Weekend Reading – Portfolio drawdown options
Welcome to my latest Weekend Reading edition about portfolio drawdown options.
You can read my previous editions below:
My approach and thoughts to core and explore investing.
Congratulations to the winners of the six (6) (yes, 6!) copies of Preserving Wealth. I had hundreds of entries to go through and draw some lucky winning names. The author will be sending you your books very soon!
Now, a reminder since my personal giveaway is over, check out Cashflows & Portfolios for more copies to win!
As part of our interview with the Preserving Wealth author Jack Lumsden, we asked him this:
…Based on what you shared above Jack, are there any rules of thumb that might apply to asset decumulation? This includes when to drawdown the taxable account, TFSA or RRSP in what order? What about taking CPP or OAS? Any rules of thumb there or client experiences you can speak to?
I liked his answer but I might be a bit biased since that’s how I intend to drawdown my own portfolio in the coming years.
Weekend Reading – Portfolio drawdown options to consider
Depending on when you plan to retire or semi-retire like I might, the tax consequences involved, and much more, you can probably appreciate the drawdown order could be very different between retirees.
Here are some key ideas/sequences to consider:
1. Non-registered (N), RRSPs (R), TFSAs (T) (NRT)
This sequence might work well if you have built up a modest taxable account value by your 50s or 60s and you might have higher income needs and wants in retirement. To fight longevity risk, you can exhaust your non-registered account first, allowing tax-deferred money (RRSP) and tax-free investments (TFSA) to grow and compound away. “NRT” might work well to fight longevity risk, may apply to those retirees with any workplace pensions to draw from, and help those investors who wish to defer Canada Pension Plan (CPP) and/or Old Age Security (OAS) benefits until a maximum age.
More reading: When to take your CPP benefit
2. Non-registered (N), TFSAs (T), RRSPs (R) (NTR)
Also in this sequence, you can consider tapping your taxable account first but reverse the order between TFSAs and RRSPs – keeping RRSP assets “until the end”. The benefit of this approach is you have some long-term income splitting opportunities, while money continues to compound tax-deferred. (If you are the recipient of a pension and are 65 or older, you may split income from your RRSP, RRIF, life annuity, and other qualifying payments.) The challenge however for some retirees is by keeping RRSP/RRIF assets preserved well into their 70s and 80s, these seniors could be subject to OAS clawbacks depending on their income level. Recall OAS is an inflation-protected government benefit that few retirees want clawed back! More on that in bit!
Of course beyond these sequential orders there can be a myriad of drawdown tactics that can be used to balance short-term and long-term tax efficiency needs, optimize retirement income, let alone fulfill any wealth transfer desires:
- RRSPs (R), Non-registered (N), then TFSAs (RNT) – usually done to minimize taxation and to minimize OAS clawbacks given very healthy portfolio values inside RRSP/RRIF.
- Blended withdrawals – some blends of NRT, NTR, or RNT.
- Custom withdrawals – lump sum withdrawals based on tax bracket management in the “go-go” retirement years vs. “slow-go” years which includes some strategic RRSP bulk withdrawals when minimal other income streams are in play.
- And more and more….
Weekend Reading – my portfolio drawdown order?
I’ll probably adjust my order over time but I wrote about my potential portfolio drawdown order here.
Some of the key advantages of my drawdown order is it will put less stress on my personal assets when I am older, it will provide built-in inflation-fighting power, and it will also be very tax-efficient.
How are you deciding on your portfolio drawdown order? Need some help?
As part of my Weekend Reading update, a reminder I can help answer some questions!
Subscribe for free and hit me up with a comment on one of our case studies!
On the site this week, we in fact wrote about this common question when it comes to portfolio drawdown considerations: can you really have too much in your RRSP?
A nice list of stocks from Bob Lai at Tawcan – his top-10 Canadian stocks to own.
(I own every stock in his list but one. Any guess which one that is??)
Great work by Dale Roberts, highlighting the pathetic returns of these mutual funds and helping a reader (Craig) move to lower-cost investing for wealth-building.
It’s always interesting to try and make some sense of the markets – thanks MoneySense.
Via Ben Carlson, what has the stock market taught us since 2010?
Who is the wealthiest generation? Read on to find out.
Another big thanks to Rob Carrick for the recent feature in The Globe and Mail.
The 2021 Canadian Financial Summit is almost here!
As my blog and readership continues on a upward trend (thanks very much to all readers!), I’m now considering investing within my corporation.
In fact, on that subject and more – yours truly is back once again at the 2021 Canadian Financial Summit to share what I know!
If you haven’t attended the summit in the past, well, this is your chance to do so – FREE.
The Canadian Financial Summit is a virtual summit that features over 35 Canadian personal finance experts discussing a wide range of topics geared towards helping you become the best investor you can be!
As I’ve always said on this site, follow my journey and learn how to become “your own advisor” too!
The summit is virtual, free, and it kicks off on September 22nd.
What else can you learn about at the free summit? Read on:
- Learn how to buy back some time with FIRE!
- How much does it cost to travel FOREVER?
- How to take a tax holiday by working outside of Canada
- Want an Unlimited TFSA? Try moving to these countries with territorial taxation
- Are dividend stocks in a bubble?
- The risks of investing in cryptocurrency
- Should I have Bitcoin in my Portfolio?
- Maximize the New Aeroplan and Post-Covid travel plans
- Don’t let FOMO ruin your investment returns
- Maximize Work From Home tax tips in a Post-Covid World
- Will the Canadian Housing bubble finally pop?
- How to setup a corporation, invest within it, and then pay yourself
- The BEST ETFs in Canada
- Why self-made dividends are better than ordinary dividends in every way!
How do you sign up?
Just head on over to the Canadian Financial Summit and sign up for free with my link here.
This way, you’ll be automatically entered to win one of the free Premium All Access Passes they will giving away when the event goes LIVE.
I look forward to hearing about your feedback on the entire summit and my contribution to it!
Finally, outstanding insight and a good reminder:
“There are some people whose confidence outweighs their knowledge, and they’re happy to say things which are wrong. And then there are other people who probably have all the knowledge but keep quiet because they’re scared of saying things.”
— Helen Jenkins, on the problem of communicating scientific uncertainty.
More FREE My Own Advisor content:
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Have a great weekend!