Tag: finance

What’s the deal with XGRO?

RobH12 Comments

***Numbers updated November 30, 2025****

As mentioned elsewhere, I rely heavily on all-in-one ETFs in my retirement portolio. New to all-in-ones? Read a bit about them here. While it may seem unwise to have (seemingly) so little diversification, when you buy an all-in-one like XGRO, you are actually getting a piece of THOUSANDS of different assets.

The main all-in-one Canadian ETF that I hold is an 80/20 fund1 called XGRO. There’s nothing special about XGRO other than it being free to trade on the platform I use — there are other 80/20 funds out there (e.g. ZGRO, HGRW). There’s also other all-in-ones with different equity percentages; there’s something for everyone!2

I thought it would be interesting to see what, exactly, is underneath every $100 you invest in XGRO. So by reading XGRO’s ETF description, following the ETF descriptions of what’s inside XGRO, and doing a little math, I came up with the following breakdown:

FundWhat is it?How much?Colour Commentary
ITOTBroad US stock coverage that tracks the S&P Total Market Index, about 2508 companies (top holdings: Alphabet, Apple, Nvidia, Microsoft, Amazon, Broadcom)$36.42 of your $100 investment

(of which ~2$ is in each of Alphabet, Apple, Nvidia, and Microsoft, and another $1 is in each of Amazon and Broadcom)		The Magnificent 7 and 2501 other companies
XICBroad Canadian stock coverage that tracks the S&P/TSX Capped Composite Index, about 223 companies (top holdings: RBC, Shopify, TD, Enbridge, Brookfield)$20.68 of your $100 investment

(of which RBC gets $1.40, Shopify gets $1.26, TD gets 93 cents)		You want banks? We got banks!
XEFBroad international (Europe, Asia, Australia) stock coverage that tracks the MSCI EAFE Investable Market Index, about 2500 holdings$19.49 of your $100 investment
(of which 24 cents goes to AstraZeneca, 34 cents goes to ASML…)		One of these years, MSCI EAFE is going to have another year like 2017…
XBB1400 or so investment-grade Canadian bonds that comprise the FTSE Canada Universe Bond Index$12.26 of your $100 investment (of which $3.89 is in federal bonds, $1.50 is in Ontario bonds, 91 cents is in Canada Housing Trust #, 85 cents is in Quebec bondsBonds got a lot of hate in 2023/4, but staying the course has been nice of late
XEC3000+ emerging market stocks that track the MSCI Emerging Markets Investable Market Index$4.18 of your $100 investment (of which 41 cents is in Taiwan Semi, 18 cents is in Tencent3…)“But honey, buying a case of power banks from Alibaba is helping our retirement portfolio”
XSHAbout 540 short term Canadian Corporate Bonds that track the FTSE Canada Universe + Maple Short Term Corporate Bond Index$2.96 of your $100 investment (of which 24 cents is in Royal Bank debt, 23 cents is in TD debt, 18 cents is in BMO debt)You want bank debt? We got bank debt!
USIGOver 10000 (!) US corporate bonds$1.95 of your $100 investment (of which 4 cents is JP Morgan debt, 3 cents is BoA debt)No idea how they track 10,000 bonds, but look at the yield4!
GOVTExposure to 191 US T-Bills$1.94 of your $100 investmentThey say “No pain, no gain”. I guess there’s only minuscule pain in T-Bills5.

If you were so inclined to run the numbers yourself, I’m pretty sure you’d get something similar to my numbers. It does change daily, mind you. And the percentages are routinely rebalanced, of course.

The big takeaway is that investing in an all-in-one like XGRO provides you with exposure to a bunch of different asset types across many different geographies in one product, including all of the “hot” stocks you read about ad nauseam. No FOMO here!

