Seeking input on elderly relatives portfolio

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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Koogie
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Seeking input on elderly relatives portfolio

Post by Koogie »

Hi everyone.

I am seeking your input on how best I can begin to help an 84 year old relative. We talk occasionally about investing and at Easter I was approached to look at her portfolio as she didn't understand the statements she was receiving from her banks. She currently runs a small business from her home and that has become to much for her physically. She is seeking to replace that income by improving her investments.

And boy how they could be improved. She has her tax sheltered accounts at BNS and most of her Non Reg at CIBC. BNS isn't doing to badly for her in my opinion (given that they are selling her just their mutual funds and GICs) but CIBC has taken her for a ride (including selling her a large market linked GIC and a crappy-ish mutual fund).

Below are the salient details in the usual format. It is by no means a large portfolio but she is living relatively comfortably on her low income and at this point in time, I am looking at making baby steps (mostly to replace the small business income) and making larger changes much later on as locked in funds mature. I'll detail what I think should be my first steps at the bottom.

I appreciate any and all input. Especially with the RRIFs, as I don't know to much about them.

====================================
Emergency funds: $6700 in chequing account. Equivalent to 3 months.
Debt: debt free
Marital Status: widowed.
Tax Rate: 5% bracket
Provincial Residence: Ontario
Age (a range would suffice): 84
Desired Asset Allocation: 25% equity / 75% bonds/fixed income
Desired Stock Allocation outside Canada: 10%
Annual Income: $25,354 consisting of:
CPP ($9660) OAS ($7117) UK Pension ($2000) RRIF Withdrawal ($3577) Business income ($3000)

Total Portfolio: $225K

Taxable - 56% of portfolio
44% cash/cash equivalents
1.0 yr CIBC GIC - 0.55% - $6949 - mature feb. 2018
3.0 yr CIBC GIC - 0.25% - $18000 - mature may 2018 *market linked
3.0 yr BNS GIC - 2.0% - $8215 - mature april 2019
CIBC eSavings - 0.10% - $20392
CIBC chequing - 0.00% - $6723
14% Scotia Select Income (BNS338) MER 1.93% (dripped)
42% CIBC Managed Income (CIB830) MER 1.80% (dripped)

Tax-Free Savings Account - 24% of portfolio
100% Scotia Select Income (BNS338) MER 1.93% (dripped)

RRIF - 20% of portfolio
52% cash/cash equivalents
2.5 yr BNS GIC - 1.10% - $1665 - mature feb. 2018
3.0 yr BNS GIC - 1.70% - $11000 - mature aug 2019
5.0 yr BNS GIC - 1.87% - $11149 - mature jly 2021
29% Scotia Selected Balanced Income (BNS340) MER 1.88% (dripped)
19% Scotia Partners Balanced Income (BNS346) MER 2.13% (dripped)

Pensions
CPP - $9660 annual
OAS - $7117 annual
UK Pension - $2000 annual

Contributions
- new net contributions not applicable. In withdrawal mode.
- TFSA will be funded from maturing NonReg investments.

Fixed Assets
- principal residence - +/- $400k. mortgage free.
- building lot - +/- $60k.

=======================

I believe the first steps I will take include:

- it looks to me like she missed one year of TFSA contributions. I will get her contribution history and fund the shortfall out of the CIBC savings account.
- I will try to get the details of the CIBC market linked GIC and see if it is any way redeemable or breakable.
- I will take the rest of the CIBC savings account funds and some from the chequing and buy a $25K higher yielding third party CDIC backed GIC (preferably annual pay)
- I will stop the TFSA drip and have those funds paid out to her
- I will stop the drip on the CIBC non reg mutual fund and have those funds paid out to her
- I will stop the drip on the BNS non reg mutual fund and have those funds paid out to her
- I think the total of the new GIC funds and the funds freed from Drips will equal her small business income, allowing her to stop it.

