Tag retirement-planning

Old People Need Bonds

Paul - The Wry Eye Guy Leave a comment
Defensive Retirement Assets

Some say that a 100% equity portfolio can take us all the way through our investing lives.
Is that so?
Maybe.
But it might not be for everyone. And retirement can be different.

This exercise looks at why bonds might matter to a retiree. Using some older ETFs to create portfolios vaguely similar to the modern all-in-one types, we can make the comparisons from further back. Holdings & allocations are in the table below. There are more mixed currencies than metaphors here, but it’ll do for this simple comparison.

ETF TickerAll-Equity60/40
SPY (US)4527
XIU (Can)3018
EFA (Int’l)2515
XBB (Bond)030
XSB (Bond)010

Investing $100k in each of these portfolios at the start of 2002 would see the 60/40 grow to about $570k today. Not too shabby, eh? The all-equity portfolio would have grown to almost $860k. A nearly $300k beat. Bonds hurt the 60/40 portfolio’s returns over that timeline. But that’s only the accumulation story.

Now imagine two investors retiring at the start of 2002. They heard that markets only go up, so they wanted to withdraw more than the 4% Rule suggests! They also wanted to “melt down” their registered retirement accounts. These old guys might have been ahead of their time for back then, right?
They started with an 8% withdrawal rate, taking out $8k in the first year. And increased withdrawals every year, roughly in line with inflation.
How did that all work out?

The all-equity retiree ran out of money in 2018. The 60/40 portfolio chugged along for another year. Not huge, but still a win for the portfolio with bonds. In 2009, during the great financial crisis, the 29% portfolio drawdown gave our 60/40 retiree palpitations. But our all-equity guy had supraventricular tachycardia watching his portfolio plummet 50%. Us old people know some fancy medical terms like that! In addition to the 60/40 portfolio surviving longer, it was less gut-wrenching during the bad times.

Let’s look at another retirement scenario. To get back to 2000, we’ll dump the international fund & the Canadian bond funds. We’ll just ignore the international component & replace the two Canadian bonds funds with one American bond fund. The American bond fund slightly underperforms the Canadian combo, but that just makes the comparison favour the all-equity portfolio a little more. The all-equity portfolio now has an allocation of 60% to US equity & 40% to Canadian. That translates to 36% & 24% respectively in the balanced portfolio, with the remaining 40% going to bonds. Now we can look at the impact of the dot-com crash. That was some heavy duty sequence of return risk for anyone retiring back then.

And the result for our 2000 retirees was that …

The all-equity portfolio died in 2010. While the 60/40 carried on ’til 2013. For fun: a portfolio with an even bigger bond allocation of 80% would have survived to 2015. Looking at it another way: when the retiree with the all-equity portfolio went broke in 2010, the 60/40 guy still had almost $25k in his account. And the very conservative 20/80 retiree was looking at almost $47k. Bonds helped a lot here. As it happens, that was during a great era for bonds. It hasn’t been quite so good for bonds in recent years.

Despite today’s lower bond yields, there may still be value in the ability of bonds to tamp down portfolio volatility. That can matter to a retiree. Financially & emotionally. Despite how great the markets have been for the past several years, this exercise is also a reminder that stocks don’t only go up. Stocks are risky. Especially over the shorter timelines that make up retirement decumulation cycles.

Let’s look at one additional scenario that shows how equities can deliver in the good times. Though it muddies the waters still more, it’s important. Same portfolios as in the table above, but with investors retiring in 2010 this time. Both have been withdrawing exactly the same amount every year. The 60/40 retiree checks his portfolio balance today. It sits at just under $50k. Pretty good. However, the all-equity retiree now has a portfolio worth over $150k. Despite identical withdrawals, the all-equity portfolio has continued to grow in value over this timeline. The equity guy is probably having a chuckle at his buddy’s expense. Of course, the RRIF meltdown isn’t going so well for him. He might have to make bigger withdrawals & spend more going forward. How awful for him!
If you have to have a problem in retirement, this might be the one most of us would enjoy complaining about, eh?
As a side note, this period included 2022 where, unusually, bonds fell in concert with stocks. Sometimes, bonds can be risky too!

What does it all mean?

