Weekend Reading – Death by PowerPoint, Bond ETFs, RESPs and more #moneystuff
Welcome to my latest Weekend Reading edition, where I list some of my favourite finds from the personal finance and investing blogosphere.
In case you missed the last edition, you can check it out here: Tax Free Investing Power.
These were my articles from the last week:
- Here are 5 simple ways to track your financial journey, including if you’re just starting out.
- There is no doubt an emotional side to early retirement.
This edition has some good news about Microsoft PowerPoint, some top bond ETFs to consider, I answer a reader question about RESPs, and I highlight some savvy tax approaches for any retiree to consider.
Read on and enjoy!
A great read and interesting links as always in the Carrick on Money column in The Globe and Mail. Thanks for the mention about this post on Cashflows & Portfolios about the Longevity Pension Fund – should you own it?
As a long-time PowerPoint user, I welcome this. Many companies are ditching the 30, 40 or 100+ slideshows (yes, I’ve seen those) in favour of more simple briefing notes and instead, making time during meetings to actually, well, meet!
Anyone else tired of death-by-PowerPoint?
From the article: “Even 11 words on a slide can overload working memory. Imagine what 30 or 60 minutes of non-stop information does, he says.” – skills consultant and expert. “Companies such as Amazon, Acceleration Partners, LinkedIn and several others have banned PowerPoint. Employees communicate, discuss, engage and strategize without using the loathed decks.”
I enjoyed this tax savvy article from Alexandra Macqueen and Morningstar.ca. By following a few simple tax strategies, this couple lowered their lifetime tax bill. From the article/strategy used:
- “…moving the $300,000 in their highly-taxed RRSPs to lower or non-taxable accounts (non-registered accounts and/or TFSAs).
- By implementing this strategy, “the amounts in their RRSPs that will need to be converted to RRIFs by the end of the year in which they turn 71 will be reduced, thus lowering, in turn, the amount of required minimum withdrawals from RRIFs.
- Finally, starting withdrawals now, when both members of the couple are alive, is another tax management strategy. If either member of the couple were to pass away, the tax on their remaining investments would fall entirely on the surviving member, reducing the amount that could be withdrawn before hitting the next tax bracket – at a time when that spouse is also dealing with lower household income due to reduced government and work pensions.”
Alexandra has been an excellent contributor to this site too. Read on for her content:
- Ten questions on annuities – answered here!
- Why you should consider pensionizing part of your retirement nest egg.
Our Life Financial shared an impressive dividend income update.
I’ve got my latest income update partly drafted for next week – stay tuned. You can read about my May 2021 dividend income update here:
Cashflows & Portfolios covered off an important topic – What is a Credit Score and How Do Credit Scores Work?
Dividend Earner shared what he believes is the best bond ETF in Canada. His pick?
VGV – Vanguard Canadian Government Bond Index ETF.
A good pick but I think ZAG, VAB and some others deserve more attention, due to their lower-fee structure, higher number of holdings, and shorter-term duration. Keeping a shorter-duration bond is important, based on what I shared in the MoneySense Best ETFs in Canada for 2021 edition with my pal Jon Chevreau. You own bonds for a flight from equity safety, not necessarily returns:
“New panelist Mark Seed of the My Own Advisor blog similarly calls for more selectivity in bond ETFs. He figures that if you want bond ETFs, you should go domestic if you plan to retire in Canada and, “more importantly, bonds could be considered your safety parachute when equity markets fall. Otherwise, go with more equities in your portfolio for growth if you have a multi-year investing time horizon.” Apart from helping dampen stock market volatility, Seed says bonds can be used to rebalance your portfolio. “Keep your portfolio aligned to your investing risk tolerance, and help you adjust it back to its target asset allocation (i.e., keeping a balanced mix of stocks and bonds). Finally,” he notes, “bonds can help protect against deflation.”
Like Dale Roberts, we’re all trying to make some sense of the markets.
Modest Millionnaires shared her tips about negotiating a remote work agreement.
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Reader question of the week (adapted slightly for the site):
I’m new to your site. I have been trying to Google your name for content and podcasts that I can listen to throughout the day and very much enjoying your content. Thanks.
You did mention you might answer some questions from readers, so I’m going to give mine a try in the hopes that you might have the time to help…
I’m a woman in my late 40s with 3 kids. Around 14 years ago I was off on mat leave and was determined to figure out how I could manage my own investments and more specifically my kids education fund because I had been duped by an RESP company when I had my first child. I happily stumbled on the couch potato portfolio. I followed that guidance for my two boys’ RESPs by making monthly automatic contributions to the TD eSeries funds ($400 split 3 ways: Canadian, International, U.S.). I’ve really had no time over the years (maybe until now) to look at how things are doing!
I think I know more than the average person about investing, but I would still consider myself a very junior DIY’er. Anyhow, fortunately for me, that TD eSeries approach was a solid one and now there is a decent amount of money available to them, but I don’t know what to do for next steps in order to ‘dial down’ the investment risk.
One will potentially be university bound in 4 years, the other in 8 years. I mean, if we hit a 3-4 year recession when either one goes to university, we would likely be able to fund the university costs from another source
to prevent pulling the money out at a bad time, but maybe that’s not prudent. I’m mostly afraid of the lost gains from a bad stock market. I wonder if there is a safer approach.
Would it be such a bad thing to leave it all in equities and hope that the money I make in the 4 or 8 years?
Is that just greedy or foolish?
Thank you so much for any reply!
Thanks for your readership!!
Well, I cannot offer direct financial advice of course but I will say I know of many parents that use or have used the TD eSeries funds for RESPs (Registered Education Savings Plans). Some of those funds are great products for all the reasons you already know. The challenge becomes, as you have eluded to, when kids are close to using / needing the money. How best to invest?
Personally, I think you’re already on the right track.
If you need money sooner than later, for whatever reason in life I believe it should not be in equities.
A good rule of thumb to consider:
- Any money needed in the next 1-2 years, keep in cash. (No stocks or equities whatsoever.)
- Any money needed in years’ 3-5, consider some bonds or GICs (for stability when equities tank).
- Any money needed in 5+ years, then potentially mostly equities although there are risks.
Back to you and the RESPs, I think you should consider dialing down the risk for the one child that is about 4-5 years away from accessing RESP assets. Equities could tank and the value of the RESPs (if heavily in stocks) could tank too leaving little time to recover before the money is accessed.
You might want to check this out: 4 things to get right when tapping RESP savings.
Point #2 in that article is all about dialing down risk.
“While you will need to find the right mix that suits you, experts generally recommend that you should invest more in equities than fixed income in the early years of an RESP, then gradually up the fixed income and cash proportion as your kids get closer to using the funds.”
So….potentially look at changing the asset mix to mostly fixed income 1-2 years out.
In fact, when about a year or so out, the asset mix should likely be at least 80-90% fixed income.
I hope this information was helpful!
All the best,
Other great pages and reading material:
You can see other great questions asked by readers on my FAQs page.
There are also dozens of Retirement stories and essays you can learn from on that page.