Questions
1. Generally, Market Linked GICs are non redeemable ?
2. Funds were all listed as No Load. Free to liquidate ?
3. How is BNS creating the RRIF minimum withdrawals that are required ?
Are they liquidating mutual fund units ?
4. I don't think there is much MER savings (total $$ amounts) to be hand in liquidating the
current BNS holdings and buying any other balanced funds ?
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Re: Seeking input on elderly relatives portfolio

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One more question. Does she think she will be in her home long term, i.e 5+ years, or do you think she will move to an independent facility (apartment) sometime soon? If her home, is it freehold? strata? Maintenace/repair condition? These are all major factors with respect to forecasting future expenses and thus cash flow needs. As for my responses to your points:

1. Market linked GICs - probably not, but if so, likely just principal back.
2. All bank mutual funds should be free to liquidate.
3. Have to ask BNS on the RRIF, but I suspect they'd take whatever free cash exists, and maybe a maturing GIC, or sell off part of a GIC, or sell MF units to fund the RRIF...Which one I do not know
4. Short of transferring 3 accounts (RRIF, TFSA, non-reg) to a discount brokerage, there is not likely much one can do to reduce MERs, albeit why she doesn't just have one lower cost BNS mutual fund in her RRIF is a mystery to me.

- I agree with shutting off the DRIPs/re-investments. This should have been a no-brainer already. The distributions could help fund RRIF withdrawls.
- Unless there is some specific reason not too.... convince her to sell the building lot. It is dead money IMO.
- Scotia and maybe CIBC have some high(er) interest savings accounts, with some restrictions such as funds are not accessed near term. Look into them. Seems to me Scotia has a Momentum savings account with over 1% interest
- As for higher rate GICs, do you propose to seek out one of the online banks? If so, whill she be able to manage it herself?
- I agree with about 25% equity, e.g. 110-age for equity. We had my 90+ yr old mother in 15% equity which I never had any intention of decreasing below that.

Something else to think about. The plan should be to consolidate and simplify. Does she manage her own accounts now? Does she have a POA? Her non-reg should maybe be only a GIC ladder, one mutual fund, and one higher interest savings account. Her RRIF should be similar, only one mutual fund and a GIC ladder.
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Re: Seeking input on elderly relatives portfolio

Post by OhGreatGuru »

I'm not sure equity needs to be as low as 25%, considering 75% of her current income is from government pensions.
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Re: Seeking input on elderly relatives portfolio

