Vanguard’s VRIF: Your New Single Ticket Retirement Income Solution

Vanguard’s VRIF: Your New Single Ticket Retirement Income SolutionTwo years ago, Vanguard launched a suite of asset allocation ETFs that changed the game for DIY investors in their accumulation years. These balanced ETFs provide low-cost, global diversification, and automatic rebalancing with just one fund.

Today, Vanguard announced another evolution in the asset allocation ETF space with a new product aimed at retirees in the decumulation phase. The Vanguard Retirement Income ETF Portfolio, or VRIF, uses global diversification and a total return approach to provide steady monthly income at a target payout rate of 4% per year.

ETFTSX SymbolManagement feeTarget annual payout
Vanguard Retirement Income ETF PortfolioVRIF0.29%4%

Saving for retirement is by far the number one objective for investors and Vanguard believes that space is well covered with their now flagship products like VEQT, VGRO, and VBAL. An investor in his or her accumulation phase could simply move down the risk ladder, switching from VEQT to VGRO to VBAL as they get closer to retirement age.

But what to do with your ETF portfolio in retirement? It’s a question I get every time I mention the benefits of investing in asset allocation ETFs. Prior to today, the answer was to sell ETF units as necessary to meet your spending needs or rely on smaller, quarterly distributions of around 2% per year.

With VRIF, investors get a predictable monthly income stream (targeted at 4% per year) to help meet their regular spending needs and not have to worry about rebalancing and/or selling ETF units.

Indeed, you could think of VRIF as the retirement equivalent of VBAL.

Vanguard Retirement Income ETF Portfolio (VRIF)

VRIF is a single-ticket income solution. It’s a wrapper containing eight underlying Vanguard ETFs that offer global exposure to more than 29,000 individual equity and fixed income securities.

Related: Top ETFs and Model Portfolios in Canada

Here’s a look under the hood of VRIF:

Asset classETFWeight
Canadian equityVCN9.0%
Canadian aggregate fixed incomeVAB2.0%
Canadian corporate fixed incomeVCB24.0%
Emerging markets equityVEE1.0%
U.S. fixed income (CAD-hedged)VBU2.0%
U.S. equityVUN18.0%
Developed ex North America equityVIU22.0%
Global ex U.S. fixed income (CAD-hedged)VBG22.0%

Here is the geographic breakdown of VRIF’s holdings:

  • Canada – 35%
  • United States – 20%
  • Developed ex North America – 44%
  • Emerging markets – 1%

VRIF focuses on a total return approach using an approximate asset allocation of 50% equity and 50% fixed income. This approach allows the portfolio to payout from capital appreciation in years when the portfolio yields fall below the target.

A total-return approach is more tax-friendly because VRIF can distribute from capital appreciation. In that case, only the difference between the cost basis and the sale price is taxed. Meanwhile, the full dividend distribution from underlying securities is taxable.

Vanguard highlights the transparency of VRIF and its underlying holdings, saying because its building blocks are clear, you always know what you’re investing in and why, adding that regular monitoring and rebalancing helps maintain exposures across key sub asset classes and risk levels.

VRIF’s 0.29% management fee (before taxes) is roughly one-third the cost of any comparable monthly income mutual fund in Canada. Costs matter, especially to retirees with sizeable portfolios who are looking to keep more of their returns and protect their investment base.

I spoke with Scott Johnston, head of product at Vanguard Canada, about the launch of VRIF and got the chance to ask him some questions about the new product.

He said the success of Vanguard’s asset allocation ETFs were a big part of the background on creating VRIF. Both investors and advisors were looking for the simplicity of a balanced ETF, but something that could deliver regular and stable income to help achieve retirement income goals.

Investors with a keen eye will notice that the underlying holdings of VRIF don’t generate 4% income. Mr. Johnston says with the total-return focus, VRIF will naturally pay out about 60% of its distributions through interest and dividends, with the remaining 40% coming from capital appreciation.

I asked if that would lead to the dreaded ‘return of capital’ and Mr. Johnston said that would only be expected to occur one out of every ten years.

