The 60/40 portfolio: A phoenix or a dud for retirees? + MORE Oct 26th

For Canadian investors, one of the biggest shocks of 2022 is how poorly balanced mutual funds, exchange-traded funds (ETFs) and portfolios have performed. Investors with funds based on the classic pension fund asset allocation of 60% in stocks and 40% in bonds have been bewildered to experience losses on both sides of the equation. In “normal” times, the idea is that steady-eddy bonds typically provide modest gains to offset any bear-market losses sustained by the stock holdings in a down market. 

But these are not normal times. 

Case in point: a fund I own in various accounts, VBAL or Vanguard Balanced ETF Portfolio. When I last checked, it was down 15% year to date, as of early October. (I’ll provide Vanguard’s perspective on this below.)

I’m not picking on Vanguard here—you could say the same of its direct rival equivalents, BMO’s ZBAL and iShares’ XBAL, and so on.

Questioning the 60/40 portfolio for retirees

Recently Andrew Hallam, author of Millionaire Teacher, wrote a piece for the Globe and Mail about how young ETF investors should be dancing in the streets because of the chance to buy equity ETFs at lower prices…

I am a Canadian teacher looking to withdraw my pension early. I realize that 50% to 55% of my pension will be taken as a penalty. I have many questions before I initiate the process. I am 43 and have put about 15 years into my pension, having taught in Alberta, Nova Scotia and Nunavut. The bulk of my teaching was in Nunavut.

I am wondering what the process is to gain access to my pension. I am currently on hold with Pension Canada and thinking I should hang up, as I am not sure what to say. I am concerned that they can refuse my request based on what I say. Do they reserve the right to deny me my pension if they do not like my reasons for withdrawing it so early? Or is it none of their business? It is not for medical reasons, only financial/personal ones. 

I also heard the pension needs to go through a third party, like RRSPs with my bank, before it can be released to me and that it is a good idea to initiate this process two to three months ahead of when I want the lump sum, as that is the approximate processing time…