Canadian Money Forum banner

1 - 6 of 6 Posts

·
Banned
Joined
·
1 Posts
Discussion Starter #1
Hi. I have approximately 250,000 in corporate retained earnings in a low interest savings account. This money is essentially my pension fund for when I retire. I want to invest it with a 15 year outlook. My objectives are moderate growth, preservation of capital and favorable taxation. BMO recommended their Selectclass portfolio but it has an MER or 2.47% which I understand is high. I have a discount brokerage account and was thinking of managing the money myself. I contacted my financial advisor but didn't get a definitive answer. Any recommendations or strategies I should follow? I am considering ETF's or dividend funds. Also should I consult with a fee-only financial advisor? Can anyone recommend a good one in the greater Toronto area?
 

·
Registered
Joined
·
5,464 Posts
Depending on your other retirement income resources, $250K is not a substantial amount to provide a pension in retirement.

At the risk of sounding too self-serving, you might be interested in reading the book I co-wrote earlier this year, Pensionize Your Nest Egg. It won't give you specific product recommendations, but it does exactly address your question, which is: how do I create my own pension plan for retirement?
 

·
Registered
Joined
·
1,516 Posts
IMO 2.47% is much too high of MER to place your entire portfolio into. I still have to read Moneygal's book so maybe that will influence my opinion, but my tendency would be the old standby of using your age as the percentage of fixed income and the balance in a combination of Canadian, US and International index ETFs, (with a higher weighting in the Canadian portion).

Don't rush anything. Get lots of advice and do some reading. Aside from Moneygal's book, I would suggest books by William Bernstein.
 

·
Banned
Joined
·
171 Posts
I'm in the same boat as you, and have a CCPC that I use for retained earning investments. I've spent recent years trying to improve my investing knowledge and skills , and have concluded that managed funds make no sense, even with corporation investments.

The tax advantages of corporate-class mutual funds appear tempting, but I've composed spreadsheet after spreadsheet of test calculations, and found that in no situation was it worth having the funds under a managed fund for the long run. Inevitably, the high MER eats away at any tax benefit, and then some. With $250,000, 2.47% MER works out to $6175/yr, which is insane if compounded over a decade.

I've setup up multiple portfolios with the same allocation (TFSA, Personal NonReg, and CCPC NonReg), and have decided that tax consequences are a secondary priority in choosing my investments. Reducing management fees and the comfort level/sleep at night factors far outweigh the small benefits of tax efficient planning (at least for me). In general I'm not looking for monthly income, monthly dividends or interest as priorities in the Corporation for now- as capital gain seems to be a nice happy medium (exact same retirement horizon as you).

I therefore mix Canadian Equity ETF , Cash, Precious metal bullion holdings, Bond ETF, and REIT ETF for good measure.

Good luck with you retirement plan, cheers to retiring in 15 years, and maybe 10 with a good market! :)
 

·
Registered
Joined
·
12,760 Posts
My parents are in a similar situation, but retiring imminently with a corporation that has sold off its hard assets (land, buildings and equipment) and will only have financial assets. What is the best way to transfer these over time to the shareholders? Just dividends?

What are the tax implications for a small business that ceases operations and becomes a holding corp? Is it no longer eligible for the small business tax rate?
 
1 - 6 of 6 Posts
Top