Personal Finance

Retirement Income Question

  • Last Updated:
  • Jan 11th, 2021 3:21 pm
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH

Retirement Income Question

I have some friends that are seniors and close to retirement (or maybe retirement already).
Context:
They are an elderly couple (66 and 65), my neighbours here in Toronto. They have their own house which is paid off. They are immigrants, they've been here 40+yrs. They were working random jobs - cleaning jobs, cash jobs, labour work etc. Enough to say, no RRSP, no company pensions, or CPP or anything like that. They were working regularly until Covid hit, last year. Haven't been able to find to work since. They've told me that they are too old to do any more labour work and I think they are set on trying to retire asap.

Expenses: luckily they don't have any rent or mortgage to worry about. Besides regular expenses like property taxes, gas, utilities, phone/internet etc. maybe some regular maintenance.
They don't take vacations or travel so no expenses there.

Savings: they have about 75k in just a savings account.
My question is: I want to suggest a monthly income fund/place to put their 75k so they have some income they can count on. What is the best place for them to invest or put their savings so they can maximize their monthly income. And since they wont' be working they would need it in a stable place (not something risky but also max return monthly for their regular expenses)

Any suggestions?
44 replies
Deal Addict
Mar 3, 2018
1974 posts
1978 upvotes
GTA
Take a look at Vanguard ETF called VRIF. Basically for retired folks that pays about 4% dividends. Payout is monthly.
Deal Addict
Jun 12, 2008
1171 posts
642 upvotes
Ripley
So for 40+ years they didn't file income tax?
Sr. Member
Oct 17, 2008
586 posts
137 upvotes
Earth
Have they considered renting out their basement? May just be some extra income...
Member
May 24, 2018
460 posts
291 upvotes
Ontario
Whether to save or to invest, I think this should happen inside TFSA (... I don't see TFSA mentioned in post #1).
Deal Addict
Jan 19, 2017
4430 posts
2570 upvotes
surfer007 wrote: I have some friends that are seniors and close to retirement (or maybe retirement already).
Context:
They are an elderly couple (66 and 65), my neighbours here in Toronto. They have their own house which is paid off. They are immigrants, they've been here 40+yrs. They were working random jobs - cleaning jobs, cash jobs, labour work etc. Enough to say, no RRSP, no company pensions, or CPP or anything like that. They were working regularly until Covid hit, last year. Haven't been able to find to work since. They've told me that they are too old to do any more labour work and I think they are set on trying to retire asap.

Expenses: luckily they don't have any rent or mortgage to worry about. Besides regular expenses like property taxes, gas, utilities, phone/internet etc. maybe some regular maintenance.
They don't take vacations or travel so no expenses there.

Savings: they have about 75k in just a savings account.
My question is: I want to suggest a monthly income fund/place to put their 75k so they have some income they can count on. What is the best place for them to invest or put their savings so they can maximize their monthly income. And since they wont' be working they would need it in a stable place (not something risky but also max return monthly for their regular expenses)

Any suggestions?
Not even $1 of CPP over 40 yrs in Canada? Must be mostly cash jobs. They should qualify for max payment from OAS + GIS which should be at least $2000/month for both. Plus GST credit payment. Since they are not big spenders, that should cover basic monthly living expenses. $75K of savings won't provide too much help. I suggest just putting it in TFSA with high interest saving acct for emergency expenses.
Deal Guru
Feb 9, 2009
11011 posts
9499 upvotes
Man if only millennials today could afford a house in toronto. Lucky ducks!

They got a million dollar gold mine. They can easily sell their home, net a mil or more, buy a home in a secondary city like London and unlock some funds so they can go enjoy life like travel or go live in a foreign country....this is worst case scenario or live a little more comfy scenario.

If they are ok to live minimal go with what porticoman or dave the dude suggested. depends on their risk tolerance if they are willing to accept short term losses. annuity is a possibly but if they have heirs i recommend a high dividend etf fund so they can live off the income and let the capital grow (which if they live for 20+ more years will grow) in which they can pass off the money to their heirs.

I think sit down with them and see what their risk tolerance is and what their goals in retirement are...
Deal Expert
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Feb 8, 2014
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I seem to repeat this often but my first suggestion is a fee based financial planner.

That said have they applied for CPP?
Whether they should or not is also dependent on their health, delaying does increase the entitlement but if they burn their 75K its hard to say whether they would be better off or not in the end. A financial planner would be able to figure this out after gathering more information from them.