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AltaRed wrote: 18 Apr 2017 18:52 One more question. Does she think she will be in her home long term, i.e 5+ years, or do you think she will move to an independent facility (apartment) sometime soon? If her home, is it freehold? strata? Maintenace/repair condition? These are all major factors with respect to forecasting future expenses and thus cash flow needs.
Thanks for your feedback. I would forecast that barring a health calamity, she is likely to stay in her own freehold SFH for 5+ years. The last time I was there it seemed in very good repair with most major systems having been upgraded in the recent past. She is in a fairly LCOL small town.
AltaRed wrote: 18 Apr 2017 18:523. Have to ask BNS on the RRIF, but I suspect they'd take whatever free cash exists, and maybe a maturing GIC, or sell off part of a GIC, or sell MF units to fund the RRIF...Which one I do not know.
Nor do I. I would suspect they are unlikely to be liquidating GICs so suspected they probably sell off MF units as required (they seem to do two payouts a year into her hands. Is that normal for a RRIF ?) She is very amenable to having me go to the banks with her, so I am likely going to take a day off work and try and hit BNS and CIBC with her in the same day. How they manage the RRIF payouts is one of the first questions I will ask BNS.
AltaRed wrote: 18 Apr 2017 18:52 4. Short of transferring 3 accounts (RRIF, TFSA, non-reg) to a discount brokerage, there is not likely much one can do to reduce MERs, albeit why she doesn't just have one lower cost BNS mutual fund in her RRIF is a mystery to me.
That made me suspicious as well. It made me wonder about commissions but the answer is probably more likely to be bank employee incompetence and/or a result of bank turnover. She tells me that she has had 6 different advisors at BNS in the last 19 years. And this is in a small town. I will probably ask her if she wouldn't prefer to consolidate the two MF into one holding but that might be down the line just yet. I think I still have to build up her trust in my own competence.
AltaRed wrote: 18 Apr 2017 18:52 - I agree with shutting off the DRIPs/re-investments. This should have been a no-brainer already. The distributions could help fund RRIF withdrawals.
Good, I thought I was on the right track there. It also makes sense to me to take the dividends out of the TFSA for tax free spending, even though she will still be funding the TFSA each year as well. The annual contributions in my mind are just a way to move maturing funds out of NonReg into the TFSA.
AltaRed wrote: 18 Apr 2017 18:52- Unless there is some specific reason not too.... convince her to sell the building lot. It is dead money IMO.
Agreed but when I broached the subject it didn't go far. I suspect she has a sentimental attachment to it. I think next time I will point out that the 60k, even after realtor commission, if invested conservatively would give her another 6K per year spending money for about 12 years. Not to mention the money she would save on property taxes on the lot itself (no idea what that is but it must be something)
AltaRed wrote: 18 Apr 2017 18:52- Scotia and maybe CIBC have some high(er) interest savings accounts, with some restrictions such as funds are not accessed near term. Look into them. Seems to me Scotia has a Momentum savings account with over 1% interest
That might be worth it to mop up funds and remainders that accumulate.
AltaRed wrote: 18 Apr 2017 18:52- As for higher rate GICs, do you propose to seek out one of the online banks? If so, whill she be able to manage it herself?
Yes, I was going to get her a CTC Bank GIC at 2.5% or Oaken at 2.25% and have them annual pay back into her chequing account. I don't think it is to onerous for myself or her eventual executor (likely my brother or cousin) to track it.
AltaRed wrote: 18 Apr 2017 18:52- I agree with about 25% equity, e.g. 110-age for equity. We had my 90+ yr old mother in 15% equity which I never had any intention of decreasing below that.
I haven't broached the subject of the mutual funds yet. My remit was to better the GICs and cash and I thought I would start there and build up trust. Yet, surprisingly, from what I have read so far on the BNS funds, I wasn't to upset with them and told her as much. Maybe we will get there in the fullness of time. Either way, I think for someone her age that these "balanced funds" with their 75/25 allocations are fine.
AltaRed wrote: 18 Apr 2017 18:52Something else to think about. The plan should be to consolidate and simplify. Does she manage her own accounts now? Does she have a POA? Her non-reg should maybe be only a GIC ladder, one mutual fund, and one higher interest savings account. Her RRIF should be similar, only one mutual fund and a GIC ladder.
She sort of manages her own accounts. I mean she takes the meetings with the banks alone and makes her own decisions based on their "advice" However, she couldn't read her own statements, so take that for what it is worth. I am unaware of any POA but it probably does exist for legal matters. I have the feeling if this goes well, she will want to designate me as an authorized person on her investment accounts at any rate.

I am all for simplification. In fact, quite honestly, I completely rubbished CIBC and told her they were a bunch of crooks. Not just for that damn market linked GIC (I'd love to punch that advisor in the nose) but for letting the other funds languish as well. So, my aim would be to move all the CIBC funds over to BNS and then have just RRIF/TFSA/NonReg there. Then re-arrange internally as you say:

RRIF - GIC ladder and a MF
TFSA - MF
NonReg - GIC ladder and a MF
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Re: Seeking input on elderly relatives portfolio

Post by Koogie »

OhGreatGuru wrote: 18 Apr 2017 20:08 I'm not sure equity needs to be as low as 25%, considering 75% of her current income is from government pensions.
True but it is also a matter of matching risk with reward isn't it ? She is comfortable on her income as is, which is based on her current level of risk (all those mutual funds are pretty much 65-75% bonds). So why take on more risk to bring in more potential income she doesn't really need ?

If she does have to move into assisted care, I assume the house would be sold and the subsequent invested funds would pay for that. In such an eventuality, I would guess her need for day to day income would also probably decrease.
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Re: Seeking input on elderly relatives portfolio

Post by AltaRed »

I would have thought the balanced/income mutual funds would be rangebound somewhere in the 60/40 to 40/60 range but perhaps not. If they are 65-75% bonds, then I would agree with OGG that the overall equity allocation may be light. You may want to take a look and if they are that high in fixed income, it might be worth a boost in investment or other type (see below).

It takes effort by someone (not her) to make specific distribution withdrawals from a TFSA. I see no point of really doing that if her cash flow needs are being met. It's just as easy to make sporadic withdrawals if there is a cash crunch. Always remember KISS.

I think a variety of arrangements can be made with respect to RRIF withdrawals. It's just a matter of setting it up. Maybe even quarterly withdrawals can be done without service fees.