  1. A spirited discussion on the wisdom of 80/20 over here: https://www.bogleheads.org/forum/viewtopic.php?t=210178 ↩︎
  2. More equity=more risk=higher returns. No free lunch. ↩︎
  3. I desperately wanted the math to work out to “10 cents in Tencent”, but alas ↩︎
  4. https://stockanalysis.com/etf/usig/dividend/ ↩︎
  5. No gain. I feel much pain: https://www.google.com/finance/quote/GOVT:BATS?sa=X&window=MAX ↩︎

Preparing your portfolio for retirement

RobH8 Comments

It’s all well and good to leave the working world, but unless you have a way to start tapping into your retirement savings, it’s going to be tough sledding. Here is what I did to prepare.

Preparation step 1: Try to keep your RRSP aligned with your spouse’s RRSP

By “aligned” I mean “try to keep your retirement income equal to your spouse’s retirement income”. This only matters if you’re planning on retiring before the age of 65; those who are 65+ can achieve similar results via pension splitting. For me, this is rather easy to work out since I’m the same age as my spouse and we don’t have workplace pensions. So for me, that meant keeping the value of my RRSP close to my spouse’s RRSP.

This step isn’t so easy to do if you’re in the last stages before retirement, admittedly, since the only way to “fix” the numbers is by contributing to a spousal RRSP. But I figured I’d mention it anyway as it can reduce your household income tax bill once you are retired.

Preparation step 2: Simplify the portfolio

As shown over here, the vast majority (about 80%) of my holdings are in four investments: two asset-allocation ETFs (one in CAD, one is USD) and two high interest savings accounts (one CAD, one USD).

It didn’t always look like that. Prior to moving to XGRO and AOA, I had holdings that attempted to mirror (more or less) what these all-in-ones actually invest in under the hood — US Equity funds, Canadian Equity funds, International Equity funds, short-, mid- and long term bond funds….The list was pretty long. This for me caused three problems:

  • Trying to keep the holdings at the ratios I wanted while actively selling the assets seemed like too much effort, too much trading, and too many opportunities for emotion1 to get in the way.
  • The folks behind VPW (my chosen method of budgeting in retirement) recommended using an all-in-one which is based on “no market timing, no concentration into any asset, no investment into alternative assets, no factor investing, and no modulation of asset allocation or withdrawals based on guru prognostications or metrics“2
  • The random bus principle3 meant I had to make things easier for my spouse and/or my heirs

And so, with a bit of trepidation, I started the work, one account at a time — bearing in mind that between RRSPs, TFSAs, and non-registered accounts, many of which had USD and CAD variants, there were around a dozen accounts to take the simplification knife to.

These were big trades! To mitigate market volatility somewhat (I didn’t want to get caught on an overly good or overly bad market day), I made progress account by account and after about a month, my portfolio was more or less what it is today.

Preparation Step 3: Open and fund RRIFs

If you’re new to RRIFs, you may want to take a detour to Demystifying RRIFs. I’ll wait here.

Part of the retirement plan I paid for recommended that I fund the early part of my retirement with a combination of RRSP money and non-registered money. My plan didn’t say anything about when to convert to a RRIF, and I figured that a RRIF was something for much older me to worry about.

As I started to investigate the mechanics of taking money directly out of an RRSP, I discovered two things:

  • My provider, and I suppose most providers, charge a fee for making this sort of “exceptional” request, known as a “deregistration fee“. I hate fees.
  • RRSP withdrawals attract withholding tax. I hate loaning the government money interest-free.

And so, I set out to open RRIFs. (Don’t forget to designate a beneficiary or successor annuitant!) This was a bit more involved than I imagined, and due to a number of snags unique to my provider4, it took about 4 weeks from beginning to end. I already had set up EFT connections5 between my provider and my bank, so that wasn’t something I had to do as well.

At the time of opening the RRIF, I also had to designate the frequency of payment. I presume (you tell me) that most providers offer the same options of annually, quarterly or monthly. I chose monthly, which makes cash flow a bit easier to manage, it does create extra work to make sure funds are in place every month.

Preparation Step 4: Move employer based holdings to your control

My private-sector employer offered no pension plan. They did offer an RRSP matching program with associated DPSP at a provider dictated by them. Anyway, the instant I could break off that association (my last day of work) I did, and planned to move the money to my usual provider. Unfortunately, I got caught in a situation I describe in my cautionary tale, and this money will not be part of my RRIF holdings in 2025. A minor hiccup, but if you’re counting on having access to this money shortly after pulling the plug, be very careful!