Who knows! There isn’t one solution fit for all investors. But if you go for coffee with the guys that retired in 2000 or 2002, they’ll tell you to include bonds in your portfolio. Spend time with the guys that retired in 2010 & you might find them doing a harder sell on the all-equity approach. We all have biases. These come from who we are & what we’ve lived through. Sometimes, they are shaped by the biases of the people we hang out with. Do you know what your biases are? Biases can be tempered by knowledge. Knowledge is usually a good thing. And while the past doesn’t predict the future, we can learn from it.

In retirement, we’re going into the final stretch of the investment lifecycle. And of our own time on earth. We don’t always have time to wait for a big market recovery. We no longer have the big earning power to make up for large losses either. Downturns can hurt a portfolio a lot more during the decumulation years. We need to assess the different risks of stock & bonds in light of those limitations. Along with our willingness, our ability, & our capability to tolerate those risks.

So how do we handle this? Too big a bond allocation might downgrade the quality of the retirement home we move to at the end. Under different market conditions, the right bond allocation might save us from homelessness. While some investors feel safer having more bond & cash-like funds in the retirement portfolio, they also worry that inflation will evaporate the value of these assets over time. There are other strategies that might help too. Like variable spending, investing for income, annuities, real estate, & so on. These approaches may provide some additional levers to help get us through the journey. But retirement planning is complex. And second guessing is a part of the annual review!

If you can ‘t shake off enough of the uncertainty, it may be worth spending some time & money with a qualified financial advisor or financial planner. A topic for another day!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Growth versus Income Investing

Paul - The Wry Eye Guy Leave a comment
Growth or Income for Retirement?

The growth investor needs capital appreciation & the sale of shares for income in retirement. The income investor wants an income stream that can be used for living expenses without selling shares. Until recently, dividend paying stocks were the primary solution for an equity income stream during retirement. But with modern dividend yields so low, that takes a large portfolio. Over the past 5 or 6 years, a flood of new high income ETFs have changed that picture. These new income funds use options strategies & leverage to generate far higher distributions than are available from dividends alone.

But do they work?

According to some retirees, the answer is yes. Critics of this income investing approach say these funds tend to lag an equivalent growth fund. For the most part, that’s true. But some retirees are living higher on the hog than they expected to because of these funds. And they’re posting pics from their sunshine destination vacations to prove it. They can do this because their portfolio distributions run anywhere from 5 to 15%, with some far higher even.

To be fair, given the phenomenal market performance of the past decade & a half, a growth investor could also have spent far more than the traditional 4% Rule allows for. Investing in an S&P 500™ fund, from 2010 onward, could have delivered an inflation-adjusted withdrawal rate of about 12% all the way up to today. The great market performance of recent years makes the 4% Rule look a little outdated, eh? But there’s no guarantee that will continue! Of course most retirees would probably not be in a 100% equity portfolio. Instead they would have invested in the more common 60/40 balanced portfolio. And that portfolio would not have survived that 12% withdrawal rate from 2010 up to today.

Now this is where it gets interesting with income investors. Because they seem to have a bias towards a higher equity allocation. Some are 100% invested in equity income funds. While very few professional advisors would recommend a 100% equity portfolio for a retiree, these new income focused retirees seem to be less troubled about relying on an all equity solution.

So how does that impact the retirement picture?

I’m going to use ETFs from Global X by way of example, because they have globally diversified all-equity portfolios that serve all the strategies we’ve mentioned. Ticker HEQT is a regular growth ETF. EQCC is the same thing with covered calls. While EQCL employs option strategies & leverage. For further comparison, Global X also offers HBAL, a balanced 60/40 portfolio that we can use to represent a more traditional retirement mix. At the time of writing, the yield data below come from each fund’s web page. Be sure to check at each fund’s web page for current data.

It is very important to recognise that this comparison timeline is far too short to be very useful for assessing how funds like these might operate under a greater variety of market conditions, & over a longer time horizon. However, the characteristics displayed are in accord with what you’ll hear in some of the online arguments.

The all-equity HEQT is the best performer for total return. The traditional 40% fixed income allocation of HBAL makes for the poorest performance here, as the bond allocation drags down the total return during times of great market growth. Also as expected, EQCC delivers great income, but at the expense of some of the upside. In this example, over this very short time, the covered call version does outperform the traditional 60/40 portfolio. Finally, the leverage added to EQCL adds back some of the lost covered call upside, though not quite enough to catch back up to the returns of the vanilla all-equity fund. Note that the total return column is with all distributions reinvested.

