A Two Fund Solution For Investing In Retirement

A Two Fund Solution For Investing In Retirement

The transition to retirement can be hard enough without having to deal with a mess of individual stocks, mutual funds, and/or ETFs held across several accounts and institutions. Indeed, one of the most sophisticated moves you can make is to simplify your investment portfolio as you head into retirement.

Consider Chris and Liza, a couple in their early 60s who intend to fully retire this year. In fact, Liza (63) retired at the end of last year and Chris (62) will retire this summer. They have combined savings and investments of just under $800,000 across their RRSPs, TFSAs, a LIRA, and a small joint non-registered account. Liza also has a modest pension of $12,000 that began in January this year.

Their desired after-tax spending in retirement is about $60,000 per year. They plan to start their RRSP withdrawals next year and delay taking CPP until at least age 65. That means making some fairly aggressive RRSP withdrawals for a couple of years while they delay their government benefits.

Meanwhile, they’ll have enough income from RRSP and non-registered withdrawals to meet their spending needs, so their TFSAs will stay intact and invested for the long-term (though they no longer plan to contribute to their TFSAs annually).

Two-Fund Retirement Solution

How do they structure their investments to generate the income they need while keeping costs low and the portfolio easy to manage?

Enter the two fund solution for investing in retirement.

You know that I’m a big fan of asset allocation ETFs and believe that many investors can and should simply hold a risk appropriate all-in-one ETF in each of their investment accounts (and reach out to a fee-only advisor as needed for financial planning advice) during their working years.

Not much needs to change in retirement. That’s right – simply carve out 10-15% of your portfolio and use those funds to purchase a high interest savings ETF. Examples include:

  • CI High-Interest Savings ETF (CSAV)
  • Horizons High-Interest Savings ETF (CASH)
  • Purpose High-Interest Savings ETF (PSA)
  • Horizons Cash Maximizer ETF (HSAV)

The cash held in a high interest savings ETF should represent approximately 18-24 months in expected annual withdrawals. Note, you’d need to do this in each account type that you’d expect to withdraw from in retirement. In Chris and Liza’s case, that would include their RRSPs, Chris’s LIRA, and their non-registered investments.

Let’s take a look at the couple’s current account balances and holdings:


  • RRSP – $268,000 (VBAL)
  • LIRA – $121,000 (VBAL)
  • TFSA – $80,000 (VGRO)
  • Non-registered – $22,000 (VBAL)


  • RRSP – $203,000 (XBAL)
  • TFSA – $80,000 (XGRO)
  • Non-registered – $22,000 (XBAL)

Chris expects to withdraw $20,000 per year from his RRSP (RRIF), $6,000 per year from his LIRA (LIF), and $6,000 per year from non-registered investments until his CPP and OAS kicks-in at 65.

Liza will draw $16,000 per year from her RRSP and $6,000 per year from non-registered investments until her government benefits kick-in at 65. 

With Liza’s $12,000 pension, this covers the couple’s annual spending needs, plus taxes.

They both like the idea of the two fund retirement solution and want to queue-up their “cash bucket” this year so it’s ready for withdrawals to begin next January. They also want to be conservative, given their higher than normal first few years of withdrawals, so they opt to hold 15% in cash in their RRSPs and Chris’s LIRA, and 50% in cash in their non-registered investments.

Chris and Liza sell off units of VBAL and XBAL (respectively) so their accounts now look like this:


  • RRSP – $40,200 (CASH) / $227,800 (VBAL)
  • LIRA – $18,150 (CASH) / $102,850 (VBAL)
  • TFSA – $80,000 (VGRO – no change)
  • Non-registered – $11,000 (CASH) / $11,000 (VBAL)


  • RRSP – $30,450 (PSA) / $172,550 (XBAL)
  • TFSA – $80,000 (XGRO – no change)
  • Non-registered – $11,000 (PSA) / $11,000 (XBAL)

The couple will also turn off automatic dividend reinvestment so that the quarterly distributions from VBAL and XBAL will now just land in the cash portion of their respective accounts (and help refill the cash bucket).

Using a RRIF and LIF for Withdrawals

They each decide to open a RRIF account and transfer the high interest savings ETF into the newly opened RRIF. Again, the goal is to queue-up next year’s withdrawals and to reduce any fees they might incur by withdrawing directly from their RRSP.

RRIF minimum mandatory withdrawals won’t begin until the calendar year after the account is opened. Chris also opens a LIF, as that’s the only way to begin withdrawals from his LIRA next year.

Fast forward to next January. Chris starts withdrawing $5,000 per quarter (January, April, July, and October) from his RRIF – literally selling off units of CASH.TO to meet his withdrawal needs. He also starts withdrawing $500 per month from his LIF account, again selling off units of CASH.TO as needed.

Liza also withdraws from her RRIF quarterly, taking $4,000 every January, April, July, and October. 

The couple dips into their non-registered account to top-up spending as needed, and earmark the remaining cash for taxes the following year.

Final Thoughts

We often end up with a tangled mess of investment accounts and investment products by the time we get to retirement. It’s common to have accounts at multiple institutions, group savings plans from previous employers, and a mix of stocks and funds from dabbling in different investment strategies over time.

