I'm 61, married with two grown children. I have no debt and approximately $2-million in financial assets. I want to retire in the next couple of years, if possible, but the income generated from my portfolio is currently just $30,000 a year, before tax. I need at least triple that income to keep my current lifestyle. I am looking for objective and realistic advice. Is there a financial planning company that does not just want to sell something or get one to open an account?
First, a few general comments.
If you're generating $30,000 in income from a $2-million portfolio, that's a yield of just 1.5 per cent. With many high-quality dividend stocks and dividend exchange-traded funds (ETFs) currently yielding 3 to 5 per cent (or more in some cases), you should be able to increase your income fairly easily without eating into your capital. However, if you currently have a large chunk of your assets in low-yielding bonds or guaranteed investment certificates, you'll have to increase your equity exposure and accept more risk.
You made no mention of whether you expect to collect a company or government pension, but these would supplement the income from your portfolio. If you're eligible for the Canada Pension Plan and Old Age Security, you can start collecting benefits as early as 60 and 65 years of age, respectively, although you'll receive more per month if you wait longer.
Also keep in mind that, if your investment and pension income doesn't cover all of your expenses, it's perfectly acceptable to spend some of your capital in retirement. Based on the limited information you have provided, it's possible that you would benefit from having a comprehensive financial plan prepared that details your expected sources of future income, expenses and taxes. You do not have to open an account or buy any products; you can pay a financial planner a one-time fee to perform such a service.
Fee-only financial planners typically charge by the hour or by the project. The Financial Planning Standards Council and Institute of Advanced Financial Planners both offer a "find a planner" tool on their websites, and MoneySense magazine maintains a directory of fee-only planners. You can also do a Google search for fee-only planners in your area. I recommend that you interview two or three planners and also get references from other clients.
It's not clear if you are managing your own investments, but given the size of your assets, you might also wish to look into hiring a portfolio management firm that can build and manage a custom portfolio to meet your income goals and risk tolerance. Portfolio managers typically charge a fee of 1 to 2 per cent of your assets, but you can often negotiate a lower fee if you have a large portfolio. The Portfolio Management Association of Canada has more information, including tips on selecting a portfolio manager, on its website.
If you are comfortable managing your own investments, you can cut your costs even further. Competition among ETFs has driven expenses down sharply, with several broad Canadian index ETFs charging less than 0.1 per cent annually. ETFs that specialize in dividend stocks generally charge more, with management expense ratios typically ranging from 0.3 to 0.7 per cent.
I am planning to sell some of my Canadian Utilities stock, but I want to capture the 29.5-cent dividend payable on Sept. 1. The "record date" is Aug. 11, which is a Tuesday. Could I sell my CU as early as Thursday, Aug. 6 and still get the dividend?
In order to receive the dividend payable on Sept. 1, you must be a shareholder of record on Aug. 11. It takes three business days for a trade to settle, so if you sell on Aug. 6 your trade will settle on Aug. 11 (Aug. 8 and 9 being a weekend). You would, therefore, not be a shareholder on the record date and would not be entitled to the dividend.
To receive the dividend, you would have to sell your shares on or after Aug. 7. This is what's known as the ex-dividend date, and it falls two business days before the record date. If you sell on or after the ex-dividend date, you will still receive the dividend; the person who buys on or after the ex-dividend date will not receive the dividend.
It's important to understand, however, that you aren't really gaining anything by timing your sales or purchases to receive the next dividend. The market is efficient; all else being equal, the price of the shares will fall on the ex-dividend date by the amount of the dividend to reflect the fact that buyers will not be entitled to the payment. So, if you wait until Aug. 7 to sell, you'll get the dividend, but you may well receive a lower price for your shares – again, all else being equal. Of course, lots of other factors can affect a stock's price on any given day.