From a pure numbers perspective, the total return of the regular all-equity fund comes out ahead. Regardless of how the income stream is delivered, total return is always important. The growth investor would typically concentrate on the ‘Total Return’ column & claim the win for HEQT. The income investor might look at the income column & favour the income streams from EQCL or EQCC. It’s worth noting that all these ETFs, with all distributions removed, left a fund that continued to increase the NAV well ahead of the inflation rate. That’s not always the case with all such funds. But even with the high yield funds in this example, you could have spent all that income in 2025 & still grown the NAV!

But again be warned … that’s only over this very short timeline when markets have performed well.

Let’s return to that 100% equity allocation thing we mentioned earlier. All our high yield funds above outperformed the traditional balanced portfolio. Retired growth investors are more likely to have a fixed income or cash component. Moreover, most financial advisors will probably not recommend 100% equity portfolios for retirement, regardless of the investment approach. But retirees investing in these new income ETFs appear to be able to tolerate a higher equity allocation. And that behaviour means that they have outperformed the traditional balanced portfolio in this instance. Indeed some income investors abandoned the balanced approach in favour of their new income strategy.

That’s the crux of the strategy comparison dilemma. Sometimes, we’re not really comparing apples to apples. The first big question is this: should a retiree have an equity allocation of 100%? And if that 100% equity allocation can be justified, would you want to own the growth or the income style portfolio? The answer is, as usual, it depends!

There are studies that support a 100% equity portfolio through the accumulation years and throughout retirement. One of the most recent, & one of the most thorough, is Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice, from July 2025 by Anarkulova, Cederburg, & O’Doherty. This paper is widely discussed amongst the gurus online, but even professional advisors seem reluctant to tell their older clients to jump on board an all-equity portfolio during retirement. However, if this proves to be correct going forward, then an income fund that only slightly (& I’m not sure how to accurately define ‘slightly’ here!) underperforms an equivalent all-equity growth fund might be useful. After all, investing is both a mathematical & a behavioural exercise. If the higher income stream helps a retiree stay the course with a higher equity allocation, might that be a better solution for retirement?

I don’t know the answer to that one either. But it is fun to think about!

We don’t have enough history to understand how these income funds, & their income streams, might survive a more severe crash or a prolonged downturn yet. But I certainly look forward to seeing how things play out going forward. Let’s be real here, if a fund can deliver a 10% yield while growing the underlying NAV faster than inflation, who wouldn’t want a piece of that action, eh! In fact, if it came with inflation security, I’d probably take that bet with a far lower yield!

Unfortunately, I don’t think we can consistently predict such positive outcomes for these income funds. They have done very well in recent years. But their recent successes probably shouldn’t encourage others to retire too early. If your retirement plan was to work towards having a million-dollar portfolio supporting a 5% withdrawal rate, it might not be prudent to flip everything into a fund with a 10% yield & retire earlier with only a half-million-dollar portfolio today. Indeed, any strategy running at its limits won’t work very well if things turn bad. And, given a long enough retirement timeline, there will almost certainly be some bad times ahead. We need to plan our retirement accordingly. On top of those style deliberations, the 100% equity allocation has been part of the solution for some. But it remains an open question for others. We didn’t even get into the active versus passive conversation today! There really are a lot of moving parts to consider with all this. I wouldn’t be surprised to find some investors doing a mix of these strategies. As they tread water, waiting to see how things play out over time.

One last thing to consider is the impact of all this on financial planning exercises. We need to be careful about conflating distribution yield and total return. They are not the same thing. We cannot assume that high cashflows will remain intact for income funds, in the event that a market downturn severely draws down the underlying portfolio. And especially if that happens over longer periods of time. Even if the yield percentage remains high, the actual income stream in dollars could still be seriously reduced. I think sticking with FP Canada’s projection assumption guidelines for financial planning makes sense, regardless of the investing approach. But that’s a whole other conversation that we’ll save for another day. And maybe a downturn will provide the insights we need before I get round to it!

Meantime, wear your water wings in the deep end & take care out there!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Financial Planning is Guesswork

Paul - The Wry Eye Guy Leave a comment
When a Plan Comes Together!

Financial planning is based on estimates & projections. It’s educated & data-driven guesswork. The return projection numbers are so precise that they run to two decimal places. Reality is not that predictable! Planning projections for equities have been about 6.5%, give or take, for the past few years. On a year by year basis, it’s been way off. Markets have done far better. They could have done far worse. But the projections generally work well, when considering average returns, over longer timelines. After the exceptional market returns of the 90s, a financial plan using 6.5% for projections might have been considered too conservative. But a 50/50 mix of the US & Canada would have returned an average of almost 8% annually, from 2000 up to today. Looking back, that 6.5% wouldn’t have been a bad number to create a plan with in 1999, eh? But things can get crazy over shorter time horizons. Especially when retirement withdrawals come into play.

