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It’s been a while since we checked the inbox so let’s see what questions are on readers’ minds.

Advisor wants to move some assets overseas

Q - I am retired with a large cash cushion in ISA (individual savings account), GICs, and high interest savings accounts - enough to last us five years. The rest of our assets are 100 per cent equities, and we earn a decent dividend income from these, not to mention capital appreciation as we are long-term holders and not prone to sell in a downturn.

My question: Our for-fee advisor (who does not manage our portfolio) wants us to shift from mostly U.S. and Canadian stocks to 45 per cent international and emerging market stocks. We are not comfortable with that. Our current exposure is around 10 per cent and seems more than sufficient.

We are not seeking stellar, swing for the fences returns – just steady eddy returns. Our portfolio has done that.

The U.S. market has done much better on a compounded after inflation basis than EAFE or EM, so why shift to those markets for one of their possibly brief outperformance periods over the S&P 500 only to revert soon thereafter to returns that lag the TSX or S&P 500? Many thanks. – Peter H.

A – You answered your own question when you wrote: “We are not comfortable with that.” I would never advise anyone to do something they weren’t comfortable with, even if I thought it was a world-beating strategy. Being able to sleep well at night far outweighs the few extra dollars you might earn.

That said, your advisor isn’t talking complete nonsense when it comes to the markets he recommends. The iShares MSCI EAFE Index ETF (CAD-Hedged), which trades under the symbol XIN, has gained 17.25 per cent this year (as of Dec. 15). The 10-year average annual compound rate of return to Nov. 30 is 6.61 per cent.

The iShares MSCI Emerging Markets Index ETF (XEM-T) is less impressive, with a gain of 5.7 per cent year-to-date. The 10-year average is only 3.55 per cent.

There is speculation that both could do better in 2024. But that’s what it is – speculation.

Meantime, the U.S. market has done better, both short and long term. The iShares Core S&P 500 Index ETF (XSP-T) has gained 23.25 per cent this year and shows a 10-year average annual compound rate of return of 10.45 per cent to Nov. 30,

Canada hasn’t fared as well. The iShares Core S&P/TSX Capped Composite Index ETF (XIC-T) is ahead 10.55 per cent this year and has gained 7.39 per cent on average over the last decade. But it has done better than EAFE over the long haul.

You currently have 10 per cent exposure to international stocks. If you are comfortable moving 5 per cent of your Canadian holdings over to EAFE, your asset allocation would be better. But if even a small move like that makes you nervous, stay where you are. – G.P.

Death of a spouse

Q - If a spouse is contributing a monthly sum to a TFSA and passes away, can the surviving spouse contribute to plan for the remainder of the year? What happens if the passing spouse has contributed the yearly maximum of $6,500 prior to their death? – Pete M.

A - If the surviving spouse has been designated as the “successor holder” of the TFSA, then the plan continues uninterrupted. All contributions to date stand, but any unused contribution room expires at the time of death. Profits continue to be tax-sheltered.

If the surviving spouse is designated as a beneficiary, instead of a successor holder, the plan is deemed to be terminated. The survivor will inherit the assets tax free, but any gains made after death will be subject to tax.

In neither situation can the survivor continue contributing to the plan. – G.P.

What do the banks know?

Q - The banks are offering us high interest rates, 5 per cent plus in some cases. They obviously make more somewhere in the market.

What is it they know that we don’t? – Adam P.

A – I don’t think there are any secrets. Banks lend the money at a higher rate and profit from the spread. For example, Royal Bank of Canada recently posted a two-year fixed mortgage rate for 7.09 per cent. At the same time, they offered a two-year non-redeemable GIC for 5.3 per cent. That’s a spread of 1.79 percentage points. It’s not hard to make money with those numbers. – G.P.

Paying CPP after retirement

Q - I retired in June of 2021 from SAIT Polytechnic and started collecting CPP in August of 2022 after turning 62 in July. I’ve since returned to work with SAIT on a 10-month contract. As a result, I’m contributing to CPP again, approximately $510 per month. Does this eventually top up my CPP a bit? Or should I not be contributing to CPP? – Tom B.

A – It used to be that when you retired, that was it for CPP contributions. That changed in 2012 when the post-retirement benefit (PRB) was launched.

The plan requires that people aged 60 to 65 who work while receiving a CPP retirement pension continue to make contributions, which employers must match. Those aged 65 to 70 can choose whether or not they want to contribute.

The calculation of the benefit is complicated. It’s based on the amount of your earnings and contributions the previous year and your age as of Jan. 1 of the year the post-retirement benefit starts. Service Canada says the maximum PRB amount is equal to 2.5 per cent (1/40th) of the maximum CPP retirement pension. This is because the post-retirement benefit is generated by a single year’s contributions, rather than all the contributions made from age 18 until a person started collecting the pension.

As an illustration, the Service Canada website shows a maximum PRB for a 65-year-old to be $40.25 in 2023.

You can get an estimate of your Post-Retirement Benefit amount by using the Canadian Retirement Income Calculator. – G.P.

What’s in store for this T-Bill fund?

Q – Several months ago, based on the suggestion you gave, I decided to invest in UBIL.U-T. I decided to do that with the hope that I could preserve the capital if and when the market went down. So far, I’ve lost very little. But I am concerned about the future given the turbulence in the bond market. What are your thoughts about UBIL.U in the near- and long-term future given current market conditions? Thanks. – Robert P.

AUBIL.U is the trading symbol for Horizons 0-3 Month US T-Bill ETF. It invests in short-term U.S. Treasury Bills, one of the safest forms of investments in the world. However, that doesn’t mean it’s completely risk-free. Nothing is.

The units trade on the TSX within a tight range that so far this year has varied from a high of $50.31 to a low of $49.96. Based on those numbers, there is a potential for a fractional capital loss, depending on the time of purchase. But many investors don’t seem to care about that. They look at the current yield (7.7 per cent, based on the November distribution of $0.31987 per unit), and that’s all they need to know.

But there are some reasons to be wary. For starters, the monthly payments have varied considerably since the fund started trading last spring, ranging from a high of over $0.40 to a low of $0.27. This makes it problematic to project yields based on a single month’s distributions, especially when we don’t even have a full year with which to work.

Also, the fund has a short history. It’s well-suited for the current interest rate climate, but what will happen when rates start to fall, and the fund’s yield declines? Will investors rush to dump their units? If so, what will be the effect on the market price?

We have no answers to those questions. We do know that there is little appetite for more rate hikes and that an easing by the central banks is likely in 2024. The Federal Reserve Board recently signaled the possibility of three cuts in the coming year. When that happens, this and other comparable funds will be put to the test. – G.P.

If you have a money question you’d like to ask me, send it to and write Globe Question in the subject line. I can’t guarantee a personal answer, but I’ll reply to as many questions as possible in this space.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.

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