A breakthrough strategy: How to make TFSAs a retirement-income tool

A breakthrough strategy: How to make TFSAs a retirement-income tool

Introducing the retirement-income TFSA

The tax-free savings account is ideal for use by retirees to produce investment income. Here are two approaches to building a retirement-income TFSA, one emphasizing simplicity for do-it-yourselfers and the other a more sophisticated approach. Both portfolios were put together by Neville Joanes, who oversees portfolios for the robo-adviser WealthBar. Exchange-traded funds are used in each case.

ETFStock symbolMER (%)Yield (%)**Weighting (%) iShares Short Term High Quality Canadian Bond Index ETFXSQ-T0.14*1.560 iShares Core S&P 500 Index ETFXUS-T0.11.620 Vanguard FTSE Developed All Cap ex U.S. Index ETFVDU-T0.212.315 BMO Equal Weight REITs Index ETFZRE-T0.615.35

Key points: Low cost of ownership and trading. Well diversified. Easy to maintain. VDU covers off Canada; moving five percentage points of this weighting to a Canadian market ETF is an alternative.

ETFStock symbolMER (%)Yield (%)**Weighting (%) Vanguard Canadian Short-Term Corporate Bond Index ETFVSC-T0.00110.0160.25 Vanguard Canadian Short-Term Bond Index ETFVSB-T0.00110.010.15 BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETFZWA-T0.00720.0460.15 BMO High Yield US Corporate Bond Hedged to CAD Index ETFZHY-T0.00620.0560.1 BMO Laddered Preferred Share Index ETFZPR-T0.0050.0430.1 iShares Core S&P 500 Index ETFXUS-T0.0010.0160.075 iShares Core MSCI EAFE IMI Index ETFXEF-T0.00220.0470.075 Horizons S&P/TSX 60 Index ETFHXT-T0.0003n/a***0.05 BMO Equal Weight REITs Index ETFZRE-T0.00610.0530.05

Key points: Adds exposure to areas such as high-yield bonds, preferred shares and covered-call options. The WealthBar team monitors global markets and adjusts this portfolio as required

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