The Long and Winding Road


This past week I received the first payout from my Registered Retirement Income Fund. It marks the end of a 44 year history of accumulation and marks the decumulation and taxpaying phase of my personal pension savings. It’s the end of a long and winding road to be sure.

A RRIF is what you get when at age 71 or earlier you transform your RRSP to pay out regular annual payments. An RRSP is Canada’s equivalent of a US 401(k) or UK SIPP. I got started with an RRSP as early as 1973 – when I was 26. The “other” private retirement instrument – TFSA – wouldn’t exist for another 45 years, so it was never a part of my retirement plan.

An RRSP is tax deferred – you deduct your contributions during your working life and hopefully pay less taxes when you take out the income in your 70s. The taxman is still hanging around though waiting to get a cut of your income.

Today we see a lot of criticism of Millennials as being financially illiterate, economically challenged and risk averse. But looking back at what I knew then and the mistakes I made, I can hardly claim any better knowledge. For example:

  • I started out my RRSP by setting up an endowment insurance policy (gah!) and later on converting it to some brain-dead mutual funds which I eventually sold.
  • I did not stay long enough with any employer in my early years to get vested in a good Defined Benefit plan. Mind you it wasn’t like today when 2 years is enough to “vest” the employer contributions. In fact one of my employers didn’t even deduct anything for pension plans – and as a result I got nothing. At least a couple of the other companies gave me back my contributions with interest.
    One would think I didn’t lose anything with the employer who “funded” the pension plan for me – but I lost valuable headroom in my RRSP that I never got back – as a result I contributed less than I would have liked.
  • When I had to invest my own returned pension money in an RRSP I went to the bank and bought bond funds at a time when interest rates had started to climb and the value of the funds fell. No advice back in those days, or at least I didn’t pay attention if there was.
  • Eventually in my mid 30s I got a financial advisor and my RRSP was somewhat straightened out. However I didn’t listen to him all the time and at least once gave in to emotion and converted all my equity assets to fixed income for a while. Eventually I came to my senses before it was too late.
  • My advisor was a pretty good guy but looking back on it I am not sure every decision he made was in my best interests and that his interests were secondary.
  • I never consolidated my retirement and non-retirement savings with the same financial advisor so I missed out on some holistic tax structuring that could have been done.
  • Fortunately for me I did get a job with Unilever and had close to 20 years in a decent Defined Benefit pension scheme. My RRSP grew over that time – I was careful to maximize my contribution every year – and during my retirement years I didn’t collapse it to a RRIF until this year. But at the end of the day I probably could have done better if I had been smarter.

Today I would likely use a robo-advisor and start off maximizing my TFSA. And no insurance thank you.

In spite of all my stupidity, my RRIF can provide us with some useful inflation protection and possible chronic health insurance as we get into our dotage. So at the end of the long and winding road I’m glad I did something positive with what I knew at the time. Hindsight is sure 20/20 though.



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