Retiring soon – what strategy?

Question: I am 58 years old have $700,000 of which $200,000 is in RRSP GICs, $350,000 in regular GICs, $100,000 in government bonds, and $50,000 in gas shares.  All are coming due shortly.  I am intending to retire at 60.  How would you suggest I invest the $700,000 dollars as my retirement?  I own my own home clear of title and have no other income. – M.L.

Gordon Pape answers: You will want to employ different strategies for the RRSP/RRIF portion and for the non-registered securities. In both cases, however, you should adopt a conservative approach since this is the only source of retirement income you will have, apart from CPP and OAS.

For the RRSP, you do not need to convert the assets into a RRIF immediately, even though you will be retiring. You can retain the RRSP until age 69 and we recommend you do that.  Once you convert to a RRIF, you must make regular annual withdrawals. This is not necessary in an RRSP, but the money is there for you if required. So you have more flexibility.

I suggest you invest part of the RRSP, say 50%, in securities with modest growth potential and low risk. These could include your gas compa shares and units in conservatively-managed mutual funds. See a financial advisor for specific recommendations. The balance of the portfolio can be held in government bonds and/or GICs.

The non-registered investment portfolio should be structured so as to provide tax-advantaged cash flow with minimal risk. GICs are not recommended here because the interest income they pay is taxed at your regular rate. Consider moving to a portfolio that includes preferred shares and dividend income funds to get the benefit of the dividend tax credit. You may want to also consider some low-risk royalty income trusts and/or REITs, which can also provide tax-advantaged cash flow. Again, ask a financial advisor for specific recommendations.

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