Preparation Step 5: Have potential capital gains insight into your non-registered accounts

Capital gains are only a concern in non-registered accounts. If you don’t have any, ignore this step.

Part of my retirement funding in the early days will come from non-registered accounts. Any time you sell a stock/ETF in a non-registered account, it generates capital gains (or capital losses) which are reported on your tax return. Knowing up front what the potential capital gains are for each ETF/stock you hold will help you optimize your taxes. You can only know that if you know the Adjusted Cost Base (ACB) of your holdings and the current price. Your provider probably shows a “gain” number, but it’s not always accurate. Best to track it yourself using a tool like https://www.adjustedcostbase.ca/.

This I think captures the main steps I went through to get “retirement ready”. My first RRIF payment is due January 31, 2025 — I’ll believe it’s “done” when I see the entry in my chequing account!

  1. “I’m sure if I wait a week, this ETF will go lower/higher” is a good sign you’re using emotion rather than cold, hard, numbers to make your investment decisions. ↩︎
  2. As stated at Re: A Simple Retirement Using Variable Percentage Withdrawals (VPW Forward Test) ↩︎
  3. A lifetime guiding principle of mine: “what would happen if I got hit by a random bus today”? Thankfully, it hasn’t happened yet. ↩︎
  4. Dear QTrade, please fix your RRIF application forms so you can properly fund both CAD and USD accounts. And make sure you can designate a successor annuitant correctly when filling out the application. ↩︎
  5. EFT = “Electronic Funds Transfer”. It’s a connection that allows the RRIF payment to land directly in your usual bank account where it can do useful things, like, you know, pay bills. If your RRIF provider is also a bank, you probably (?) needn’t worry about this. ↩︎

Demystifying RRIFs

RobH7 Comments

RRIF stands for “Registered Retirement Income Fund” and can be thought of as your own self-funded pension plan. The RRSP is where you built up that pension plan, and the RRIF is where you get to take a salary from it.

I opened a RRIF last year as part of my retirement preparations (more on that in a future post) and came into this process with a whole lot of preconceived notions about how this would work and what the final result would look like. Turns out I had a lot of incorrect beliefs that I’ll break down for you:

RRIF Myth #1: You can only do this when you turn 711

A lot of what you read about RRIFs may make you believe that they’re only available as an option once you turn 71. Nope. That’s the absolute LAST opportunity to convert your RRSP into a RRIF. Anyone can open a RRIF, and in the year after opening it must start getting (at least) RRIF minimum payments.

RRIF Myth #2: You can only withdraw so much money a year from a RRIF

Nope — you can take as much from your RRIF as you want in a given year. However, the rules state you MUST take a MINIMUM amount from your RRIF every year (an amount I’ll refer to as “RRIF Minimum”) starting the year after you open it. RRIF Minimum for a given year is based on your (or if you prefer) your spouse’s age and the value of your RRIF on January 1.

The formula for calculating the minimum amount you can withdraw from a RRIF for a given year prior to age 71 is (1/(90-age))*(RRIF value on Jan 1).

https://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm

You can take more at any time, but then two things are likely to happen:

  • You won’t get all the money you asked for because your provider is obliged to withhold tax once you exceed RRIF minimum
  • You may get hit with an additional fee from your provider (e.g. QTrade charges $50 for every “additional” payment per https://www.qtrade.ca/en/investor/pricing/fees.html)

RRIF Myth #3: You ‘convert’ your RRSP to a RRIF

“Convert” is a completely inaccurate way to describe the mechanics of opening a RRIF. It’s more like “open a new account and move your RRSP assets into it”. And what’s more, each kind of RRSP you have gets its own RRIF. In my case:

  • My personal CAD RRSP has a personal RRIF
  • My personal USD RRSP has a personal USD RRIF
  • My Spousal RRSP (the one in my name but has my spouse as a contributor) has a Spousal RRIF

You may think (as I did) that the opening of a RRIF collapses all this nonsense into one tidy account. Not so. For every RRSP you have, you can expect a corresponding RRIF. And, each of them will have RRIF minimum amounts calculated at the beginning of the year.