Another thought to consider. Some of the big 5, e.g. RBC, has managed payout funds whereby the mutual fund pays out 5% every year regardless of how the fund does. In most years, there may be return of capital components, but at her age of 84, that is not really an issue. What matters is a predictable distribution to meet cash flow needs. She will expire before a conservative payout such as 5% runs out of money. I wouldn't go with a higher payout ratio than that... I suspect Scotia and/or CIBC have similar offerings.

Ultimately, she has a $400k asset sitting under her and at some point (most likely), she will have to leave it for a better care facility. That house value conservatively invested is worth 10 years of 'higher care' facility costs. I had to remind my own mother about that when she moved from her SFH to an independent apartment at circa age 92 or so. She worried about the monthly cost at the apartment and I had to keep telling her she had 10 years of cash alone from her house to keep her going...without anything else coming in.
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Re: Seeking input on elderly relatives portfolio

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AltaRed wrote: 18 Apr 2017 21:45 It takes effort by someone (not her) to make specific distribution withdrawals from a TFSA. I see no point of really doing that if her cash flow needs are being met. It's just as easy to make sporadic withdrawals if there is a cash crunch. Always remember KISS.
I don't think it'll be to onerous if we make it a quarterly transfer of accumulated dividends from the TFSA to her chequing. I would just add it to my tracking list for instance to do on her behalf. I could make it to match the timing of an increased quarterly RRIF withdrawal.
AltaRed wrote: 18 Apr 2017 21:45Another thought to consider. Some of the big 5, e.g. RBC, has managed payout funds whereby the mutual fund pays out 5% every year regardless of how the fund does. In most years, there may be return of capital components, but at her age of 84, that is not really an issue. What matters is a predictable distribution to meet cash flow needs. She will expire before a conservative payout such as 5% runs out of money. I wouldn't go with a higher payout ratio than that... I suspect Scotia and/or CIBC have similar offerings.
Interesting, I was unaware of them. I will look into that at BNS. It might be that the management fees will be higher but as an overall dollar amount it might not be to bad.
AltaRed wrote: 18 Apr 2017 21:45Ultimately, she has a $400k asset sitting under her and at some point (most likely), she will have to leave it for a better care facility. That house value conservatively invested is worth 10 years of 'higher care' facility costs. I had to remind my own mother about that when she moved from her SFH to an independent apartment at circa age 92 or so. She worried about the monthly cost at the apartment and I had to keep telling her she had 10 years of cash alone from her house to keep her going...without anything else coming in.
Indeed, part of my agreeing to help will undoubtedly come down to explaining that she has actually done okay since her husband died and that she definitely will not be ending up destitute.

Having mulled it over last evening as well, I think I will immediately push her to liquidate everything she can at CIBC and move it to BNS. It will make my job easier, it will be invested in roughly equivalent BNS products for now and it feels good to spite CIBC a little (with very little in the way of tax ramifications).
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Re: Seeking input on elderly relatives portfolio

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AltaRed wrote: 18 Apr 2017 21:45 Ultimately, she has a $400k asset sitting under her and at some point (most likely), she will have to leave it for a better care facility. That house value conservatively invested is worth 10 years of 'higher care' facility costs. I had to remind my own mother about that when she moved from her SFH to an independent apartment at circa age 92 or so. She worried about the monthly cost at the apartment and I had to keep telling her she had 10 years of cash alone from her house to keep her going...without anything else coming in.
agreed. my mom was the same way and i suspect my in laws are the same as well. even if they are in really good shape, can spend more, etc it's hard to convince older people they will not run out of money.
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Re: Seeking input on elderly relatives portfolio

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Koogie wrote: 19 Apr 2017 10:04 Having mulled it over last evening as well, I think I will immediately push her to liquidate everything she can at CIBC and move it to BNS. It will make my job easier, it will be invested in roughly equivalent BNS products for now and it feels good to spite CIBC a little (with very little in the way of tax ramifications).
While I feel sort of the same way (consolidate at BNS or CIBC), be careful with this one. She may have an identity with the staff at the CIBC branch and be more familiar with their processes and symbols. Clearly she does her day-to-day banking with CIBC with BNS having been more of an "investment" institution. It all depends on her social connections at CIBC and how she does her day-to-day banking, e.g. getting her utility bills paid there. I am not trying to sell this lady short in capability but making major changes too fast can be overwhelming for someone 20 years her junior.