We also don't know their exact expenses, whether CPP for both of them would cover it.
They might also consider selling the house and moving to a lower cost of living/lower house priced city and then using the difference to augment their income. Depending on how much money that difference is could be a very big deal if they unlock 6 figures of equity.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
zeddy wrote: So for 40+ years they didn't file income tax?
I believe they file every year because they go to HR Block
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
andy_ca_cn wrote: Have they considered renting out their basement? May just be some extra income...
Yes actually, that was what I was suggesting to them. It's a small bungalow but the basement is partially finished, it's totally rentable.
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
Yes, so the lower cost city was something I suggested but I think they're a little settled in the are they are in. and its convenience to the shops, stores they go to. But the CPP, does that apply to them ?
I'm not sure how CPP works. I believe they have been filing their taxes regularly, is that something they can access?


Quentin5 wrote: I seem to repeat this often but my first suggestion is a fee based financial planner.

That said have they applied for CPP?
Whether they should or not is also dependent on their health, delaying does increase the entitlement but if they burn their 75K its hard to say whether they would be better off or not in the end. A financial planner would be able to figure this out after gathering more information from them.

We also don't know their exact expenses, whether CPP for both of them would cover it.
They might also consider selling the house and moving to a lower cost of living/lower house priced city and then using the difference to augment their income. Depending on how much money that difference is could be a very big deal if they unlock 6 figures of equity.
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
Yeah totally, it's gonna take me another 20yrs before I can pay off my house! Different time, we missed it.

I mentioned the smaller town bit, my feeling was they were kinda settled in their space. Feels like they have their little routine they've been doing for years, but they might not have any other option.

The Vanguard fund, 4%? is there one closer to like 10%?
Sanyo wrote: Man if only millennials today could afford a house in toronto. Lucky ducks!

They got a million dollar gold mine. They can easily sell their home, net a mil or more, buy a home in a secondary city like London and unlock some funds so they can go enjoy life like travel or go live in a foreign country....this is worst case scenario or live a little more comfy scenario.

If they are ok to live minimal go with what porticoman or dave the dude suggested. depends on their risk tolerance if they are willing to accept short term losses. annuity is a possibly but if they have heirs i recommend a high dividend etf fund so they can live off the income and let the capital grow (which if they live for 20+ more years will grow) in which they can pass off the money to their heirs.

I think sit down with them and see what their risk tolerance is and what their goals in retirement are...
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
That's interesting, what is annuity ?
How does the CPP work exactly? is that something that they access by applying for it or does it kick in automatically?
porticoman2 wrote: OP, I can relate, because my wife & I are seniors age 73 living in the GTA.

your friends with no income from RRSP/RRIF or CPP will be getting a guaranteed income from the Canadian government.

https://www.canada.ca/en/services/benef ... ab2-1.html

of approx $1200/mth each person

on top of that seniors property tax credit, Trillium benefit & HST.

approx combined $2600/mth

on the basis they dont have investments or rental property, with just $75, they could plonk it into an TFSA so that any income wouldn't be taxable. .... do they/dont they?

my guess based on personal knowledge is that their monthly expenses are less than $2000/mth

at their age they need to safeguard their capital .... and putting into any fund or ETF there are zero guarantees.

they could find an HISA that could pay them approx minimum 1.25% inside a TFSA.

Or consider buying an annuity with the $75k that will pay them approx $300/mth for life

.
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
I believe they have been filing taxes regularly but I'm not sure how CPP applies? or if it does at all...
What is GIS?

Yeah i fgured the 75k isn't much, I was hoping to get them in to something that gives them the max return as possible.
ml88888888 wrote: Not even $1 of CPP over 40 yrs in Canada? Must be mostly cash jobs. They should qualify for max payment from OAS + GIS which should be at least $2000/month for both. Plus GST credit payment. Since they are not big spenders, that should cover basic monthly living expenses. $75K of savings won't provide too much help. I suggest just putting it in TFSA with high interest saving acct for emergency expenses.
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Feb 8, 2014
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surfer007 wrote: Yes, so the lower cost city was something I suggested but I think they're a little settled in the are they are in. and its convenience to the shops, stores they go to. But the CPP, does that apply to them ?
I'm not sure how CPP works. I believe they have been filing their taxes regularly, is that something they can access?
If they are legal immigrants who have been paying taxes for 40 years they should be eligible.
The longer you delay CPP/OAS/GIS the more you get but on the flip side if they need income 75K is probably not going to buy them 5 years of living expenses.
Applying is a specific process, i don't know it but i assume they can contact Service Canada to get more information. Though these days i'd try calling them.

I would be very hesitant to rent out their basement. Tenants are a headache and unless they get lucky its often not worth the trouble. And if they get professional tenants they will probably end up screwed out of far more than the rent they made.
In Ontario only those who know the laws inside out and have 6 figures to blow should become landlords. Unless they enjoy pain.
Could they handle this?
eviction-professional-tenant-2424361/

Once again a fee based financial planner is a worthy investment.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
[OP]
Jr. Member
Nov 30, 2011
104 posts
10 upvotes
SCARBOROUGH
Do you recommend any planners?
is it worth to pay?

