Retiring on bonds? + MORE Jun 24th

Surprisingly, securing a CPP solution, once considered impossible, seemed to be a breeze. Now is the finance minister’s chance to solve another pension accident waiting to happen: Canada’s ghost pensions.

After the federal and provincial finance ministers announced the expansion of the Canada Pension Plan earlier this week, many were left wondering how much more they’d have to pay and how it would measure up to the boosted retirement income they’d receive.
To give us an idea of how much more Canadians will see siphoned off their paycheques and to determine the winners and losers of the plan, we worked with pension and retirement experts at Morneau Shepell to crunch the numbers and answer some of your burning questions regarding the new CPP.
How much smaller are my paycheques going to get?
Wait a minute! Before we dive deep, let’s clarify something: The following analysis is based on the projected “Year’s Maximum Pensionable Earnings” (YMPE), a figure defined by the Canada Pension Plan as the maximum cap for what is fair game to be “payroll taxed” by the government. That cap usually grows each year. The federal government also announced it would raise the salary cap so that higher-income earners would also contribute and receive more CPP…

This is the fourth post of Jonathan Chevreau’s new column, Retired Money, which will explore smart ways to draw down income in retirement and semi-retirement. 
Just how tough is it for modern retirees to generate a liveable income solely from fixed-income investments? According to BMO Asset Management, 20 years ago a 65-year old wishing to generate $50,000 a year from a bond-heavy portfolio needed almost $1 million. That assumes a “vanilla” portfolio two thirds in bonds and a third in stocks. At a 5.3% yield, it required a portfolio worth $946,846*, according to Robert Armstrong, vice president and Head of Managed Solutions at BMO.
Today, with a similar portfolio generating a yield of about 2.3%, it takes a portfolio of $2,183,271* to generate the same $50,000 in investment income, Armstrong calculates.
There was a time when it was relatively easy to manage clients’ bond books, Armstrong said in a recent presentation titled “Successfully Investing in Retirement.” Fixed-income investors enjoyed a 30-year-plus bull market as interest rates fell steadily between 1980 and 2016…

Q: Is there a best month of the year to retire?
—Dory Urbano, Vancouver
A: It really depends on how you define “best.”  If you follow astrology, a consultation with the stars will tell you what’s best. If you play golf, I’d say April is best so you can plan your summer tee times unencumbered. But from a financial perspective, there isn’t really a best time to retire. That said, there are still a few factors to take into consideration. For instance, you’ll want to make sure you work long enough to qualify for the richest pension possible. And if you have a bonus or retirement allowance you might want to consider scheduling your retirement in December so that the bonus pays out in the following tax year, when you have no salary income. Whichever month you choose, I hope you have the best retirement ever.
Leave your question for Bruce Sellery »
More expert answers:
Do I qualify for the pension tax credit? »
What can I hold in a non-registered account? »
How to pay less tax on RRSP withdrawals »
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A briefing book prepared last fall for incoming Finance Minister Bill Morneau warns that Canada’s spending on public pensions is dramatically lower than many other rich countries — even though private-sector pension coverage has deteriorated.