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RESP: near withdrawal timeline investing / AA

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  • Oct 22nd, 2016 7:25 pm
Sr. Member
Jan 14, 2010
701 posts
249 upvotes
Central Ontario

RESP: near withdrawal timeline investing / AA

I've seen most of the threads about RESP investing, as well as read CCP and other blog advice on asset allocation at various life stages. Most threads here discuss new RESPs. I've got 2-6? years until start to full draw down (family plan, different aged children), so am trying to shift toward FI to protect (relatively) soon-needed funds. At this point, according to some advice, I am still significantly overweighted in equities at 30%.

I've always had a GIC ladder, and therefore have slowly realized the sad drop in rates over the past few years. Psychologically, though, it's crossed a line. At RBC DI, rates for 2y max out at 1.55%. And those are for a lot of mortgage trust co., any concerns about housing/mortgage changes relative to investing with these? I realize GICs are CDIC protected, but if it's a hassle to collect on that, I do need this money quickly.

Even if I stretch to 5y terms, max is 1.88% (and I can't ladder to that time frame for very much longer). ETF bond funds are seen as longer term investments. Am I simply screwed for the next few years as my plan goes into drawn-down mode?
4 replies
Deal Addict
Jan 20, 2016
2028 posts
1013 upvotes
Houston, TX
It was proposed to have about 60% bonds 40% stocks with 2-4 years remaining till FULL withdrawal, with 100% bonds or GIC with 2 and less years remaining.

You also can make laddered GIC or "market-tied" (like TD promotes) but return will be 1.5%-2% yearly...

P.s. part of "university" money will come from bigger tfsa portfolio. Yes, this will lack some "free" money (but there is a cap anyway) but probably will be compensated by better returns from more stock-tilted portfolio as it as a whole has longer horizon (and better returns than GIC). Also it's more flexible in terms of withdrawal or if someone will skip the uni :/
Make the face great again
Sr. Member
Jan 14, 2010
701 posts
249 upvotes
Central Ontario
asa1973 wrote: It was proposed to have about 60% bonds 40% stocks with 2-4 years remaining till FULL withdrawal, with 100% bonds or GIC with 2 and less years remaining.
Curious where you got that; none of my sources propose that level of risk.
CCP RESP AA chart (suggests progressing down 10% each year after age 8 to 0% eq once withdrawing)
MoneySmart Blog RESP AA (suggests conservative be 25% eq up until age 17, 0% once withdrawing)
Cash Preservation in RESP “There’s a point where you have to stop trying to grow those assets and protect the capital, because you will not have the time to make up any potential losses that the market may give you,” Mr. Armstrong says.

Not sure how a TFSA has a longer horizon to warrant different AA if you are using the funds for education in a limited timeframe.

As for the comment about GIC ladder, that's what I identified as my problem in the first post. Any potential solutions?
Deal Addict
Jan 20, 2016
2028 posts
1013 upvotes
Houston, TX
Curious why you surprised by 40% stocks 4 years before 18, as it's quite inline with CCP recommendations...
But when you come to withdraw phase and have to be 100% fixed income it's very few options here. Medium term bonds probably the most profitable one with less risk, but the only guaranteed one is either GIC or saving account, but returns are 1%ish. No free lunch here, no risk - no returns.

TD offering some kind of step-up payments with 3-7years duration, average return about 2% yearly. Not sure if it's available outside TD, they offering to me as TDDI client. Not a big difference from GIC however.
Make the face great again
Sr. Member
Jan 14, 2010
701 posts
249 upvotes
Central Ontario
Thanks, sorry, I misunderstood. You originally wrote 40% equity with 2-4y until FULL (emphasis yours) withdrawal. I thought that meant full account depletion (ie: 3rd or 4th year uni for youngest child).

So in other words, I (and others) are screwed. I guess enjoy the 20+% I made for the last 16y, and be content with GICs. I don't see rates climbing to rescue the scenario.

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