Quentin5 wrote: I seem to repeat this often but my first suggestion is a fee based financial planner.

That said have they applied for CPP?
Whether they should or not is also dependent on their health, delaying does increase the entitlement but if they burn their 75K its hard to say whether they would be better off or not in the end. A financial planner would be able to figure this out after gathering more information from them.

We also don't know their exact expenses, whether CPP for both of them would cover it.
They might also consider selling the house and moving to a lower cost of living/lower house priced city and then using the difference to augment their income. Depending on how much money that difference is could be a very big deal if they unlock 6 figures of equity.
Deal Guru
Feb 9, 2009
11011 posts
9499 upvotes
surfer007 wrote: Yeah totally, it's gonna take me another 20yrs before I can pay off my house! Different time, we missed it.

I mentioned the smaller town bit, my feeling was they were kinda settled in their space. Feels like they have their little routine they've been doing for years, but they might not have any other option.

The Vanguard fund, 4%? is there one closer to like 10%?
10% naw thats very risky. 4% is pretty reasonable. High Dividend ETF can pay more. The TD Q Dividend ETF is around 6% yield but mind you the dividend payout can be different based on each distribution so it may not be 6% in a straight line but its roughly there.

Or they can buy 5-6 individual stocks that yield over 4% that pays them increasing dividends every year>

Some stocks that yield over 4% that will be here nearly forever:

All the banks. (TD is my fav pays around 4.25% yield or Scotiabank and CIBC can pay you over 5%). (note banks cannot increase dividends right now cause of regulation but that should change soon)

BCE (6%). Telus (around 4.75%).

Canadian Utilities (5.5%). Emera (4.9%). Capital Power (5.6%)

TC Energy (6%).

Solid names. Wont be going anywhere. Good solid dividends and capital that will grow over time. yes the share price can go up and down but if they can live off the yield that should be ok. You can easily average 5% out of that. $75k = $3750 = $312.50 monthly (and divys that will grow every year most likely).
Last edited by Sanyo on Jan 9th, 2021 9:20 pm, edited 1 time in total.
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surfer007 wrote: That's interesting, what is annuity ?
How does the CPP work exactly? is that something that they access by applying for it or does it kick in automatically?
An annuity is something you purchase that gives you a guaranteed return every month for life. But you lock your money in, you can't ever get more then the agreed upon amount. You need a new car or money for medical expenses (common when your a senior) it can't be done. Also if there are people they want to leave money to the annuity means nothing is left unless they get a guarantee of at least their principle back and they die before that happens.
In this case i think its a bad idea. Plus its not enough to live on anyways.
surfer007 wrote: I believe they have been filing taxes regularly but I'm not sure how CPP applies? or if it does at all...
What is GIS?

Yeah i fgured the 75k isn't much, I was hoping to get them in to something that gives them the max return as possible.
This is not how it works. You can get higher returns, but at greater risk. If the market goes down their returns will tank and they will be withdrawing money which means if the market recovers they have locked in their losses.

You are in way over your head here.
Its great that you want to help them but you do need to find them professional help.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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surfer007 wrote: Do you recommend any planners?
is it worth to pay?
I don't have any names to provide but its very worth paying for. And you want someone fee based so they are not steering them into a product they sell and making a larger commission by giving them bad advice.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Feb 8, 2014
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Sanyo wrote: 10% naw thats very risky. 4% is pretty reasonable. High Dividend ETF can pay more. The TD Q Dividend ETF is around 6% yield but mind you the dividend payout can be different based on each distribution so it may not be 6% in a straight line but its roughly there.

Or they can buy 5-6 individual stocks that yield over 4% that pays them increasing dividends every year>

Some stocks that yield over 4% that will be here nearly forever:

All the banks. (TD is my fav pays around 4.25% yield or Scotiabank and CIBC can pay you over 5%). (note banks cannot increase dividends right now cause of regulation but that should change soon)

BCE (6%). Telus (around 4.75%).

Canadian Utilities (5.5%). Emera (4.9%). Capital Power (5.6%)

TC Energy (6%).

Solid names. Wont be going anywhere. Good solid dividends and capital that will grow over time. yes the share price can go up and down but if they can live off the yield that should be ok. You can easily average 5% out of that. $75k = $3750 = $312.50 monthly (and divys that will grow every year most likely).
312.50 monthly won't cover the expenses of two people living in TO. I wonder what their property tax is, never mind utilities and food and transportation.
In fact in Rand McNally they wear hats on their feet and hamburders eat people

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