You may want to walk her through the scenario about getting her investments and savings in order based on a 'simple model' of consolidation at one institution but be careful of moving it all too fast, especially if it is all goiing to Scotia. You will have to find out what is auto-deposit and withdrawal from her CIBC bank accounts and get them changed too. I will speculate it might be best to get her investments in order first, and then banking last.... over a period of months. There will need to be an 'automatic' convenient way of moving her Scotia income to CIBC banking in the interim if the final desitination is Scotia.

FWIW, I susptect CIBC has similar competitive products to Scotia so it is more a matter of where do you want to put the effort? I recall my brother and I doing a consolidation for our mother after our father passed away. It took us many months to make it all happen and in her case, the default was RBC where she did most of her day-to-day banking anyway (was also easier since we did not have to get her connected to the nice people at the other institution).
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Re: Seeking input on elderly relatives portfolio

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True. Don't want to "spook the horses" I am not completely sure which she does her day to day banking with but suspect CIBC since that is where the chequing account is. She also mentioned it was easier to set up the auto deposit of her UK pension there rather than at BNS.

I'm going to start with the drips and the GIC and see how it goes from there. If she can be persuaded later to consolidate at BNS, so much the better but that needn't be in the short term. Ideally I would be able to overhaul the portfolio completely but at this point in her life the potential emotional drama probably isn't worth it for a few percentage points gain.
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Re: Seeking input on elderly relatives portfolio

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Koogie wrote: 19 Apr 2017 11:01Ideally I would be able to overhaul the portfolio completely but at this point in her life the potential emotional drama probably isn't worth it for a few percentage points gain.
:thumbsup: I would have liked to have done more with my mother's finances as well but minor efficiency and effectiveness gains are not worth it for the likely lifespan left, whether 2, 5 or 15 years. Happiness and security counts for more at 84 years of age.
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Re: Seeking input on elderly relatives portfolio

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Just one quick point. Not sure why you would take the income from the TFSA while still making contributions. It makes no sense and complicates her bookkeeping.
Are you going to contribute the allowable contribution each year? If so you are essentially just taking the money out and putting it back in the following year as withdrawal amounts get added to her cibtribution limits.
Better to take cash fliw needs from either rif or non registered funds. Her effective tax rate is so low it doesnt really matter which.
Does she qualify for any GIS or is that included in her OAS figure.
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Re: Seeking input on elderly relatives portfolio

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twa2w wrote: 19 Apr 2017 12:24 Just one quick point. Not sure why you would take the income from the TFSA while still making contributions. It makes no sense and complicates her bookkeeping.
Are you going to contribute the allowable contribution each year? If so you are essentially just taking the money out and putting it back in the following year as withdrawal amounts get added to her cibtribution limits.
+1!
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Re: Seeking input on elderly relatives portfolio

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I had to take over my mother's RRIF account after my father's death over fifteen years ago. It was being run at the time by a financial planner. My mother and I had gone to see him, but he refused any offer of help in regards to what we should do to get everything straightened out with the government etc. We had to figure it all out and do it ourselves. Then the planner had the nerve to challenge me, "Do you want to run the portfolio yourself". I didn't want to do invest it myself, but I couldn't deal with this guy any longer, and I didn't particularly like the way he had the portfolio set up either. It was something like 50% investment trusts, 10-15% in a high yield bond fund. I can't remember what the rest of the RRIF was in but I recall all the funds in there were very expensive. Nothing safe about it at all.

I had my mother move the RRIF to her bank brokerage and basically sold everything in there. I listened to what she had to say when I asked her. She said she couldn't take any equity risk, so that asset class couldn't be used. She couldn't take any capital loss risk in the portfolio either, so that left me with few options. I just took most of the portfolio and converted it to a ladder of 1 through 5 year GIC's, leaving enough cash yearly in the portfolio for the monthly minimum withdrawals she requested. The money in her RRIF will have expired in another five years or so when she's in her mid 90's. Since everyone else in the family is absolutely clueless when it comes to investments, I've left the account so that if I kick the bucket first, then each of the five GIC's will expire year by year until whatever is left will be cash.

