of the reasons you seem to have “more” money when you retire is that you stop saving money for retirement. RRSP contributions constituted a significant line item in my annual budget while working. In retirement, I don’t really need to save the money, but taking advantage of the possibility to defer taxes seems like a good idea.

One way to tackle the issue is to initiate a small monthly contribution to my RRSP; at least this starts to build up deductions I can use when it makes sense to; I don’t need to make it a huge amount, but over time it will build up a deduction that could come in handy later.

So, when is “later”, exactly?

When to take the RRSP deduction when retired

My annual salary in retirement, by design, is variable, based on my net worth calculated every month. You can read about it here. I expect that over time my salary will increase3, so “future me” will be the one taking the deduction.

My guess is that there will be a few places where having a deduction ready might come in handy:

  • Generally, I’m just trying to reduce my overall tax bill. My advisor suggested that I try to optimize my income every year to get to an overall (not incremental) tax rate of 15% for the household. The RRSP deduction is another lever I’ll be able to use to help accomplish that.
  • I’m trying to avoid paying tax by instalments. Looks like if your tax owing is >$3000 in two consecutive years, then you’re going to be asked to pay your taxes four times a year. Taking RRIF minimum payments (as I do) means no withholding tax, so it’s rather likely that at some point I’m going to be faced with this. Having the possibility to delay this is a nice thing; I hate giving the government access to my money any sooner than strictly necessary.
  1. Most writing on this topic talks about “converting” RRSPs to RRIFs. But that’s not really how it works, at least not with two providers I have dealt with. In reality, you open new RRIF accounts and move the RRSP assets in-kind to those RRIF accounts. The RRSP account remains intact, albeit with nothing in it. ↩︎
  2. RRIF payments become obligatory in the calendar year AFTER the year in which you open them. You can take payments sooner, but that’s a manual process, and any payment so taken will be subject to withholding tax. Since I wanted to take RRIF minimum payments in 2025, I had to have the RRIFs ready in 2024. ↩︎
  3. The percentage of my net worth used to fund my monthly salary increases every year, just like how a RRIF calculation works. In theory, the rate of return of my retirement investments is currently higher than my percentage withdrawal, meaning that future salaries are likely to be higher than current ones, but that’s not an ironclad guarantee. ↩︎

News: Deal for DIY Retirement Planning

RobHLeave a comment

Disclaimer: I get nothing from pointing out this deal, and I haven’t used the product below myself. But all the same, it might be of possible interest to readers of this blog.

“Cashflows and Portfolios” is one of my top places to get advice. (It’s listed along with other great resources, in the blogroll).

Along with great (and free) advice, the folks behind the blog offer for-fee retirement planning services. But they do have one twist for the hard-core DIYer: they offer access to retirement projection software so you can do your own projections. (Looks like they use Adviice — just like a lot of planners do).

Anyway, their latest newsletter indicates that they’ve lowered the price of their DIY retirement planning service and are offering an additional 10% off. You can get all the details here.

I do recommend paying for some kind of retirement planning service; I did it and it gave me the confidence to set my retirement plan in motion 2 years earlier than I first anticipated. You can read about how I came to the decision to “pull the plug” here.

The Mechanics of Getting Paid in Retirement

RobH8 Comments

***This is no longer accurate; my new diagram is found at The Mechanics of Getting Paid in Retirement: 2026 Edition ***

DIY investing also means DIY decumulation. I recently completed a change in online broker from QTrade to Questrade and this is how I get paid in retirement; I’ll refer to the letters in the diagram below so you can follow along.

How I get paid, April 2025

A: QTrade? What?

I know I started by saying I completed the transfer from QTrade to Questrade, but due to an unexpected snag, I still have 4 accounts with QTrade which are currently paying a monthly obligatory RRIF-minimum contribution to my salary. I talked about the snag here, but suffice it to say I could have moved these accounts too, but at the expense of foregoing monthly payouts for the remainder of 2025, which I didn’t think was worth it.

Next year, those accounts will disappear and Questrade will handle the RRIF minimum payments.