The other unexpected side effect is that even after opening RRIF accounts, I still have all the RRSP accounts2. Yes, it’s possible to have a RRIF and an RRSP3 at the same time.

Anyway, once the work was complete, all the assets I was used to seeing in my RRSP were now showing up in my shiny new RRIF account (new number, new entry on the monthly statements…sigh) and all my RRSP accounts showed zero assets4.

RRIF Myth #4: You can only withdraw RRIF minimum payments once a year

This is one I learned from my parents, who dutifully withdrew their RRIF minimum payments as late in the calendar year as possible to max out every last bit of tax-free growth. As it turns out, my provider (and I presume all providers) allow monthly, quarterly or annual RRIF payments. There is no change to HOW the payment is calculated regardless of how you choose to get paid. The total amount is still only calculated once, at the beginning of the year. For example, if in a given year your RRIF minimum payment works out to $1200, then you can choose to get paid $1200 once, $300 a quarter, or $100 a month.

I’ve set up my RRIF payments such that I’m getting them monthly. Why?

  • All my expenses tend to show up on a monthly basis, and that’s how I’ve always been paid. Monthly payments make cash flow less of a concern.
  • Having a big lump sum of cash would require me to DO something useful with it, like earning interest until I needed it. Given my day-to-day bank account does not pay any interest, it would require extra effort to figure that out.
  • A single payment implies a single relatively large stock transaction, and then you may have a timing issue if you happen to pick a bad day to sell. I’ve always invested on a monthly basis, it just feels “right” to de-invest on a monthly basis too.

  1. Why did I convert to a RRIF? Firstly, it’s what my advisor recommended in order to reduce my taxable income later in life, when I start collecting CPP and OAS. Secondly, the alternative, withdrawing from my RRSP directly didn’t look so great once you started to factor in withholding tax and likely deregistration fees imposed by your provider. ↩︎
  2. All with no assets, of course. However, it SHOULD be possible to convert only part of your RRSP to a RRIF according to https://www.taxtips.ca/rrsp/converting-your-rrsp-to-a-rrif.htm. I’ve not tried this, YMMV. ↩︎
  3. Of course, for the RRSP to be useful you have to actually earn employment income ↩︎
  4. Do keep an eye on that — as a result of a dividend payment during the transition of assets, I ended up with some cash in my RRSP after all other assets had moved to the RRIF. ↩︎

How much can I afford to spend in retirement?

RobH2 Comments

Summary: Variable Percentage Withdrawal (VPW) is a safe way to draw down your retirement investments, and feels a lot more reasonable than relying on a fixed budget.

When I finally decided to pull the plug on the “working to earn a living” world, (and you can read about how I came to that decision here) I was still left with lingering doubts over my retirement spending plans.

Of course, I had prepared a retirement budget as part of the exercise.

Of course, I had hired an advisor to take a look at the numbers.

And as a result, of course, I had a tidy year by year breakdown of my inflation-adjusted budget and net worth. The charts always look something like the one on PERCs home page.

But my own experience made me really uneasy about this approach — in 2023 that forecast showed I couldn’t retire until 2027, but then back-to-back stock market silliness (in a good way) allowed my 80/20 investment portfolio blow through “the number” two years early!

So, on the one hand, hooray for me, but on the other hand, the story could have happened in precisely the opposite way with a (temporary, they are always temporary) market meltdown, and the moneyengineer.ca domain would have been snapped up by the Canadian Mint, and I’d still be working for a living. The variability of year to year returns isn’t a big deal over a long period of time, but it makes a huge difference in the immediate future1, and by “immediate” I mean, “how much will I take out of my retirement portfolio this month?”

And then I stumbled upon Variable Percentage Withdrawal (VPW).

In plain language,

VPW offers you a sustainable salary in retirement; if the market is doing well, you can afford to spend more, but if the market is doing less well, tighten the belt.

VPW uses your net worth, your age, your portfolio and any current or future pensions to dynamically calculate what you can afford to spend in a given month, quarter or year.