Grumpy old guys & gals who retired in the last 10 or 15 years complain about not being able to draw down their big RRIF accounts fast enough. Their portfolios are growing faster than they can spend them down. While many of these retirees are probably brilliant investors, some just got lucky! They timed the start date of their retirement pretty much perfectly. The 50:50 US & Canada portfolio would have returned almost 12% annually since 2010. Almost double that 6.5% planning number. Now there’s nothing wrong with being lucky. But luck is not always good enough for retirement planning.

That same 50:50 portfolio would only have returned a little more than 2% annually from 2000 to 2009. An investor who went all in on the American market over that decade would have had a negative return. The US market lost money over that 10 year period. And that’s without withdrawing any retirement income from it. The really big question with financial planning going forward, especially for new or imminent retirees, is this … what will the next few years be like? Those early retirement years can matter. A lot. As we saw above, average return numbers work really well over the long haul. But a severe or protracted downturn in early retirement, like the 2000 to 2009 period, can make a real mess of a plan. Taking a big hit immediately after retirement can seriously impair income for all the years that follow. The message here is that we cannot assume that the high returns of recent years will continue. Planning must allow for these different outcomes.

Financial planning guidelines have to thread a needle with respect for a wide range of potential returns. And it’s wise to err a little on the conservative side of what the long term data say. Many recent retirees, & new financial advisors, have not experienced something like the lost decade back in the early 2000s. To varying extents, we are all influenced by recency bias. And recently, things have been great. But we may need to temper the optimism & plan a little more cautiously for the future. Especially if retirement is imminent. Despite our retired friend’s success over the past 5 or 10 years, thinking we can begin retirement & spend at a consistent 10% rate is very risky.

So if planning is just guesswork, should we ignore it? Absolutely not! Nobody can foretell what happens next, but that makes having a plan even more critical. The purpose is to figure out how to best use our money so that we can pay the rent & buy groceries all the way to the end. Plans include success rate estimates & simulations that show if the plan can survive the best & the worst combinations of market cycles.  Plans can include fun things like bucket list travel & fancy cars. Along with some things we hope aren’t needed, like illness or meeting long term care needs. It’s important to have a plan that considers the many vagaries of retirement. It’s equally important to have regular plan reviews & revisions over the years to ensure things stay on track.

Getting a financial plan done professionally can be very expensive. If you are paying an advisor to manage your retirement, financial planning may, indeed probably should, be included as part of that service. A good financial plan is a crucial part of living a successful retirement. Even for those DIY folk with a good knowledge of what’s required, having another set of eyes review the plan may still make sense. Indeed, it may be worth having a plan done by more than just one professional advisor. I know, sorry!

DIY folk tend to be frugal by nature & some may not want to pay for a professional plan. I get that. But you could ask about getting a review of your DIY plan, or a freebie, or a demo plan from whatever institution you have your money at. Some financial institutions provide that service. Sometimes you just need to ask. Fortunately, more & more planning tools are becoming available for the DIY cohort nowadays. Maybe with AI, we’ll even get some apps for that! But until that perfect app arrives, & perhaps even afterwards, getting a professional financial plan done might matter for most of us. Planning, especially for retirement spending, is quite complex. If you are not using a professional to put a plan together, there are some tools available that may help. Check out some of the tools in this post DIY Financial Planning … An Update. I have used the Adviice platform mentioned there & there are others like Optiml & MayRetire that I haven’t played with yet. Doing our own planning on a spreadsheet usually carries a greater risk of error. Whereas these platforms are getting feedback from a wider public audience, which helps weed out the errors & improve the product over time. Some of them have an access path to professional planning services. It’s great to see tools coming onto the market for DIY financial planning. As they improve & get smarter, perhaps they’ll help the profession space to offer more competitive services too. But until that happens, we’re stuck paying more. And despite the high price, it’s worth the spend if it helps us avoid a bad outcome.

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Asset Allocation ETFs are like Pasta!

Paul - The Wry Eye Guy Leave a comment
Portfolios & Pasta!

