Joe from Nanoose Bay dropped by last week to update me on his retirement income plan and to let me know he’s on track.
A year ago I wrote about Joe and his retirement income plan suitable for a 65- year-old senior with a conservative investment focus.
Joe has split his investments up five ways.
First, he took 30 per cent and invested into one and five year GICs. The barbell approach as it is referred to, is to invest half into short term investments and half into long term investments. This takes advantage of averaging the interest rates.
The next 40 per cent was invested into fixed income. This consisted of a portfolio of bonds and bond funds including government bonds, real return bonds, mortgages and high yield bonds. Joe liked the consistency of his fixed income portfolio and safety of GICs since he has about 70 per cent overall invested into conservative and less choppy (volatile) investments.
The next 15 per cent was into income trust funds. Funds that invest into income generating investments to give a monthly income. These consist of oil and gas, resource trusts, real estate and business trusts. Joe likes the fact that the potential income is higher than GIC rates but holds an element of risk. They can also be less taxing than interest income and the strong oil and gas price and rise in real estate has helped offset inflation.
The final 15 per cent was also to produce income by investing into dividend income funds. These are stock funds that invest in strong dividend paying companies. The dividend payout also gives Joe additional monthly income.
Each section of his portfolio is designed to payout income on a monthly or quarterly basis. Joe wants to retain most of his capital and occasionally dipping into principal to go on his expensive holidays.
In five years, Joe wants to eventually decrease the 30 per cent equity down to 20 per cent and hopefully spend more on his travels.
He is comfortable with the diversification into five asset areas. That way he can see where his income will be generated from, the specific dollar amounts of cash flow coming in, and what he can typically expect from each asset class.
Now Joe can spend more time planning his next big trip accordingly.
Prepared by: Grant W. Hicks RDB, C.I.M., FCSI, Investment funds advisor with Manulife Securities Investment Services Inc. in Parksville / Qualicum Beach. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. The views and opinions contained in this article are those of Grant W. Hicks and not Manulife Securities Investment Services Inc. Comments or questions Grant can be reached at 954-0247 or 1-866-954-0247. E-mail: grant@ghicks.com. Web: www.ghicks.com. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
