What 2 Passive Retirement Portfolios May Look Like

Many Canadians would rather do something else than spend a lot of time managing their investment portfolios in retirement . If that’s you, here are two types of passive retirement portfolios for your reference. A stock and bond ETF portfolio for passive investing

Canadian Couch Potato provides two model portfolios with stocks and bonds exposure for passive investing. The idea is to buy two exchange-traded funds (ETFs), each providing wide exposure to either stock ETFs or bond ETFs. The portfolio is so simple with two ETFs that you can easily tweak or re-balance the components of your portfolio. Most of the time, you’re sitting on your investments. You only need to make a move if you’re re-balancing the portfolio.

The traditional investment portfolio has 60% weight in stocks and 40% in bonds. However, as investors near retirement, they might want to reduce their risk by reducing their stock exposure and consequently increasing their bond exposure.

Let’s say you have a $1,000,000 investment portfolio, and it was 60% ($600,000) in iShares All-Equity ETF Portfolio (TSX:XEQT) and 40% ($400,000) in iShares Core Canadian Universe Bond Index ETF (TSX:XBB). When you’re near retirement, you can transition $400,000 out of the equity ETF to switch to the bond ETF. The result would be a 20% exposure to the equity ETF and 80% exposure to the bond ETF.

In real application, it would be more complicated than that. For example, you could have multiple accounts , like RRSPs/RRIFs, TFSAs, and taxable accounts. Additionally, you’d need to account for the withdrawal or drawdown rate. It’d be smart for retirees to have one to three years of living expenses in cash and cash-like investments, such as savings accounts and GICs, to allow their long-term investments to ride through financial market volatility, including market crashes. Building a well-designed dividend portfolio […]

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