Many years ago we visited some Italian friends for dinner. That was the first time I realised that pasta wasn’t meant to have a couple of pounds of stew heaped on top of it. Pasta in our house was usually over-boiled spaghetti, buried under lots of meaty-tomatoey stuff. Sometimes, we tossed in a few tablespoons of curry powder. Or maybe some jalapeños. And left-over spuds were always a no-brainer addition. Look, I’m not saying I didn’t enjoy some of these concoctions. But I was totally taken aback by how much I truly enjoyed the far simpler pasta that we experienced at our friends’ house. Portfolios are a bit like pasta in that respect. Sometimes, we can get carried away by having too many ingredients to choose from. Simpler can be better.

BlackRock’s iShares XGRO (20% fixed income) & XBAL (40% fixed income) have been available as all-in-one portfolio solutions since 2007. The arrival of the all-equity ETFs boosted interest in these off-the-shelf portfolios. In 2019, Vanguard Canada launched VEQT, their all-equity ETF. In that same year, the iShares XEQT ETF & Horizons (now Global X Canada) HEQT were also launched. And in 2022 we got BMO’s ZEQT. These funds are globally diversified, with about 45% of the allocation going to the US, 30% to Canada, & the remainder going to International, which includes a small allocation to emerging markets. These ETFs hold 10,000, or more, different company stocks from around the globe. That is some kind of diversification! And according to Harry Markowitz, a Nobel Prize-winning economist, diversification is the only free lunch in investing. There are a bunch of academic papers that support this level of diversification. While there are minor squabbles about percentages, or how great the American market is, I think some of us could benefit from using the allocation model employed by these highly diversified ETFs. Of course, that won’t stop us trying to mess with a good recipe from time to time, eh?

My own portfolio has gone through changes over the years. I was a growth investor at one time. Later, a dividend growth investor. Over time, new ETFs made it easier to chase the next hot sector or geography, so I started adding some of those. It wasn’t long before my portfolio looked more like one of my mad Irish-Indian-Mexican, & only vaguely Italian, pasta dishes! I finally got around to doing pasta the Italian way. It took me a little longer to learn how to apply that same keep-it-simple philosophy to my portfolio. But both cooking & investing are a little easier now. I will, however, admit that I occasionally toss a little hot pepper, or a little hot stock, into the recipe too!

Regardless of your preferred investment philosophy, there’s probably an all-in-one solution out there for you now. Along with the 100% equity ETFs, if you want 20% bonds, there are the V/X/ZGRO ETFs. The V/X/ZBAL ETFs cover the 40% bond allocation model. And so on. If you want the fund managers to take care of selling shares for you for income, BMO now has the T Series ETFs, like ZGRO-T & ZBAL-T. These ETFs dispense monthly income at the rate of 6% annualised. Now this distribution is well supported by recent market performance, but you should consult a professional to see if that 6% spending rate is sustainable throughout a lengthy retirement. Global X launched some funds for the high income investor. In 2023, EQCL provided a covered call & leveraged ETF that pays out at about a 12% rate. This sounds like a dream ETF &, since it was launched, it has been. Along with the fantastically high distribution, the underlying share price has continued to grow. But a 12% withdrawal rate might not be a safe bet for anyone starting out with a long retirement horizon. To complement this, Global X also have a globally diversified ETF with only covered calls. And another with only some leverage. What’s your favourite flavour?

With any fund that deviates from just holding & compounding plain old company stocks, it’s worth comparing its total return performance against an equivalent regular version. Regardless of huge differences in yield, total return comparisons offer a very useful perspective on relative performance. This is important to review during different parts of the market cycle. Many of these new funds look good, but they’ve only been active during a period of generally great market growth. Or with some smaller shocks that recovered quickly. Comparisons of these newer funds over recent shorter timelines are not as useful. Be wary of overly optimistic expectations until there’s some history of performance during longer or more severe downturns. Maybe these funds will do well. But getting it wrong with overly optimistic expectations can wreak havoc with retirement planning.

So what’s the message here? Having a big, sloppy, messy set of investments can add work & stress to the job of managing a portfolio. It’s worth comparing such a portfolio to the far simpler portfolios like those asset allocation ETFs we talked about above. If you are confidently outperforming an equivalent all-in-one or asset allocation fund, & if you don’t mind the work, then carry on doing what you’re doing. But if the off-the-shelf ETF is beating your portfolio over the long haul, you might want to ask why. Could the simple recipe be worth considering?

