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Retirement Portfolio Construction


Constructing a retirement portfolio is one of the most important, and most misunderstood parts of retirement planning. The right mix of investments, properly positioned across your accounts, can help you weather market volatility, reduce taxes and create reliable income for decades to come.


In this episode of the Retiring Canada Podcast, we explore key aspects of building an enduring retirement portfolio, one designed to provide stability, flexibility and growth through all stages of retirement.


What You'll Learn


  • Two core considerations when building a retirement portfolio

  • How to view your investments through a tax lens

  • Why asset location and asset allocation matter more than you might think

  • A real-world example of how we build portfolios across client accounts

  • and a few action items you can apply to your own plan.


Asset Location: Where You Hold Investments Matters


Asset location refers to where your investments are held across your different accounts, such as RRSP's RRIF's TFSA's or non-registered accounts.


For example, should you hold equities in your TFSA or your RRIF? Bonds in your non-registered account or registered account? The answer can have a big impact on your after-tax return.


In simple terms:


  • Bond or fixed-income investments are better held in registered accounts (RRSP's or RRIF's) where interest income is already fully taxable.


  • Equity investments which generate dividends and capital gains, are generally more tax-efficient in non-registered accounts or TFSA's.


While this is a simplified example, it highlights an important point: no two retirement portfolio are identical. Two retirees may own the same investments, but if they're held in different types of accounts, their after-tax returns can be drastically different.


Example: The Power of Proper Asset Location


Let's take a couple, age 60, with $1.5 million in investments:


  • $600,000 in RRSPs

  • $300,000 in TFSAs

  • $600,000 in a non-registered account

Through our Fundamental Retirement Plan (FRP) process, we determine they'll need $75,000 per year from their investment and can comfortably target a 3.5% rate of return. We also plan to draw from their RRSPs before age 65, then reduce withdrawals once CPP and OAS begin.


Because they likely won't need to touch their TFSAs for 20 years or more, it may make sense to hold more equity within those accounts, allowing tax-free growth over the long term.


This strategy, when paired with thoughtful tax planning and deregistration timing, can make a meaningful difference in preserving retirement income.


Asset Allocation: Balancing Growth and Stability


Asset allocation refers to how your divide your investments, between stocks, bonds, and cash, to match your goals and comfort with risk.


More equities generally mean more short-term volatility but higher long-term potential. More fixed income typically means greater short-term stability but lower long-term growth.


When building a retirement portfolio, it's crucial to find the balance that:


  • Supports your retirement income needs

  • Matches your comfort with market ups and downs

  • And allows your portfolio to sustain itself through decades of withdrawals


At Retiring Canada, we build portfolios designed to withstand two or three years of market uncertainty, so our clients can stay confident during downturns while keeping their long-term growth on track.


Your Action Items


  1. Review your statements. Where are your assets located? Are your investments tax-efficient?

  2. Stress-test your plan. If markets dropped tomorrow, where would you draw income from?

  3. Get advice. Portfolio construction in retirement is nuanced, and this is not the time for one-size-fits-all advice. Work with a professional who understands tax, income, and risk in retirement.


Building a retirement portfolio is about much more than picking the right investments. It's about structuring them strategically to create dependable income while keeping CRA out of your pocket.


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For the links and resources discussed please check out the link in the show notes or visit retiringcanada.ca


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And hey, when it comes to your retirement, don’t take chances. 

Make a plan so YOU can retire with confidence.


All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.

 
 
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