So, would there be any real advantage to have this over lets say VGRO? other than the potential upside on dividends and monthly payments?
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
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- faken
- Deal Fanatic
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- Sep 21, 2007
- 5083 posts
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- Winnipeg
- Stryker
- Deal Addict
- Jul 23, 2007
- 4135 posts
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In retirement and still own ZBAL in the registered accounts which is still outperforming both VBAL and XBAL on one year and YTD returns.
No change in direction planned. Like john Bogle used to always say, "Stay The Course". Will be staying with this setup for a while yet.
Not much interested in this new VRIF. Too complicated and I'm not yield hungry. The income from our taxable Canadian dividend paying equities are doing just fine.
Another option for those near or in retirement that Dan Bortolotti brought forth just before the pandemic got started in Canada. From what I've been reading lately though you'd have to start shopping outside of the major banks registered account offerings in order to get the highest GIC rates. That could get complicated in itself.
“Is it smart to hold a single exchange-traded fund in our RRSPs?”
No change in direction planned. Like john Bogle used to always say, "Stay The Course". Will be staying with this setup for a while yet.
Not much interested in this new VRIF. Too complicated and I'm not yield hungry. The income from our taxable Canadian dividend paying equities are doing just fine.
Another option for those near or in retirement that Dan Bortolotti brought forth just before the pandemic got started in Canada. From what I've been reading lately though you'd have to start shopping outside of the major banks registered account offerings in order to get the highest GIC rates. That could get complicated in itself.
“Is it smart to hold a single exchange-traded fund in our RRSPs?”
- bubak
- Deal Addict
- Jul 15, 2009
- 1937 posts
- 1052 upvotes
VRIF is essentially the same thing as VBAL except that it automatically sells off or reinvests just enough to smooth out distributions to 4% annually. It saves you the hassle and commissions of selling yourself if those smoothed distributions are what you want. For this convenience you pay 0.07% of your investment each year in higher MER over VBAL, or $70 for every $100k invested.
- freilona
- Deal Addict
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- Aug 4, 2014
- 2623 posts
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- Toronto, ON
More detailed explanation:
https://cutthecrapinvesting.com/2020/09 ... olio-vrif/How is the 4% income determined?
The 4% income value will be based on the year end value of your holdings. If your portfolio value at year end is $200,000, VRIF would pay you $8,000 annually or $666 monthly.
Of course it’s possible that your income stream could increase or decline year-by-year based on the value of your VRIF holdings. If your year-end portfolio value the next year is $180,000 the annual payment would decline to $7,200.
The key here is the Vanguard retirement income ETF – VRIF is looking to create a reliable income stream. It’s not a guarantee for the income to remain steady, nor is it designed to create income growth. Thought it’s possible that VRIF could come through on either count.
Why use the Vanguard retirement one ticket – VRIF?
The main benefit is convenience. You buy the ETF, you get a 4% income stream without having to sell any shares or units. Vanguard does the work for you, the payments arrive in the cash balance in your discount brokerage account.
Could you do this yourself with a ‘traditional’ one ticket portfolio? Absolutely. You would simply sell shares to create the needed income. Though you would likely have trading costs to sell those shares of course. Costs might be a consideration.
Vanguard is not saying this would be more successful than their 60% stock and 40% bond one ticket ETF – VBAL. It’s just a matter of convenience and reliability. With the 10% greater stock exposure of VBAL vs VRIF it’s quite likely that VBAL would have the ability to create greater portfolio income.
Go another step further and Horizons one ticket HBAL is likely to do even better than VBAL. It has greater growth potential and greater tax efficiency.
- FarmerHarv
- Sr. Member
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- May 31, 2018
- 504 posts
- 1011 upvotes
- Saskatchewan
Interesting, thanks for the article. I think we'll keep adding to HBAL (as per The Plan), although we might pick some of this up to replace a couple of high MER bond heavy advisor series balanced/income mutual funds that are getting sold as we move out of Scotia McLeod.
- freilona
- Deal Addict
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- Aug 4, 2014
- 2623 posts
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- Toronto, ON
I don’t think we’ll need a monthly income from RRIF or any other account. We’ll keep 3-5 years of expenses in GICs and HISAs, so selling whatever ETFs we’ll end up with once a year for minimal withdrawals will definitely be cheaperFarmerHarv wrote: ↑ Interesting, thanks for the article. I think we'll keep adding to HBAL (as per The Plan), although we might pick some of this up to replace a couple of high MER bond heavy advisor series balanced/income mutual funds that are getting sold as we move out of Scotia McLeod.
- DealRNothing
- Member
- Jul 30, 2012
- 416 posts
- 404 upvotes
For higher net worth retirees, this product likely makes little sense if one does not have to do a "forced" monthly withdrawal / income. I suspect the real purpose of the product is for individuals that will require monthly income and have no interest in timing or sector selecting for sales/withdrawal. To be honest, in these days of $0-$10 discount brokerage trades, I don't see sales commissions on competing / alternate products a prohibitive issue.
Even for those using VRIF exclusively for a RRSP/RRIF, the 4% return on various sources (i.e. interest, dividends, capital gains, etc) will not meet the minimum RRIF withdrawal rates as prescribed by CRA. In other words, further annual RRIF sales/withdrawals (aka "commissions") will likely be required for most in retirement. At 71, withdrawal rates start at 5.26%.
CRA Prescribed RRIF Withdrawal Rates_71+
- Onlyuo
- Jr. Member
- Jul 16, 2020
- 130 posts
- 23 upvotes
is it better to go with class B shares with some credit union? , they are promoting to receive 4.5% interest, payment are not guaranteed each yr