One year ago, I created a portfolio for my Income Investor newsletter designed for registered retirement income funds (RRIFs). The objective was two-fold: to protect capital and to provide higher cash flow than investors could get from conservative securities like bonds and GICs.
At the time, I commented that during a period of low interest rates, it's impossible to set up a low-risk RRIF that would produce enough income to meet Ottawa's minimum withdrawal requirements, and that continues to be true today. For example, a 71-year-old must take out 7.38 per cent of the value of the plan on Jan. 1 of that year. By age 80, that rises to 8.75 per cent. It would require a great deal of risk to generate that much cash flow, which is inconsistent with the need to preserve capital.