“VRIF has a 5% annual return target,” he said.

One benefit of VRIF’s total return approach and transparency with its underlying ETF holdings is that it doesn’t have to chase yield to meet its distribution target. Rather than guaranteeing a fixed return for the long term, Mr. Johnston says Vanguard will adjust VRIF’s target distribution once per year to meet its objectives.

“In the current low interest rate environment, there is increased interest in higher-yielding products and narrow sectors. Investing in these products (and their riskier asset classes) might be appealing in the short term, but it could lead to capital loss over the longer term as these products experience more performance and distribution volatility during periods of market turbulence.”

VRIF is also tax efficient enough to hold in both taxable and tax-sheltered accounts. This aligns with the idea that an asset allocation ETF like VBAL is also appropriate to hold across all accounts. VRIF, as the retirement equivalent of VBAL, would then be appropriate as a single ticket holding across all accounts in retirement.

When asked about Vanguard’s approach to holding CAD-hedged versions of U.S. and Global fixed income, Mr. Johnston says their considerable research has shown that the risk return is improved when hedging foreign income back to Canadian dollars. That way it’s not subject to the potentially volatile movements of foreign currency.

Final Thoughts

I’m excited to see Vanguard launch an asset allocation ETF aimed at solving one of the more difficult problems in retirement planning: How to derive income from an ETF portfolio.

VRIF is a low cost, globally diversified, single ticket solution for retirees to earn a predictable and tax efficient stream of monthly income. VRIF can be held across all accounts, making it a true game changer for retirees looking for income from a simple and easy-to-manage solution.

Now, ETF investors don’t have to worry about the complexities of selling ETF units or relying on smaller, quarterly distributions to generate their retirement income needs. Simply convert your portfolio to VRIF to get a 4% annual payout target with a 5% annual return target.

Thanks to Vanguard Canada for the early preview of the VRIF. Let me know your thoughts on the new retirement income solution VRIF in the comments below.

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  1. Christine Pearce on September 16, 2020 at 9:48 am

    Hi Robb,
    Very interesting product. One question – how do they handle mandatory withdrawals >5% from a RRIF?

    • Grant on September 16, 2020 at 3:21 pm

      You would need to sell appropriate slivers of the fund to bring up the amount to the level of your required minimum distribution.

  2. Pam on September 16, 2020 at 9:58 am

    I have a similar question to Christine? Is this more a product that you’d use before you have to convert to a RRIF or would you keep TSFA/non-registered in this? I see this as being a great option but not sure it can work under the RRIF rules.

    • Robb Engen on September 16, 2020 at 4:57 pm

      Hi Pam, this could certainly work in your RRSP prior to converting to a RRIF, where you either spend the distributions or re-invest them. Once converted to a RRIF, as Grant indicated above, you’d need to sell some units to get to the mandatory minimum withdrawal rate.

      That said, I’m still a believer in a total return approach and that not touching your capital isn’t a realistic option for most retirees. Selling some shares should not dissuade you from investing in VRIF.

    • Tim Jarvis on September 16, 2020 at 5:32 pm

      On the surface this new Vanguard ETF looks like a great product. Looking forward to digging in a bit more to look at the holdings a bit more but overall, a slam dunk for sure for those interested in some converting pre-retirement EYF’s. Well done Vanguard!

  3. DGI&R on September 16, 2020 at 10:17 am

    As always, good article Robb.

    This product has potential to solve a retiree’s withdrawal problems quite well considering it’s an all in one product.

    I’m curious how Vanguard will maintain it’s 4% target yield.

    You mentioned : “Vanguard will adjust VRIF’s target distribution once per year to meet its objectives.”

    My question is what do you think will happen in down years when the distribution is adjusted?

    Or, how often will the distribution be adjusted down?

    For example you buy at the ETF at $25 in Year one and they are paying 4% so you receive $1 in distributions. Next year the price drops to $20 when the yield is adjusted back to 4%, but because the price dropped the distributions are now $0.80 which is 20% less.

