Q&A: Aiming for $1,000 a month

Question: I am 60 years old and newly retired. My CPP is $5,000
per year. I have $173,500 in an RRSP, $125,500 in RBC Balanced Fund and $48,000
in GICs. When I reach 65 I will have approximately $5,000 per year from my U.K.
pension. I have no debt. I would like to get an income of $1,000 per month after
tax. I don’t mind depleting my principal somewhat to achieve this. What should
I do? – D.A.

Gordon Pape’s answer: You shouldn’t have any problem
at all achieving that goal. In fact, you should be able to do much better. No
matter where you live in Canada, you can generate after-tax income of $12,000+
with as little as $13,250 in taxable income. (Based on 2006 tax rates and using
Ernst & Young’s Tax Calculator.)

You already have $5,000 from CPP, so all you need is $8,250 from your RRSP.
That works out to a return of 4.76 per cent on the money currently in the plan.

Your GICs are paying less than that but the RBC Balanced Fund shows an average
annual return of 6.6 per cent over the past decade so between the two you should be
able to meet that goal. For greater certainty, you might want to consider cashing
in the GICs when they mature and moving the money somewhere that offers a higher
yield. For example, if you wanted a very conservative option from RBC, look
at their Bond Fund which has a 10-year average annual return of 4.8 per cent. That’s
probably at least a point and a half more than the GIC is producing.

This way, your $5,000 from your pension plan plus Old Age Security will all
be gravy when you reach age 65, and you will not have to encroach on capital.

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