It certainly wasn't the way I wanted to set up the portfolio originally but after listening to what little risk my mother could take, I felt it was the best way for her.
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Re: Seeking input on elderly relatives portfolio

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twa2w wrote: 19 Apr 2017 12:24 Just one quick point. Not sure why you would take the income from the TFSA while still making contributions. It makes no sense and complicates her bookkeeping.
Are you going to contribute the allowable contribution each year? If so you are essentially just taking the money out and putting it back in the following year as withdrawal amounts get added to her cibtribution limits.
Better to take cash fliw needs from either rif or non registered funds. Her effective tax rate is so low it doesnt really matter which.
Does she qualify for any GIS or is that included in her OAS figure.
You are right. I think I am maybe projecting my own situation and timeframe onto her requirements. It obviously makes more sense to draw from the NonReg accounts. Personal bias at play.

Based on what I have googled for GIS limits in 2017, she does not qualify for it.
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Re: Seeking input on elderly relatives portfolio

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Taggart wrote: 19 Apr 2017 14:21 I had to take over my mother's RRIF account after my father's death over fifteen years ago. It was being run at the time by a financial planner. My mother and I had gone to see him, but he refused any offer of help in regards to what we should do to get everything straightened out with the government etc. We had to figure it all out and do it ourselves.
I admittedly know very little about RRIFs. One question I had for knowledgeable posters is: why does she have two RRIFs at BNS ? One is exclusively GICs (FI) and the other is exclusively MF (equity). Is that why ? Otherwise it makes no sense. For comparison, I don't have two separate RRSPs.
Taggart wrote: 19 Apr 2017 14:21 It certainly wasn't the way I wanted to set up the portfolio originally but after listening to what little risk my mother could take, I felt it was the best way for her.
I am struggling to keep my own biases out of planning what is best for her. That is why I am planning to make changes to her portfolio in baby steps because it will ease the transition and the anxiety of change. Especially as she doesn't know very much at all about investing and will undoubtedly have to struggle internally between accepting the wisdom of the "nice people at the bank" and what her 40 years younger relative is telling her.
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Re: Seeking input on elderly relatives portfolio

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Koogie wrote: 19 Apr 2017 16:14 I admittedly know very little about RRIFs. One question I had for knowledgeable posters is: why does she have two RRIFs at BNS ? One is exclusively GICs (FI) and the other is exclusively MF (equity). Is that why ? Otherwise it makes no sense. For comparison, I don't have two separate RRSPs.
Banks do things differently. Asset management is run by a different division/entity than GIC issuance and the financial reps in the branches report elsewhere I believe. Banking is archaic in this way. IIRC in some online banks, each GIC has its own freaking account!!
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Re: Seeking input on elderly relatives portfolio

Post by Taggart »

Koogie wrote: 19 Apr 2017 16:14
Taggart wrote: 19 Apr 2017 14:21 I had to take over my mother's RRIF account after my father's death over fifteen years ago. It was being run at the time by a financial planner. My mother and I had gone to see him, but he refused any offer of help in regards to what we should do to get everything straightened out with the government etc. We had to figure it all out and do it ourselves.
I admittedly know very little about RRIFs. One question I had for knowledgeable posters is: why does she have two RRIFs at BNS ? One is exclusively GICs (FI) and the other is exclusively MF (equity). Is that why ? Otherwise it makes no sense. For comparison, I don't have two separate RRSPs.
Sorry Koogie, I can't even add my own ideas to what AltaRed has already said, since once my mother's RRIF was amalgamated with my father's RRIF, well...., that was it. One RRIF only to look after. The RRIF is in one of the big five bank's online brokerage account. I'm listed as the trading agent, although even though I check on the portfolio online monthly, I only have to roll over a GIC into a new one once a year.
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Re: Seeking input on elderly relatives portfolio

Post by Koogie »

It is not a terribly big deal that there are two RRIF accounts, I was just curious. As far as I can tell, there is no duplication of fees involved. The trailing commission indicated is for the equity RRIF account in its totality.
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Re: Seeking input on elderly relatives portfolio

Post by gsp_ »

Koogie wrote: 19 Apr 2017 16:04Based on what I have googled for GIS limits in 2017, she does not qualify for it.
The OAS number you quoted is slightly higher than the max($6942) which may have lead to twa2w's question. If her business income is now going to be zero, she should be entitled to GIS. Remember OAS is not counted in the GIS income threshold.