    Granted I’d expect most years will be up years for the ETF so I’d expect stable or growing distributions in those years, but for a retiree looking for a set minimum amount of income they might be a bit nervous about buying this ETF if the distribution income could drop in the down years.

    Penny for your thoughts.



    • Robb Engen on September 16, 2020 at 5:01 pm

      Hi DGI&R, thanks for the kind words. It’s unclear how the distribution will be adjusted. Vanguard said it targets a 5% annual return, so there’s some wiggle room with the 4% distribution target. They expect to pay return of capital one out of every 10 years, and it looks like that would have been the case in 2018.

      I’d expect the annual adjustment to be targeting 4% of the market value.

  4. Greg on September 16, 2020 at 10:21 am

    I’m wondering if this would be a good ETF to park some extra cash in over a HISA given the expected payout of 4%

    • Robb Engen on September 16, 2020 at 5:04 pm

      Hi Greg, I’ve seen a few comments like this online today and I don’t think it’s appropriate to put short-term cash into a product that holds 50% equities. I realize that high interest savings accounts aren’t paying much more than around 1.7% these days, but that’s the risk-free rate of return that we have to accept for our short-term money. Chasing yield often ends badly, so I’d stick with medium-to-long term time horizons with a product like VRIF.

      • Greg on September 17, 2020 at 5:12 am

        Thanks for the reply Rob.

        I didn’t think I would be chasing yields if they are planning a 4% return. The only thing is the fees to buy and sell but I don’t expect that I will need this cash in the next several years so I will buy once and leave it there.


        • Robb Engen on September 17, 2020 at 8:39 am

          Hi Greg, the challenge isn’t the 4% return, it’s whether your principal will remain intact. In a savings account you earn next to nothing but your principal investment is guaranteed. With VRIF (or any other market security), there’s no guarantee that your principal investment will be at the same level or higher over a short period of time.

          Justin Bender has done some great work backtesting various ETF portfolios and a portfolio of 50% equities and 50% bonds (a VBAL/VCNS combo) had returns of between 5-7% over the long-term, but also had a lowest 1-year return of -17%. Time it wrong and you could end up on the wrong end of that distribution of returns.

          • Greg on September 17, 2020 at 10:50 am

            Thanks Rob. I understand now.

            Always enjoy reading your emails and blogs.

            On another note, I like to see some information for the person nearing retirement but was never lucky enough to have a defined pension and will only have what they’ve managed to save, invest, and receive from the government. Specifically the withdrawal plans. This new VRIF certainly looks good on the surface.

            Thanks again

  5. John S on September 16, 2020 at 10:27 am

    Interesting. I was about to pull the trigger to convert some holdings in my RIF/LIF to annuity(s), which would require selling holdings in ETFs and paying the sell commission as well as the commission to the insurance broker who is selling the annuity. Looks like with this product, I don’t have to do that! Although a 4% payout may not match the CRA requirements for defunding RIFs/LIFs. Guess I’ll keep an eye on this as it rolls out.

    • Mark W on September 16, 2020 at 1:30 pm

      As a long term retiree, I like the proposed 50% Fixed Income allocation and the minor
      tax advantages. But if I don’t. need the income, does the ETF come with a DRIP type

      • John S on September 16, 2020 at 2:28 pm

        I skimmed the prospectus and saw that it does have a drip feature, but why would you do that? The intent is to generate income as in to spend. If you don’t need the income, I don’t think this is for you. Just use one of the other wrap type ETFs (like VBAL, VGRO or VCONS) But then, I’m no expert.

        • Robb Engen on September 16, 2020 at 5:09 pm

          Hi John, I think you could use the DRIP feature if, for example, you were to convert to it from another portfolio in your 60s (say from a high fee mutual fund portfolio) but weren’t quite ready to draw income from it yet.

          The 50/50 balance is still attractive from a risk management + long-term growth perspective so it does not necessarily have to be used exclusively for income.

    • Robb Engen on September 16, 2020 at 5:11 pm

      Hi John, in a RRIF you’d just need to sell some shares to make-up the difference between the 4% target distributions and the 5.28% (and rising) RRIF mandatory minimum withdrawals.

