Is our RRSP strategy okay?

Question: We now have investments of approximately $550,000 made up of 16 stocks, 4 mutual funds, and cashable GICs. Home, cars and personal would be in the vicinity of $300,000. Low company pension of $15,000 per year and OAS of $840 per month are both used for monthly expenditures.CPP was taken at age 60 and split. We are currently collecting $682 per month and this has been saved. We have no debt and are saving $1,000 per month.

We are splitting income of about $50,000 at approximately 60 – 40 and have a tax accountant. I pay very little income tax as almost half of my income is derived from dividend paying stocks. I do hold growth stocks as well.

Looking at our overall financial picture, is it ok for us to leave our RRSPs, a modest amount of approximately $120,000 as of now, in compounding GICs rolling over every 5 five years with staggered maturities? We will not access any of these funds until the mandatory dates for us which is December, 2004, the year we turn 70 years of age. Hopefully, if those funds are not needed, or only partially needed, I will re-invest. How difficult would it be to place each maturing GIC in another investment, which may incurwitching fees, as well as having so many on-going decisions for me to make if you answer that I should not stay as we currently are with our RRSP GICs? – J.K.


This question is an example of why we do not encourage people to send us their financial history and ask for our guidance. No matter how much information you provide (and this question was edited down considerably) there are always some key facts missing which make a definitive answer impossible. For that reason, we encourage everyone to discuss their specific portfolio situation with a professional financial advisor.

In this case, J.K. hasn’t told us how much income she believes they will require down the road. They are currently saving $1,000 a month, so from that we can infer that they are already living very comfortably on the income they have. But we know nothing about their future needs or desires (a Sunbelt condo, perhaps?) or about their estate planning goals.

Based on the information she has provided, there appears to be no need to move away from the conservative GIC approach in the RRSP. If you don’t need to take more risk at this stage in your life, why should you do so? Allow the interest to continue to compound tax-sheltered within the plan, even after it is converted to a RRIF, and don’t worry about it. The RRIF income will be icing on the cake since they already appear to have enough to live on very nicely. Think of it as inflation protection.

One technical point. J.K. says: “We will not access any of these funds until the mandatory dates for us which is December, 2004, the year we turn 70 years of age.” We assume that she realizes she will have to convert to a RRIF a year earlier, when they both turn 69. However, the first withdrawals from the RRIF don’t have to be made until the next calendar year, which is why she refers to age 70. It’s an important distinction. – G.P.