B: Yes, there are multiple RRIF accounts

When I started the paperwork to open RRIF accounts, I was surprised that the same choices were offered as were offered for RRSPs — individual and spousal. I’m sure that some of the reason is due to the attribution rules for spousal RRIFs, but anyway, there are 4 RRIF accounts generating 4 individual payouts every month. This is automatic, so I have to make sure that there is cash available in the 4 accounts each month, or else my provider will happily charge me an arm and a leg1 to do the necessary asset sale.

The asset sale takes a few seconds; and with T+1 settlement, the cash is available the next day. Right now I try to do all my moves on the 22nd of the month, but admittedly, this is more time than strictly necessary.

C: Opening the RRIF account includes providing your banking information

I don’t know whether there is any provider out there who permits RRIF payments to be paid to a non-registered account, but so far it seems that they all prefer to make EFTs into a bank account. That’s not a problem for me but this may not be what you’re expecting. The money just shows up like a paycheque on or near the last day of the month.

D/E: The sum of all RRIF payments isn’t enough to fund my desired lifestyle

I’m withdrawing RRIF minimum payments and funding the rest of my monthly paycheque by liquidating assets held in my non-registered account. Another approach would be to increase the RRIF payments, but then that attracts withholding tax, which I hate. The monthly liquidation of assets in my non-registered account generates taxable capital gains each time, naturally. The advice I got from my retirement planner suggested I should be able to maintain an overall 15% tax rate by making sure that I have a mix of favorable taxable income (capital gains and dividends) along with the unfavorable2 RRIF income.

I keep an eye on my 2025 tax bill by using the tax calculator I mention on https://moneyengineer.ca/tools-i-use/. I can always choose to switch gears if needed.

In Questrade, movements of cash are done from their aptly-named “Move Money” menu. Setting up your bank account in Questrade was a bit clunky3 and relied on some app like Plaid to get the job done. Moving funds in this way isn’t instant, expect a delay of at least two business days in each case.

Another oddity with Questrade is that any joint non-registered account is set up as a margin account, which means it’s shockingly easy to borrow money you don’t have4.

One unknown with Questrade — I was able to move money instantly after an asset sale. It’s not clear to me whether this uses margin or not5. I’ll know more once I get my April statement, I guess. If I get charged margin interest, I’ll have to hold off moving money until the day after the asset sale.

F: Variable Percentage Withdrawal (VPW) requires the use of a cash cushion

I described the methodology I use to calculate my take-home pay in a previous post, but in essence my salary is related to my real-time net worth, filtered through a 6-month moving average so an anomalous month on the stock market doesn’t impact my take-home pay quite so quickly. VPW makes a “suggestion”, this suggestion is added to the cash cushion, divide by 6, and presto, the “suggestion” is converted to a monthly “salary”.

In any given month, the cash cushion is either being augmented by the sale of some assets in my non-registered account (the suggestion is larger than the salary), or the cash cushion is being depleted to make up the shortfall in my calculated salary (the suggestion is less than the salary). All of those movements are manual. Transferring cash between non-registered accounts is supported by Questrade, but it wasn’t supported by QTrade6.

All in all, this process should take less than 15 minutes a month. The first time included a learning curve and extra setup, but now that pre-work is done. Next step is making sure my spouse knows how to do this, too!

  1. Assuming your arm and leg are worth $40. ↩︎
  2. Unfavorable because it’s treated as straight income, and since RRIF-minimum, no witholding tax. I’m expecting a decent tax bill come April next year. ↩︎
  3. Bank accounts showed up in my mobile app but not on the web portal. To get them to show up there I had to set up my account — again — and successfully transfer a nominal amount. Only then would the web app remember my bank accounts. ↩︎
  4. Which I inadvertently did, paying myself from the wrong non-registered account. Sigh. ↩︎
  5. Since the transfer isn’t instantaneous, and since the cash really is available the day after, one could make the case that this doesn’t require margin. But I really have no idea. ↩︎
  6. For QTrade I had to use my bank account to get around this restriction. ↩︎