    • Brian on September 16, 2020 at 8:56 pm

      Is this not a clone of the I shares etf XTR ? Besides a targeted return of 5% and a payout of 4% how is this possibly going to keep up with inflation, with no room for growth?

  6. Ian on September 16, 2020 at 10:43 am

    Thanks for this article. Very timely for myself. I’d be very interested in a future topic you mentioned in the article pertaining to “how to derive income from an ETF portfolio” at some point.

    • Grant on September 16, 2020 at 3:39 pm
      • Ian Babey on September 18, 2020 at 9:48 am

        Thanks Grant. That is a good article indeed.

    • Robb Engen on September 16, 2020 at 5:17 pm

      Hi Ian,

      Grant beat me to it but I often share that MoneySense piece to show investors how to derive income from an ETF portfolio. The challenge is twofold:

      One, it’s a bit too complicated for a retired DIY investor to follow, manage, and execute.

      The solution then is to use one of the asset allocation ETFs such as VBAL, which automatically rebalances, and just sell shares to produce the income you require.

      Two, is the behavioural problem that investors have about selling shares (dipping into capital) rather than just receiving income from dividends and interest. And, before today, most ETFs pay out in the 2% range, which is not enough for income hungry investors.

      The solution to this is to use VRIF and collect the 4% annual targeted payout (paid monthly). Then you only have to sell a few shares in a RRIF to fill the gap between the minimum mandatory withdrawals and the 4% payout.

      • Sean on September 16, 2020 at 5:41 pm

        Why not stick with VBAL (as you’ve mentioned) during your retirement since it has a lower MER.. and on the day of the withdrawal for the money you need for the month, just do some math:

        total value of holding of VBAL * 0.04 / 12

        0.04 for 4% withdrawal which seems what VRIF is aiming to do.
        dividing into 12 for each month of the year

        So if the value of my holdings in VBAL is $100,000.. math above says that I can withdraw $333.33.

        Only issue is if you’re doing it through most brokers through banks or Questrade, you’ll be paying a fee to sell. I’ve just started using WealthSimple Trade as there’s no fees for buying or selling equities using the TSX only.

        • Robb Engen on September 16, 2020 at 5:45 pm

          Hi Sean, I think the idea is to avoid math and additional transactions and fees. Just collect the monthly payout with no fuss.

          I hear you, but there’s behavioural issues at play and tremendous value in simplifying the process in retirement.

      • Ian Babey on September 18, 2020 at 9:50 am

        Thanks to you too Robb. Looks like I have a bit of research ahead of me.
        I just left my high-fee broker so all this information is very timely.

  7. Richard B on September 16, 2020 at 11:01 am

    Hi Robb, great article as usual.
    In your Final Comments you mention the following:
    “VRIF is a low cost, globally diversified, single ticket solution for retirees to earn a predictable and tax efficient stream of monthly income”.
    Forgive my naivety (I’ve never purchased units of an ETF), but what is the mechanism in which an investor in the ‘VRIF’ ETF receives his/her “stream of monthly income”? Is it by way of a single annual distribution? In other words, what does the income (so-called “annual payout”) look like? How is it executed?

    • Amit on September 16, 2020 at 11:17 am

      Hi Richard,
      Most ETFs payout dividends like stocks. So the payout would like a cash deposit in your account monthly. If you held 1,000 units, and they paid $0.10 per unit per month, you would see $100 in your account monthly. In some months, the transaction code beside the $100 may say “Dividend” and other months it may say “Return of Capital”. This will have an impact on you w.r.t taxes.

      • Yap on September 16, 2020 at 12:37 pm

        “…VRIF will naturally pay out about 60% of its distributions through interest and dividends, with the remaining 40% coming from capital appreciation…”, I like this distribution strategy. But the downside is that preserving the amount of capital invested will be more challenging during global bear market. However, I am still planning to convert all my Vanguard ETFs portfolio in my RIF account to VRIF ETF.