Of course you absolutely should consult a professional before you start moving investments around. There are so many things that can go wrong. You don’t want to get hit with a big tax bill from selling off investments in a taxable account, for example. Nor from shifting things between tax sheltered or tax deferred accounts incorrectly. That’s a huge no-no. Professional assistance may be required to avoid these, & other, potential pitfalls. And finally, if a big, sloppy, messy portfolio is underperforming by a significant amount, it may even be worth paying a professional to manage things. DIY investing isn’t something we’ve sworn an oath of allegiance to! At the very least, it may be worth interviewing a few financial planners & advisors, to get a feel for what they might do differently for you. Even if you decide to continue with the DIY approach, these encounters can be very educational. They may even help you create a better plan. You’ve already got a financial plan though, right?

Okay enough with all that for now, can you guess what’s for dinner tonight! 😜

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

DIY Financial Planning … An Update

Paul - The Wry Eye Guy 2 Comments
Financial Planning on a Napkin!

It’s been almost a year & a half since the post entitled DIY Financial Planning … Is it for You? went up. I have learned a little more about the whole process since then. The biggest lesson is that financial planning is pretty complex & winging it is probably not a good idea. While financial planning is built on forecasts & estimates, it remains crucially important for retirement planning. We need to make a plan with the best estimates available. A plan provides a foundation. Something to work with & measure against going forward.

I continue to like using the Adviice platform to massage the data & predictions into a plan. This platform will not be for everyone. It does take time to learn. I sometimes worry about what might be missing. Starting out, I made errors that I only caught much later in the process. Though I used a pretty straightforward scenario, I still made mistakes & found myself wishing there was a do-over button on a number of occasions. I have to accept most of the responsibility for this.  I should have watched a few of the instructional videos first!

It’s still just $9 a month but, now, you can convert to an even more frugally attractive $49 a year plan. For what you get, this is pretty amazing value. At this price, you get a lifetime of financial planning for what you might pay a professional for developing a one-time plan. Which is out of date when you walk out the door. A plan requires updating & tweaking periodically. Aside from the many changes that can impact our own lives directly, much financial planning is dependent on estimates. Although data driven, these inputs will change over time. Many professional planners, for example, use the projection guidelines published by sources like FP Canada™ & the Institute of Financial Planning. As does the Adviice platform. Now this is good information to plan with. Rather than a DIY investor thinking that the annualised 15% returns from the past decade or so will continue indefinitely into the future! While these projections are done by professionals (& they do put a lot of careful thought & work into this), it’s still just a set of best guesses. Reality will typically be different, either up or down, from the projections. These projections are updated annually. Ideally, we should be reviewing our financial plan following any major changes too. That might be the result of job loss, a health issue, an inheritance, a market crash, a lottery win, & who knows what else.

A retiree might benefit from an annual review, in order to confirm the spending plan for the next year or two. And maybe to confirm that the budget for the retirement home is still intact, should it be needed down the road. All that reviewing & confirming stuff can be more challenging if we need to pay a financial planner to do the reviewing & updating for us. Some of us can take a dismally frugal view of spending money on such things, right? I know it won’t be for everyone, but tools like Adviice can be part of the solution to that problem. With a bit of luck, AI will continue to to take on even more of the financial planning burden. These are complex tools & AI may enhance the usability, while adding some protective guardrails to help defend against our potential for errors.

In this regard, it can be very useful to consider what-if outcomes. Creating alternative scenarios in Adviice is now more comprehensive. For example, you can more easily look at the impact of the earlier demise of one spouse. Previously, you needed workarounds for this. Now you can just choose an age from one of the options in the AI cluster & hit recalculate. The low-cost, single-user version limits the user to one plan, but you can create up to 10 scenarios around that.

The platform does pretty much most of the things you’d expect. With many of these managed by making choices in the AI options. You can start OAS or CPP at different ages. And for each spouse. Set it to prioritise drawing down accounts in different order, beef up tax free savings accounts, limit OAS clawback potential, modify retirement spending up or down, smooth out taxes, manage the size of the after-tax estate you want to leave the kids, & more. Within each scenario, you can target something different. Just select & enable the appropriate options within the AI cluster. You can then use the “Compare” function to see the differences in outcomes between the scenarios. Along with a graphical representation of net worth, the columns of information for each scenario allow for fast & easy comparisons of all the useful information, like income, including CPP & OAS, taxes, lifetime withdrawals & spending, & so on. It’s all pretty cool.