The key is “dynamically”. Every month, quarter or year, you calculate your net worth, and the VPW Accumulation and Retirement worksheet generates two numbers: what you can afford to spend, and what that number would look like in the event of a market meltdown.

And all of a sudden, my unease evaporated. This was just like REAL (pre-retirement) LIFE! I’ve never had a “constant” budget, I’ve never had a “constant” salary, and I’ve never been able to predict what either would look like 6 months from now, let alone 15 years from now. So why pretend I had all the answers in retirement? VPW gives a boring, emotion free algorithm2 for doing the work, and is perfectly aligned with my boring, emotion-free algorithm for investing.

You can watch a simulated VPW-based retirement, in real time over at https://www.financialwisdomforum.org/forum/viewtopic.php?p=638130#p638130. It’s been running since July 2019. An outstanding effort!

In future posts, I’ll talk a bit about how the mechanics of VPW work in practice with my own situation. NB: my first VPW-calculated retirement payment will be in January, 2025!

  1. Interested readers should take a look at the many writings out there on “sequence of returns” risk. Basically, it’s the risk that the retiree gets really unlucky and suffers a big stock market meltdown at the very start of retirement, the worst possible time. ↩︎
  2. AND spreadsheets 🙂 ↩︎

How did you know you had enough to retire?

RobH3 Comments

As a recent and relatively young retiree, I get this question a lot. I’ll try to break down the significant steps in the journey….

It started with knowing how much I actually had saved and tracking it

When you have multiple accounts across multiple providers, this can be more difficult than it should be. The full list circa 5 years ago looked something like this:

  • Joint investment account in Canadian Dollars
  • Joint investment account in US Dollars1
  • My spouse’s investment account2
  • My TFSA account
  • My spouse’s TFSA account
  • My RRSP in Canadian dollars
  • My RRSP in US dollars
  • My wife’s Spousal RRSP in Canadian dollars
  • My wife’s Spousal RRSP in US dollars
  • My spousal RRSP
  • My RRSP at my employer-mandated provider3
  • My DPSP4 at my employer-mandated provider

So yeah, a lot of accounts to keep track of. Not to mention that the RRSPs and TFSAs still had active monthly contributions, so aside from stock market changes, the actual amount being invested kept changing, too.

I built a partly-automated Google Sheets spreadsheet to keep track of everything. The template I used is over here if you’re interested.

Knowing how much I had saved for my retirement allowed me to start charting progress, and even allowed me to build models with calendar predictions for hitting milestones.

Then, I started researching how others figured this out

A book that made a lot of sense to me at the time was Fred Vettese’s great book, “Retirement Income for Life“. This started me down the rabbit hole of the many, many forecasting tools out there. A small sample included:

These tools provided me with three very important pieces of information.

First, it forced me to think about what retirement might look like from a budget perspective. What will I spend per month/per year in retirement on housing, utilities, transportation, entertainment, medical expenses, charitable giving, clothes, subscriptions….the list can be very long.

Second, it also forced me to think about how income would work in retirement. Would I radically change what I was investing in? Would I still earn money part-time? How much would that bring in? For how long?

Third, every simulation I ran showed me that I was quite close to retiring. But honestly, the amount of effort I put into running the numbers through these free tools was not very high. So I was still not feeling very sure I really had a handle on things.

I paid for a professional assessment

One habit of mine is that unless I have money invested in something, I’m unlikely to follow through. I want to learn piano, so prepaying for a year of lessons provides me with the incentive to put in time at the keyboard every day without fail. The same held true for making a retirement plan. Until and unless I put some money against it, I was likely to keep putting off making a decision. So I started searching for an independent financial planner who specialized in retirement. Someone local to me was Retirement in View5 and with appointment booked and payment sent, I was on my way to have a pro look at what I had concocted. How did I pick this provider? I had a short list of must-haves:

  • They didn’t sell products, only services. Providers who sell products (e.g. mutual funds, ongoing subscriptions) are always going to have some degree of a conflict of interest. I wanted to pay for advice, not stuff I didn’t need.
  • They had professional designations (CFP is the usual one)
  • They seemed to have a clue about retirement

The process of producing a detailed plan forces you to put a stake in the ground with respect to the questions I raised in the previous section: what’s your net worth, what’s it invested in, what’s your budget, what’s your work plan and so on.