    • Robb Engen on September 16, 2020 at 5:19 pm

      Hi Richard, according to Vanguard it’s going to be a blend of capital gains (40%), dividends, and interest (60%). It’s paid monthly and will land in the cash side of your brokerage account. From there you could withdraw it or reinvest it.

  8. David on September 16, 2020 at 12:21 pm

    What is meant exactly by target payout rate of 4% per year

    Is that 4 per cent of the initial amount invested? Or is it 4 per cent of the current market value — either up or down — of the investments?

    Is 4 per cent guaranteed?

    • Robb Engen on September 16, 2020 at 5:27 pm

      Hi David, it’s a 4% target annual distribution, paid monthly. So, $100,000 invested for a year would receive $333.33 per month for 12 months. The next year Vanguard would revisit the payout target and adjust it as necessary.

      Let’s say your new market value is $105,000. If Vanguard decided that 4% was still appropriate you would now receive $350 per month for 12 months.

      On the flip side, if the new market value was $95,000 and Vanguard decided to still payout 4% you would receive $316.66 per month for 12 months.

      What’s unclear is if the market value declined to $95,000, would Vanguard look to increase the 4% target to 4.2% to ensure you would continue to receive the original $333.33 per month.

      Looks like a wait and see on how that would work.

      • David on September 16, 2020 at 6:19 pm

        That last point was my question. In other words, what is the meaning of targeted? If the markets really swooned and our value went to $75,000, would they even be able to give us 4 per cent of that?

        Nonetheless, this is the most interesting thing I have seen. I have enough retirement fund that if 4 per cent was reliable, my funds would make Mexico more than happy.

  9. Toby Stewart on September 16, 2020 at 12:45 pm

    Good article Robb… and thanks for previewing this new VRIF option for those of us geezers trying to figure out what to buy to replace individual stocks and some other more aggressive ETFs (including Vanguard’s)… as we enter our statistical end-of-life decade(s).

    I’d be interested in knowing if Vanguard (or you, or someone) may have done any “back-testing” of their underlying funds in VRIF — to illustrate how closely its 4% and 5% income and growth targets would have been achieved — over say the past decade or so?
    That data might also help answer some of your earlier commenters’ questions.

    From experience over the past few years, after one new type of ETF appears (often by Vanguard), other providers seem to follow suit within a short while. I’d expect some of the big name competitors to soon offer similar RIF-like ETFs … possibly with a bit lower MeRs? What’s your crystal ball saying along these lines? I’m prepared to wait a bit before jumping into this sole RIF-like ETF… but I am going to look into it.

    I haven’t checked out Vanguard’s site yet, but I have just put VRIF into my research do-list for later this Fall… possibly after doing some “tax harvesting” (with more 2020 capital losses than gains unfortunately — Boo-Hoo).

    Please stay well… and thanks for this …and more generally for your sound past analyses;

    • Robb Engen on September 16, 2020 at 5:29 pm

      Hi Toby, hopefully some smart advisor *cough* Justin Bender *cough* will run the backtest and publish it so we can see how VRIF would work in real life and if the 5% target annual return is realistic.

      • Toby Stewart on September 16, 2020 at 7:05 pm

        I hope you’re wearing your mask while you’re “coughing” there Robb… LOL. And my relatives in Bragg Creek and former Sask friends in Lethbridge are also hoping that too!
        And Justin, are you hearing all of this…? LOL
        I’ll wait… please Stay Well!

  10. Angelo Bin on September 16, 2020 at 12:52 pm

    It seems that only registered accounts would be put in this ETF, meaning those that you have to deregister an amount each year. You would know how much was taken in this way. If you had non registered accounts and TFSA’s included, it would be difficult to know what amounts came from what accounts

  11. Kundan on September 16, 2020 at 2:03 pm

    Hi Rob,
    Thanks for highlighting this ETF. It certainly seems to be a great strategy for retired individuals. Would you mind explaining the tax consequences from the structure of this ETF? in such, how will the income show for RSP, margin and TFSA accounts during retirements?
    Thanks again.

