With the ever-declining number of defined benefit pension plans in North America, the ultimate goal for most investors is a well funded retirement. The idea that a lifetime of disciplined saving and investing leads to a comfortable retirement is generally accepted, and the accumulation of a significant nest-egg should be viewed as an achievement. However, the goal of a fully funded retirement won’t have been surely achieved until death. In an ideal world, each investor would use their known annual rate of return and life expectancy to draw down their pool of retirement assets to zero (or some ..read more

Every now and then we get a question from a client that results in some head scratching. Recently we were asked about the use of a joint prescribed annuity as a tool in an investment portfolio, simple enough. The complexity came from an American spouse. The Canadian husband was the annuitant, and while he is alive the income from the annuity will be taxed in his Canadian hands. Upon his death it will be taxable in his wife’s American hands. Both of them are Canadian residents living in Canada. The benefit of a prescribed annuity is that its cash flows are taxed as a level blend of return of c ..read more

For most Canadians, the Canadian Pension Plan or Quebec Pension Plan is the only guaranteed pension they’re going to get. So, a critical decision for your financial health in retirement is what age you opt to take your government pension. Once you start taking it, you can’t change your mind. So, you should be sure to understand your options and choose carefully. The standard age to take CPP or QPP is 65. However, you can take your pension as early as 60 and as late as 70. If you choose to take your pension early, you will be penalized .6% for every month you collect it ahead of your sixty-fift ..read more

Globe and Mail columnist Andrew Coyne wrote a pretty tough piece recently on the lack-lustre performance and high expenses of the Canada Pension Plan Investment Board. The CPPIB, which manages almost $500 billion in Canada Pension Plan assets, reported its “strongest ever” net return of 20.4% for the year ending March 31, 2021. As Coyne notes, the return sounds good until you dig into the CPPIB annual report. There, you discover that a basket of indexes used by the CPPIB to benchmark itself returned 30.4% for the year. In pursuing its active investment management strategies, the CPPIB ran up o ..read more

The combination of variable withdrawals and dynamic equity allocation leads to a surprising gain in the total income from a retirement portfolio. Good news for income challenged retirees. Prior generations of retirees have been blessed with a combination of defined benefit pension plans and strong investment returns from their personal retirement assets. Consequently, one third of retirees recently surveyed have seen an increase in retirement assets (Blackrock, 2021) and avoided the risks associated with managing a shrinking retirement nest egg. This is expected to change for current and futur ..read more

David M. Blanchett, PhD, CFA, CFP® is head of retirement research for Morningstar Investment Management LLC. In this role, he helps develop and maintain methodologies relating to wealth forecasting, general financial planning, automated investment selection, and portfolio assignment for Morningstar Investment Management LLC. Prior to joining Morningstar, he was the Director of Consulting and Investment Research for the Retirement Plan Consulting Group at Unified Trust Company. He has published over 100 papers in a variety of industry and academic journals. His research has received best pap ..read more

At a time when the financial community provided inconsistent retirement advice, the 4% withdrawal rate was a data-backed strategy that revolutionized retirement planning. Today we speak with William Bengen, a literal rocket scientist and the influential personal advisor who popularised the 4% withdrawal rate, A.K.A, the 4% rule. After exploring what the 4% rule entails and the impact that it had on the financial industry, we talk about updates that William has made to his theory since first publishing about it in 1994. We then unpack more of the rule, talking about its conservative nature, wh ..read more

Low interest rates are bad for savers. Saving more may not be the best or the only response. Joe is in a quandary. He had figured that he would buy a new truck in 3 years. He hadn’t been paying attention to the news much and assumed his $40,000 savings would grow by 3% annually so he estimated he would have approximately $44,000 to spend. In fact, given current interest rates, his interest rate on his savings is close to zero. Joe could respond by saving more money and reducing his current spending elsewhere to ensure he still has $44,000 to spend. Alternatively, he could note that there is no ..read more

Polls consistently indicate Canadians feel a high level of pride in their country. This one, for example, found 90% of respondents are proud to be Canadian compared to 74% of Americans who expressed the same sentiment toward their country. One area of excellence that has likely escaped the attention of many Canadians is our public pension plans. Despite being one of Canada’s least sexy attributes, the strength of our pension funds is one the most important because it helps to ensure the financial security of all Canadians. The high quality of Canada’s pension funds hasn’t escaped the attention ..read more

Stocks have fallen approximately 25% since the start of the year. Does this mean my retirement plans and other financial goals are in ruins? When we are immersed in a world where the doubling rate of a virus infection is measured in a few days, it is tempting to be consumed only by the here and now. But whether you achieve a future goal depends on the value of your investments now and future expected returns. Certainly, if you needed to sell your investments this week and buy a retirement annuity then your income expectations would be lower. For everyone else, a longer perspective is warranted ..read more