The net result of the assessment from two years ago was that I was in good shape to retire two years from now, in 2027. It also provided me with the specific, per account totals I should have in place in my retirement savings. Those totals became my obsession, since they represented “the number” I needed to retire. The assessment also gave me a realization that the mechanics of withdrawing from your holdings isn’t trivial if you’re also trying to reduce taxes (and who isn’t, right?). The big things I learned from my encounter were:

  • I had become accustomed to thinking of taxes in terms of marginal rates, i.e. the rate of tax you are paying for the last dollar you earn. For retirement, it makes a lot more sense to think of overall tax rates, meaning the average rate of tax you’re paying. And since RRIF/RRSP income is treated differently from capital gains income which is treated differently from dividend income, you can play with sequencing to have some control over your annual tax bill.
  • Start with drawing down your RRSP6 holdings. Otherwise, by the time you start collecting CPP and OAS, you’re going to be paying a lot of tax, and maybe foregoing the income-tested OAS.
  • Delay CPP and OAS as long as possible, since this income may be the only income you have that is inflation-adjusted. (ok, this wasn’t really new, just about every pundit out there recommends you do this)

Some Lingering Doubts, But Onward!

And so, in 2023, I resigned myself to retiring sometime in 2027 and continued doing what I was doing, namely tracking my retirement savings and contributing to TFSA and RRSP. I even built a little “number tracker” to show how close I was to the targets I had for retirement.

And then, in 2023 and 2024, the stock market had back-to-back banner years, and early in 2024, barring a total disaster, it was looking quite promising that I would hit “the number” in the next 6 months. What? The assessment I paid for showed quite clearly that I shouldn’t have hit that number until 2027!

Total return of AOA and XGRO, Jan 1 2023 to Jan 1 2025, all dividends reinvested, courtesy https://dqydj.com/etf-return-calculator/ and https://www.canadastockchannel.com/compound-returns-calculator/

I realized that ALL the modeling, ALL the assessments, ALL the forecasts are based on static assumptions. Static inflation. Static growth from your portfolio. Static spending budgets, adjusted for inflation. And while static assumptions certainly make modeling easier, real life does not work that way, proven, in my mind, by the fact that my portfolio was a full 2 years ahead where it was predicted to be 2 years prior. And sure, you could build models that account for all kinds of changes, but you’re at that point building guesses on guesses. It all left me feeling rather unsatisfied.

Regardless, at that point, I made the decision that I would “officially” retire at the end of 2024 as long as the numbers held up midway through 2024. And they did. And I did.

But there was still the nagging problem I felt. 2023 and 2024, were certainly to my advantage, but what about the next two years? And the ten years after that? What happens if the stock market were to take a large beating the week after I stopped collecting a paycheque? Would I have to stock up on cheap ramen as a fallback?

It was in the last 12 months or so I discovered the concept of VPW — variable percentage withdrawal. A concept that much better models the real world. More on that next time.

  1. My provider (QTrade) treats US dollar and Canadian dollar accounts completely separately. Other providers blend them into one account. There are pluses and minuses for each. ↩︎
  2. Totally funded by a fully documented and interest-paying spousal loan. A topic for another blog post, but it’s a way to split income with a spouse. ↩︎
  3. In order to get automatic per paycheque contributions and automated matches, I had to use Manulife, a fate I would not wish upon my worst enemy. ↩︎
  4. “Deferred Profit Sharing Plan”. Not sure how common this vehicle is anymore, but my employer included it as part of my total compensation. Their modest RRSP matching contributions had to go into this separate account which is for all intents and purposes an RRSP account, except for the fact that you cannot touch the funds until your employment is terminated. I’m 22 days into my retirement, and still waiting for my funds to arrive… ↩︎
  5. Give Ayana my best regards! ↩︎
  6. Or RRIF ↩︎