    • Robb Engen on September 19, 2020 at 12:44 pm

      Hi Kundan, VRIF distributes a mix of capital gains, dividends (both domestic and foreign), and interest income – all of which are taxed in different ways. No need to worry about this inside a tax sheltered account (RRSP, TFSA), but in a non-registered account you would receive tax slips each year for the various types of income received.

      • Kundan Thind on September 19, 2020 at 1:02 pm

        Thanks Robb!

  12. Grant on September 16, 2020 at 3:35 pm

    It’s very interesting that that Vanguard is doing this. I note that they are not increasing the distributions by inflation each year as is traditionally done in retirement, which may or may not be an issue for some people. With expected returns so low now, I’d be surprised if they don’t decrease distributions or have some return of capital more often than every decade. I don’t know, I think if I were using a single ETF in retirement, I’d stick with VBAL and start with withdrawing 3.5% (due to historically low current expected returns) and increase with inflation. Rob, would you has this product in retirement?

    • Robb Engen on September 16, 2020 at 5:34 pm

      Hi Grant, I suspect it could be marketing in a sense that there’s lots of buy-in with the asset allocation ETFs but retirees are having a hard time with the idea of deriving income from a product like VBAL, given its quarterly distributions and 2% payout rate.

      So the idea would be to move down the risk ladder (VEQT to VGRO to VBAL) and then switch to VRIF in retirement.

      You and I both know and realize the benefits of simply selling off shares to generate your own income and so VBAL would still be perfectly reasonable to hold in retirement. But you and I also know the behavioural challenges that investors have when it comes to getting income from an index ETF approach.

      What I’m saying is this product speaks to those investors and aims to clear that mental hurdle.

      As for whether I’d hold this product in retirement, ask me in 20 years 🙂 The landscape continues to evolve for the better.

      It’s certainly appropriate for retirees today.

      • Grant on September 17, 2020 at 8:18 pm

        Rob, good point. I agree. So much about investing is behaviour, so if this product helps creating cash flow from an index portfolio, it’s a good thing. Apart from the simplicity, it gets past the hurdle of “only spend the income, not the principle” by selling the capitals gains and essentially turning it into income.

  13. Shayne on September 16, 2020 at 4:15 pm

    Is this leaving the original investment intact?

    • Robb Engen on September 16, 2020 at 5:37 pm

      Hi Shayne, there’s no guarantee that in a given year you won’t receive return of capital, which means paying you back with some your original investment. Vanguard estimates that may occur once every 10 years or so.

      The target annual return is 5% and the target annual distribution is 4%, leaving a little wiggle room for the fund to grow and still meet its income objectives.

  14. Stephen on September 16, 2020 at 11:30 pm

    Am I correct to think that this product is an annuity-killer, especially given today’s rock-bottom interest rates? Similar return while not having to surrender your capital…

  15. Rob on September 17, 2020 at 12:22 am

    Would this be subject to foreign withholding tax?

    • Robb Engen on September 19, 2020 at 12:45 pm

      Hi Rob, the dividends received in the U.S. and International equity ETFs would be subject to foreign withholding taxes.

  16. Alfred on September 17, 2020 at 1:31 am

    With only 9% in Canadian equities, most of the dividend portion of the distributions would not be eligible. So fully taxable.

    It would be good to see a more precise breakdown of the target distributions, between :
    – CG
    – ROC
    – Eligible Dividends
    – Other Dividends
    – Interest

    Also, at 5% targeted return, and 4% distributions, this is not the fund to choose, if you are shooting for preserving capital (w.r.t. inflation) while still generating 4% income.

    • Robb Engen on September 19, 2020 at 12:49 pm

      Hi Alfred, the fund is aimed at retirees looking for income. If you’re not ready to flip the switch from accumulation and preservation to decumulation then you’re likely better off with something like VBAL.

      Not sure on the breakdown of distributions other than what Vanguard has said, which is 60% interest/dividends and 40% capital gains. ROC is not expected to occur annually, more like once in every 10 years.