You'd then want to do one of two things: either reduce RRIF payout to minimum mandated or start making substantial RRIF withdrawals in order to deplete it, achieving higher GIS. You want to avoid death by a thousand cuts as GIS is reduced by 50% of income in her income range.

https://www.canada.ca/en/services/benef ... ments.html
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Re: Seeking input on elderly relatives portfolio

Post by Koogie »

gsp_ wrote: 19 Apr 2017 17:49
Koogie wrote: 19 Apr 2017 16:04Based on what I have googled for GIS limits in 2017, she does not qualify for it.
The OAS number you quoted is slightly higher than the max($6942) which may have lead to twa2w's question. If her business income is now going to be zero, she should be entitled to GIS. Remember OAS is not counted in the GIS income threshold.
This is where my inexperience as a young whippersnapper shows. I simply took her last OAS payment in her passbook (yes, an actual passbook) and then just x 12. I will use $6942 as her OAS going forward.
gsp_ wrote: 19 Apr 2017 17:49 You'd then want to do one of two things: either reduce RRIF payout to minimum mandated or start making substantial RRIF withdrawals in order to deplete it, achieving higher GIS. You want to avoid death by a thousand cuts as GIS is reduced by 50% of income in her income range.
The RRIF amount I quoted was based on the minimum RRIF withdrawals indicated on her statements from BNS. That should surely be accurate ?

As she is near the 17544$ GIS income limit, is it worth pursuing GIS ? Her current income of CPP/UKPension/RRIF withdrawals would be roughly 15237$ Resulting, based on the tables I have looked at, in a GIS of about $1155 per annum

If I make the changes I envision just to her GIC and cash holdings, the resultant income would put her over the threshold as I understand it and result in about an extra 3100$ per annum. Would it be better to delay those changes for now, drain the RRIF and then make the changes for instance ?

Is there a calculator where I could play with these variables ? I took a brief look on the government site and on taxtips but didn't see anything.
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Re: Seeking input on elderly relatives portfolio

Post by AltaRed »

I would be careful about too much financial engineering. If you (or a POA) takes over this lady's finances, there comes an obligation of being prudent. Granted the obligation is not as critical in an informal arrangement vs a trust company for example, you do not run afoul of potential beneficiaries who will have a 'vested' interest in how things are being managed. Accelerating, or decelerating RRIF payouts just to squeeze out a GIS payment would NOT be on my list to do.

What is important is meeting the cash flow needs of the lady while helping ensure she does not run out of money (highly unlikely given a $400k home asset that can be monetized). Given the lady is 84, the RRIF, TFSA and non-reg really only need to last about 10 years (15 years max), with home monetization providing financial support thereafter.... and most likely a legacy. I'd work out a 15 year plan with what she has in capital and pensions and forget about being cute about GIS. Don't lose sight of the forest for the trees.
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Re: Seeking input on elderly relatives portfolio

Post by gsp_ »

Koogie wrote: 19 Apr 2017 18:52This is where my inexperience as a young whippersnapper shows. I simply took her last OAS payment in her passbook (yes, an actual passbook) and then just x 12. I will use $6942 as her OAS going forward.
I'd hazard a guess that I'm younger than you are. :wink: Simply had to learn this stuff in helping several family members. If the OAS payment was higher than $578.53 then there is something else going on beyond regular OAS which you'll need to investigate. GIS does not get sent separately, it is combined with OAS in one payment.
The RRIF amount I quoted was based on the minimum RRIF withdrawals indicated on her statements from BNS. That should surely be accurate ?
Probably. Multiply the end of year RRIF balance by the prescribed minimum based on her age to verify.
As she is near the 17544$ GIS income limit, is it worth pursuing GIS ? Her current income of CPP/UKPension/RRIF withdrawals would be roughly 15237$ Resulting, based on the tables I have looked at, in a GIS of about $1155 per annum

If I make the changes I envision just to her GIC and cash holdings, the resultant income would put her over the threshold as I understand it and result in about an extra 3100$ per annum. Would it be better to delay those changes for now, drain the RRIF and then make the changes for instance ?

