The Canadian asset allocation ETF portfolios are game changers. Most Canadians who are still with an advisor should consider leaving said advisor and instead, invest in these investment options. They are so superior to poor-performing high-fee Canadian mutual funds. Those mutuals funds usually come with a salesperson not an advisor. You pay for the salesperson, you pay again for the poor investment option. In retirement, it’s even worse. The fees paid directly reduce your ability to create retirement income. A 4.5% spend rate quickly becomes a 2.5% spend rate with 2.0% fees applied. Fortunately “simple” well-diversifed global portfolios work in retirement.
First off, check out the Canadian asset allocation ETF page on Cut The Crap Investing. You’ll see the performance of the ETF providers in Canada, plus a breakdown and comparison at the 5 risk levels.
Here’s iShares suite of ETF portfolios. These are average annual returns including all fees.
Of course, they are fantastic investment options in the accumulation stage. There is a massive “XEQT and chill” movement in Canada. The idea is you buy that simple and effective managed ETF and keep adding money on a regular schedule.
As I’ve often said, creating incredible wealth should be one of the easiest and most rewarding things we do in life. Keep in mind we do have to understand the risks and invest within our comfort level. You’ll find a table that gives you a starting point on that topic on the asset allocation ETF page.
Retirement income
Please start here with creating retirement income from your portfolio.
And before we get to creating retirement income with iShares asset allocation ETFs, check out – – Creating retirement income at 4 risk levels over the last 10 years.
You’ll see the risk-return proposition at play. Even in retirement we are often rewarded for taking on more risk (more equities).
Let’s move on to those iShares ETFs. In the following chart, we start with a million dollars and have a 4% spend rate. We’re spending $40,000 annually and adjusting spending each year to receive an inflation boost. We’re protecting your spending power.
The period is from January of 2000 to May 2, 2026.
It’s a meaningful period given that we’ve moved through two market corrections. It’s a good test of the portfolios and it gives us a good reading on creating retirement income through market stress, and a brief inflation ‘shock’ in 2021-2022. Once again we see the risk-return proposition at play. The returns of the most conservative iShares XINC (not shown in chart) would be even “worse”. That demonstrates the fact that there is also the risk of not taking on enough risk.
Plus, you’d have to endure more stress to enjoy a greater outcome.
Retirement spending during market declines
Risk is the price of entry in the accumulation stage and in retirement. To maintain our retirement lifestyle we will have to learn how to spend when the markets are down. Corrections are regular events, so are bear markets. Investor behaviour is one of the most important considerations in accumulation and in retirement.
Awareness is preparedness.
Dale
It’s crucial that retirees understand how portfolios work at various risk levels. And it’s important to visualize what spending scenarios look like through the ups and downs. We need to be aware of what’s coming so that we can stay the retirement course.
The retirement cash flow plan
Keep in mind the investment portfolio is just part of the retirement mix. Consider. the three core pillars of retirement income. Your portfolio would be part of that savings pillar.
And of course there can be additional sources of income. In our Zoom Presenation last week at Retirement Club, we looked at a retirement cash flow plan that was largely dependent upon 4 rental properties. The above 3 pillars played important roles, but the foundation was the real estate. It was a fascinating and successful plan that delivered $140,000 annual after taxes in the go-go years.
The investment assets were a modest $400,000. The retirement cash flow plan using MayRetire showed that delaying CPP and OAS to age 70 was beneficial. Gov benefits, working in concert with a modest employer pension, the Retirement Clubbers were able to pensionize a considerable amount of income.
Check out Retirement Club for Canadians
There are many risk management strateges that we can employ. We certainly go over those at Retirement Club. And of course, it’s crucial that you give great consideration to your life plan and then bring it all together (make it happen) by running a retirement cash flow calculator. Successful retirement funding is a dance with many moving parts. The retirement calcultor becomes the choreographer.
You can also look to an advice-only planner who is a retirement specialist.
Low fees and retirement planning
Canadians can have it all. If you want retirement planning and low-fee, tax-efficent ETF portfolios you can look to Justwealth. You will be assigned your own advisor/financial planner, with total fees as low as 0.60%.
How to use MayRetire Zoom Presentation
If you want to learn how to use the MayRetire retirement calculator, use the Contact Dale button at the top right of this post. We’ll sign you up.
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You can also join us at Retirement Club, that carries a modest fee.
Have a great day and week.
Dale
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