It’s also interesting to colour outside the lines sometimes. You can build a scenario that cuts a portfolio’s value in half, for example. Then play with the AI cluster options to figure out how to survive that scenario. Since there are Monte Carlo simulations built in, you don’t need to do extreme things like this but, hey, it can be fun, terrifying, & educational! You can’t directly modify the FP Canada projection guidelines for returns in the baseline data, nor should we want to for the most part. However, there are workarounds to test with numbers worse, or better, than those guidelines. Create a new scenario & you can then make changes to the return metrics for each account under the “Advanced Options” button. Here you can bring down the returns to, for example, stress test a scenario where you think the guidelines might now be overly optimistic. Great options for those who like to play. And, after all that playing, you might end up with a plan. In fact several variations of a plan!

The easiest way to explore what’s possible is via the Adviice YouTube channel. You can also get more insight at the Adviice community on Reddit. Here, you’ll also get a good handle on how they respond as a company. They’ll acknowledging feature requests & partake in Q&A interactions that will give you a great feel for the user experience. They will also acknowledge where something is lacking & provide feedback on whether it’s being address in future releases. All pretty good & pretty transparent, I think. I have no affiliation but I am enthusiastic about the product & the company. For me, Adviice is a whole lot better than trying to create financial & retirement planning scenarios with my limited spreadsheet skills. Even with the Adviice platform, I don’t trust myself fully. I still might miss something important. So having a professional run a plan periodically is probably wise. A retirement plan is just too important a thing to allow for any unnecessary uncertainty or discomfort.

Inside the Adviice platform menu, you can actually book a review session with a real professional. One that can use the baseline plan that you created within Adviice. There are several advisors on board the platform, offering a range of services. These range from a review, all the way through to a comprehensive planning & support package. Some of the pricing is quite competitive, particularly for an oversight or review exercise. I don’t have any direct experience with these services, so you’ll have to assess this option further before making a decision on whether it might be right for you.

There are other new platforms coming into this space now. I haven’t played with them yet & I don’t know how they compare. But this is great news. Financial planning is so important & I know I wasn’t doing the greatest job with a spreadsheet. These tools can shed more light in the darker corners & that can make for a better plan. Potentially one a better outcome. These are the kind of tools that everyone needs access to. As AI improves, I’m looking forward to seeing them get smarter & easier to use. Hopefully this progress will deliver an even better product & at an affordable price. Easy to use, more idiot proof (I’m the idiot referred to here!), & affordable are key attributes. Many people are discouraged by the cost of a having a plan done by a professional, so affordability does matter. But costs aside, one thing is certain: we can all benefit from having a good plan. Especially one prepared far enough in advance to help us avoid going into a poorly planned retirement!

To sidestep from Adviice for a minute, I’ve also enjoyed playing with the TPAW Planner. This is a very interesting, & free, online planning tool that was developed by Dr. Ben Mathew. You can learn more about it on the Bogleheads thread for Total Portfolio Allocation and Withdrawal, that’s where the TPAW initials come from. This is based on the “lifecycle model” & it considers a variable withdrawal as a more appropriate strategy for retirement. There are a lot of Greek letters used in the formulae employed by the lifecycle model! The TPAW Planner, however, keeps all that under the hood & it is an easy tool to use. But you might not be getting all the detail you need either. It doesn’t get into taxation, all the registered account stuff, etc. so it’s not as all-embracing of detail like we’re used to seeing on Adviice, or on the financial planning video clips from the pros. It doesn’t cover all the bases that tools like Adviice & the other Canadian solutions do. But it might help provide another perspective of what things might look in retirement. It might be a good comparison exercise for any financial plan you might already have. Or to one you develop in Adviice or one of the other tools. TPAW Planner is pretty easy to use, but be sure to spend time reading up & understanding it, a lot, before trusting the results. There is a lot more to financial planning, & to this methodology, than first meets the eye. Simplicity can hide some of the dangers from sight. Even from experienced DIY planners.

Whatever you choose to do, even if it’s a spreadsheet or on a coffee stained napkin, a financial plan is hugely important. Unfortunately, sometimes we don’t know what we don’t know. If you don’t have the knowledge & confidence to do it yourself, keep yourself safe & pay for professional advice. We don’t want to discover we didn’t know something important when we’re half way through retirement, eh?
Of course, the other challenge might be figuring out how to choose a good financial planner. That’s a whole other question but, at the very least, make sure they’re appropriately qualified & certified. Be careful out there!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.