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After 35 years in the same job, Nate is more than ready to retire when he turns 60 next January. Annabelle, who is 52, would like to quit at the same time.
They both work in manufacturing, he on the technical side and she in administration.
Annabelle and Nate plan to sell their house in a small southern Ontario town and move to their summer home on Lake Huron.
“We feel that once we are down to one home, we could easily get by on $35,000 a year after taxes but $40,000 would be more comfortable,” Annabelle writes in an e-mail.
They have savings, investments and defined-contribution pension plans that together with their two properties add up to nearly $1.5-million.
They wonder, is this enough?
They also have a number of questions about their investments. Should they switch their registered retirement savings plans (RRSPs) to registered retirement income funds (RRIFs) as soon as they retire? Should they sell their high-cost mutual funds to buy annuities?
We asked Neil Murphy of Weigh House Investor Services in Toronto to look at Nate and Annabelle’s situation.
What the expert says
From a financial planning perspective, Annabelle and Nate really don’t have any problems, Mr. Murphy says. “They easily have sufficient funds to retire.”
But they do have problems with their investments. Their portfolio is “product-driven” – mainly expensive mutual funds – and “they have no plan to manage their portfolio as a whole.”
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Given the size of their holdings, Nate and Annabelle could consider moving to an independent investment counsellor, Mr. Murphy suggests. Investment counsellors manage money for wealthy people for an annual fee.
Alternatively, they could set up a passive portfolio of exchange-traded funds. He recommends an asset mix of 50-per-cent fixed income and 50-per-cent stocks.
The first step is to sit down with a professional adviser and draw up an investment policy statement, Mr. Murphy says. Without a policy statement, Annabelle and Nate “are making decisions on pieces of the portfolio rather than the portfolio as a whole.”