Fight for simplicity as you enter retirement. Consolidate accounts into one institution – ideally at the brokerage arm of your main bank, but an online broker like Questrade is fine. Consolidate your investments from a messy mix of stocks and funds to a low cost, risk appropriate, globally diversified all-in-one ETF and then carve out 10-15% of expected cash withdrawals to hold inside a high interest savings ETF.

This creates a subtly sophisticated, dare I say elegant, investing solution that you can hold throughout retirement.

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  1. Dawn on June 16, 2023 at 5:25 pm

    Robb, how do we know that this $800,000 portfolio plus pensions is sufficient to fund $60,000 annually for possibly 40+ years? I guess the pensions are ultimately doing most of the heavy lifting.

    • Robb Engen on June 16, 2023 at 6:37 pm

      Hi Dawn, remember they’ll have CPP and OAS (x2) kicking in at 65, at which time they can reduce the RRIF and LIF withdrawals to the minimum required amount.

      The non-registered funds will get used up quickly, but they’ll have their TFSAs intact and invested for many years. These can act as a funding source for larger one-time expenses that may arise down the road (new vehicle, home renos, bucket list travel, financial gifts to adult children, etc.).

  2. Bryan on June 16, 2023 at 6:17 pm

    I like this idea of being invested, and still having your cash withdrawals work for you. Moving forward, would they rebalance these accounts annually? Or every few years when the cash ETFs are depleted? I’m curious what the next 5-10 years after 65 might look like.

    • Robb Engen on June 16, 2023 at 6:48 pm

      Hi Bryan, you can rebalance annually (partially through the dividends and interest accumulating quarterly) by selling off some VBAL units to top-up the cash balance in the RRIF so you always have 18-24 months worth of expected withdrawals.

      As I mentioned in the above reply, the expected RRIF and LIF withdrawals will decrease once CPP and OAS kick-in.

      The tricky part is giving yourself permission to spend down the balances aggressively while you wait for the government benefits to start. Some delay until 70, so this can be a longer period of time. For some retirees it does not feel good, psychologically, to deplete their savings.

      • Greg on June 17, 2023 at 4:45 am

        Hi Robb, thanks for showing this option as a way to have the 2 year cash cushion and still earn a good return while drawing down.

        Curious if DRIP is turned on in the LIF/RRIF HISA fund or is the div payout left as cash to be used as part of the quarterly withdrawal?


  3. Darby on June 17, 2023 at 3:37 pm

    I am interested in the high interest saving ETFs. Are there fees for selling them as there are for other ETFs? If there are, it would appear that Chris may incur up to $160 in fees when he sells the CASH quarterly in his RRIF and the CASH monthly in his LIF. That’s a lot of fees. Liza could incur another $40 in fees making her quarterly withdrawals from her RRIF. That could be as much as $200 in fees every year. Seems like a lot and that doesn’t take into account when they sell VBAL and XBAL to replenish the high interest saving ETFs. What am I missing?

    I am also wondering if having CASH and/or PSA in their unregistered accounts along with XBAL and VBAL complicates the adjusted cost base record keeping for tax purposes. I know their unregistered account is small but what if it isn’t? Is it still a good strategy?

    • Robb Engen on June 17, 2023 at 4:32 pm

      Hi Darby, it depends on the brokerage platform.

      RBC, TD, and BMO all block the purchase of third-party high interest savings ETFs and instead steer clients to their own money market funds (BMT104, for example). These can be bought and sold without incurring a commission.

      National Bank Direct Brokerage offers zero-commission ETF trading, so that’s an option for reducing fees.

      Questrade charges $4.95 per ETF sale, so in that case you might want to limit your withdrawals to quarterly or even less frequent than that.

      DIY investors should be tracking their ACB (adjustedcostbase.ca is a well known site for this) and tracking their activity in these accounts.

      That’s no reason to avoid using this strategy or to avoid withdrawing from this account. If you want to simplify further, just transfer the cash to an actual high interest savings account.

  4. Terry Newcombe on June 21, 2023 at 3:01 pm

    I like the use of the CASH ETF. But can you tell us, please, how you decided how much of their withdrawals come from their RRSPs vs their non-registered accounts (e.g., Chris’ RRSP=$20k, LIF=$6k, non-reg=$6k)? Is it not wise to use up the non-registered savings first? Is this something about how to balance reg vs non-reg withdrawals to stay near the top of your lowest possible tax bracket?

  5. John on June 22, 2023 at 10:21 am

    This is pretty much what I do, including not DRIPping VBAL dividends and buying HSAV instead to have cash available.
    My VBAL is underwater, but only have to sell a small amount annually.

    • James on June 26, 2023 at 1:01 pm

      Don’t understand why they stop contributing TFSA?

  6. Alex on September 17, 2023 at 6:15 am

    What’s the difference between a High Interest Savings ETF to regular high interest savings account? Eg. EQ banking high interest savings account.

    • Robb Engen on September 17, 2023 at 7:30 am

      Hi Alex, regular savings accounts are covered by deposit insurance (CDIC protected). HISA ETFs are not insured, but they offer higher yields. You also need a brokerage account to purchase them, and some brokers (TD and BMO) don’t allow their clients to purchase these ETFs.

      • Alex Gonzaga on September 17, 2023 at 4:50 pm

        Are the dividends of these high interest ETF considered Canadian Eligible?

        • Robb Engen on September 17, 2023 at 4:53 pm

          Nope. It’s interest income.

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