Is there a calculator where I could play with these variables ? I took a brief look on the government site and on taxtips but didn't see anything.
Whether it is worth in her case is for you to figure out. See this thread for a discussion of GIS maximization. It's not a huge amount of money for her but it is free money so scenarios should be run that consider taxes, have fun. :rofl:
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Re: Seeking input on elderly relatives portfolio

Post by OnlyMyOpinion »

My parents have multiple RRIF's. It depends how/where a person made their RRSP contributions. As AR pointed out, conceivably, each year you go in to make an RRSP GIC contribution at the bank counter you could be opening a new RRSP account. Get talked into a good GIC rate at your other bank - there's another RRSP acc. The FA finally convinces you to get into one of the bank's income funds, that's another account, etc.
Something to be aware of with maturing bank GIC's is that they often automatically roll over into a 1 year GIC (along with the abysmal posted 1 yr rate). Check the nature of renewal with the banks and make sure they have reinvestment directions just ahead of maturity. RRIF's seem to pay out of GIC accounts just fine. As AR also noted, I think they remove the required amount from the underlying principal.
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Re: Seeking input on elderly relatives portfolio

Post by OhGreatGuru »

This a real dog's breakfast. Congratulations on trying to improve the situation.
Your relation is of a generation that believed ardently in GIC's, so I can understand why you are trying to start by simply getting GIC's with better return. But try to educate her on what has happened to GIC's in the past decade - sure they are secure, but the interest rate is the pits. If she will even agree to put them in a long-term bond fund it would be an improvement.

Here's what I dug up on the mutual funds she owns:
1. CIBC Managed Income Portfolio. CIB830. A Portfolio fund. MER 1.80. Classed as CDN Fixed Income Balanced. Fundlibrary rating C. Asset allocation: nominally cash (mostly Money Market) 5%; FI 70%; equity 20%. Appears to be made up mostly of CIBC funds, with a couple of Renaissance funds. Prospectus is very vague about what “underlying funds” they invest in.

2. Scotia Select Income. BNS338. This is a portfolio fund. MER 1.93. Classed as CDN Fixed Income Balanced. Fundlibrary C. Benchmark Index 75% CDN Bond Index; 15% TSX.; 10% MSCI World Index. Mix of Scotia and Dynamic Funds.

3. Scotia Select Balanced Income. BNS340. MER 1.88 %. FundLibrary B. CDN Fixed Income Balanced. FI 65% CDN Bond Index; 18% TSX; 17% MSCI World Index. Mix of Scotia and Dynamic Funds.

4. Scotia Partners Balanced Income. BNS 346. MER 2.13% Fundlibrary B. CDN Fixed Income Balanced. It is portfolio fund too. Benchmark Index: 65% CDN Bond Index; 17% TSX; 18% MSCI World. It holds a wider range of 3rd-party funds (in addition to Scotia and Dynamic) As usual these give the illusion of greater diversification while actually duplicating much of each other’s holdings. This fund has a very short history - must have been new in 2016.

3 & 4 have essentially the same benchmarks.

1. Start by combining the taxable Scotia Select Income and CIBC Managed Income into one account at Scotia. Personally I would suggest rolling both of them into Scotia Select Balanced Income fund. With 75% of her annual income in government pensions; and the amount of money she has in savings, TFSA'a, and GIC's, she can stand to have the 65/35% allocation. Instead of dripping, have monthly distributions paid out to her bank account. (She might need to open a Scotia bank account). If she doesn't want to open another bank account, tell Scotia to mail her monthly distribution cheques. They may suddenly discover they can make electronic deposits to her CIBC account after all.

2. In the one RRIF, roll the Scotia Partners Balanced Income Fund into the Scotia Select Balanced Income Fund. They have the same benchmarks, and the Select fund is better rated, with a lower MER.

3. See if Scotia will allow you to combine the 2 RRIFs. If one was inherited from a late spouse, it may have a different minimum withdrawal schedule, making it difficult for them to combine. In any case, if you can persuade your relative, convert the GIC's in the RRIF as they mature and put them into either Scotia Select Income or Scotia Select Balanced Income.

4. For all the taxable GIC's, try to get them rolled into the taxable mutual fund account noted in (1). If they can't be cashed without penalty, do it as they mature. If that fails, fall back on your original plan of at least searching out better GIC's as they come due. (Perhaps you could stress that GIC's are locked-in, and if she suddenly needs money she can't cash them without penalty. - yes, I know there are cashable GIC's, but they pay miserable interest if you exercise that option.)
Last edited by OhGreatGuru on 20 Apr 2017 19:54, edited 1 time in total.
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