September 1, 2019 | Time

Dave and Sue have done lots right. Selling the house was one of them. Becoming addicted to this pathetic blog was another. But now, they’ve a hit a wall. The worst kind. Psychological. Let’s try and boost them over.

“It’s a wonderful blog,” he says, doing well with the MSU. “I only wish I could have been aware of it many years ago. Anyhow here is our story….

I am going to be 73 yrs old in a couple of months and my sweet wife of 43 yrs is 67 yrs old. We had been purchasing homes all our married life, three years ago we sold our home on Vancouver Island and decided to walk away from the real estate table, we had played our last hand. We have rented a town home and pay $1500 a month since then. Have no desire to ever purchase again. Which is been largely due to your advice I have read on your blog.

We have a combined income of pensions of $53,000 per year, no debts.  Investments of $100,000 in TFSA account (GIC 2.7% ) which has matured this week. Our Credit Union have offered us 2.7 % for a further 12 months non-redeemable. I will await your reply. We have a $305,000 GIC that maturing which has been @ 2.75% and $20,000 US funds 3% GIC 12 month that matures in November.

I know your opinion of the GIC but as seniors we do not have time on our side and not a lot of investment knowledge either. I do not have any trust in the so called personal investment people in the banks, all they are after is their next commission cheque.

Please could you advise us on what our best course of action should be. We would like to be in a position that we could have an income ($400-$500 per month ) to have a cushion for extra things that we like to do. My wife has $50,000 room that she can use in RRSP. Many thanks for what you do to set the young people on the right chartered course for their life’s journey on your blog. I know if I could turn the clock back it would have been rent and invest.

Yeah, maybe, Dave. But this is now. Stop looking behind you. There’s much time left. Seventy-four may sound to a moister like you’re crawling into the crypt, but there’s a damn good chance you’ll still be reading this blog in 15 years (God help me…), so let’s get on a more sustainable path.

First the old stuff, though. You and Sue need wills, up to date, reviewed every year. Pick a date – like your anniversary – then you can have a romantic bottle of Sea Star Pinot Noir and review your final testament. What a fun night. And don’t make your kids executors.

Second, POAs. The powers of attorney for financial stuff and continuing care are essential, giving your spouse the ability to make decisions if you lose your mind reading the comments section. Your registered accounts need to name each other as beneficiaries. And the TFSAs should spell out that you are each ‘successor holders’. Finally, if you have a joint non-registered account (we’ll get to that in a minute) then should one of you pass all of the funds become the property of the other person – no probate, no deductions, no delay. This is an essential part of estate planning.

Now, that’s out of the way, so let’s discuss what you’re doing with your $450,000 in liquid net worth – which is far too little. [email protected] be engaging and trustworthy, plus she is close by and you can have a visit, but this GIC things is not doing you any favours.

First, a return of 2.7% is just not enough when official inflation is 2%, yet everything seems to go up 10% annually. Worse, most of this money is taxable in your hands – and interest is treated by the CRA just the same as earned income. Not cool. Third, the GICs give you no income. They’re just worth a bit more when they mature, which is money you can only access at the end of the term. Fourth, you may have to pay tax on interest you have yet to receive.

It sounds like your combined income of $53,000 a year come from CPP and OAS and a little bit of pension. And it’s not enough. Clearly. Rent alone is $18,000, so with food, gas, a vehicle, insurance and clothing there’s precious little left to whoop it up with. Thus you are correct to ask for some advice on investing for a better return. (And forget putting money in Sue’s RRSP – no refund benefit and you’ll make the money taxable when withdrawn.)

My answer is consistent and simple – get a liquid portfolio of low-cost ETFs (in a joint non-reg account as well as the TFSAs) that’s balanced (safe assets and growth assets) and very diversified (US, Canada and international exposure as well as some REITs). If market fluctuations worry you, adopt a 50/50 approach – with half in safer assets (like government, corporate and provincial bonds) and the other 50% in equity-based funds, plus the real estate investment trusts. This portfolio has less volatility and has kicked out about 5% annually over the last decade (in which we had lots of volatility).

So on $450,000 you could skim off at least $1,500 a month in consistent revenue and still maintain the principal for your estate or unforeseen health issues (happens). That’s enough to totally pay your rent – a 34% increase in annual income. And because a good hunk of this would be in dividend or capital gains, the tax hit would be minimal, given your incomes.

Now [email protected] is probably not up to this task, so it means finding a fee-based advisor to put it together. But look at the advantages – capital preservation, a big bump in income, better tax efficiency, monthly cash flow, increased endorphins and far more Pinot Noir in your future.

Getting old sucks. You don’t need to.

Garth Turner September 1st, 2019

Posted In: The Greater Fool

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