In December we introduced you to Nancy Woods, an associate portfolio manager and investment advisor with RBC Dominion Securities Inc.,we invited you to send us questions for Nancy at: [email protected]
Below are some of the most representative and informative questions and answers we received.
Q: My wife and I are 72 years old ,we have been taking the minimum withdrawals from our RIFFS, since age 69. Our RRSPs and our RIFFs are in segregated funds due to terminate this year and revert to 1999 values. I feel we should revise our RIFFs to more of a cash holdings, such as Treasury bills etc., when the Segregated funds are terminated. Can you advise us on which cash type of holdings are best to put into our RIFFs, given today’s market? Thank you!
A: Your primary focus should be on your asset mix. The rule of thumb that I use is 100 less your age for your equity exposure. This is only a guideline and can be adjusted up or down according to your risk tolerance. The idea is that you have an increasing level of security with more fixed income products as you age.
In your case, keep in mind that the goal for your portfolio mix would be approximately 25% equity and 75% fixed income. Most importantly, the fixed income portion will provide you with cash flow to help meet your mandatory RIFF withdrawals in cash. To be investing in the equity market at these low levels can actually be a future benefit for you. Look at Exchange Traded Funds (ETFs) or bluechip stocks paying solid and reasonable dividends. This adds to your cash flow. Having some equity exposure will help your portfolio grow and help with inflation.
Q: Dear Nancy, I am 73 years of age and no longer interested in mutual funds because of the financial “hit” I have taken along with so many others. I have converted most of my registered and unregistered investments to straight savings, namely GIC;s with various financial institutions. Am I making a mistake in placing all my saving in GIC’s and if so, what other conservative investment vehicles should I be looking at? I also have a regular pension income. I am aware of the upcoming $5000 tax-free saving account opportunity. Thank-you.
A: Nothing wrong with you investing solely in GICs, however, please be sure that you do not have more than $90-95,000 with any single institution unless you are confident about their financial position. CDIC covers $100,000 per financial institution per account registration. This includes any accrued interest. That is why I suggest only $90,000 because if you invest the full $100,000 and need to file a claim you will not get the unpaid accrued interest. You can always look at corporate and government issued bonds as alternatives. You could also consider a bond fund or bond exchange traded fund (ETF – see ishares.ca). With a brokerage firm, the Canadian Investor’s Protection Fund (CIPF) covers your assets up to $500,000.
Q: This year my spouse and I will have a retirement income from our company pension of approx. $38,000 per year. We both will both have defined benefit pensions which will be indexed every year. We do have some investments, but as with most, they have diminished somewhat this past year. We own our condo, and have no debts. We would like to retire in 2009.