  17. Robb Engen on September 17, 2020 at 12:34 pm

    More context from Vanguard with regards to holding VRIF inside a RRIF:

    VRIF is designed to work across most common investment accounts, including TFSAs, RRSPs, RRIFs and regular taxable accounts. The key feature of VRIF is a simple, predictable monthly income.

    VRIF can help get some of the way to minimum RRIF withdrawal rates, but these are specific to the individual based on their age in a given year and what else they hold in their account, so it really depends on the individual to manage either themselves or with the help of a financial advisor.

    It’s also important to note that the VRIF product will not impact the RRIF account structure itself. Many brokerage platforms will automate redemptions in RRIF accounts and work in a manner that takes the cash in a RRIF account first (which VRIF will contribute to) and adds to that through the sale of units, but again this is a discussion an investor should have with their brokerage platform and/or with the assistance of a licensed investment professional.

  18. Marko Koskenoja on September 17, 2020 at 1:56 pm

    Great article Robb and one that I found particularly useful as a 61 year old retiree living off my investment income.

    I think the simplicity of ownership, diversity and the low MER makes this new fund especially appealing. So much so, I sold my Vanguard VAB bond ETF shares today that were in my LIRA and RIF accounts and bought VRIF in their place.

    I have read a lot recently about pension funds reconsidering their bond allocations given the low returns and limited safety net (they use to provide) so I was looking for something like this new ETF.

    I’ll keep my equity and other fixed income (preferred shares and emerging markets bond ETFs) and see how VRIF works out before allotting anymore money to it.

    • Robb Engen on September 17, 2020 at 2:24 pm

      Hi Marko, thanks for the kind words and I’m glad you’ve found a fit for VRIF inside your overall portfolio.

      I see this product being carefully managed much like an endowment, which must meet a 4% distribution target but still provide some growth.

      • Marko Koskenoja on September 17, 2020 at 2:33 pm

        I hope you are right about that Robb. My return the past 3 years (since I retired) has been 4.8% which is fine by me and more than enough to live from. 4% each month in dividends wouod be great along with another 1% gain if it made my life easier like VRIF looks to do.

  19. Peter Warner on September 17, 2020 at 2:00 pm

    Is the MER truly only .29% when this product holds eight of Vanguards ETFs which will each charge separate underlying management fees on top of the .29%??

    • Robb Engen on September 17, 2020 at 2:22 pm

      Hi Peter, this is a common misconception about the all-in-one ETFs. The all-inclusive management fee is 0.29%. You do not pay separate fees for each of the underlying holdings. In fact, Vanguard is at least starting to address this in its fund fact sheets by saying:

      “This Vanguard fund invests in underlying Vanguard fund(s) and there shall be no duplication of management fees chargeable in connection with the Vanguard fund and its investment in the Vanguard fund(s).”

  20. Laurence on September 19, 2020 at 5:03 am

    Is there an equivalent to this in the US?

    • Robb Engen on September 19, 2020 at 12:52 pm

      Hi Laurence, not that I know of.

  21. David Thorpe on September 19, 2020 at 7:54 am

    I’m considering retiring in the next 12 months. This etf looks interesting in that it could provide the $30,000 income from the 4% target/capital return per year for 20 odd years that we project that we will require, without us having to do much worrying on our end. Unlike other retirees who get told they need income for 35 years we are realistically basing our needs on living into our 80’s due to medical issues and how long our parents lived for. If by some miraculous chance we live longer then our current home valued at $800,000 would be sold and used to fund any remaining years. My question is could I invest my GICs ($400,000 value at the end of 2020) currently earning 3.75% into this eft as they come open, change the RRSP to RRIF once retired, with a realistic result of providing a $30,000 income to supplement our cpp, and my wife’s HOOP pension? Or should I be looking at another product to do this?

    • Robb Engen on September 19, 2020 at 1:01 pm

      Hi David, thanks for your comment. I can’t say whether or not this would be suitable for you without looking at your entire financial picture and running the numbers.

      VRIF is not a substitute for GICs as there is a risk of your principal investment declining in value. Have you thought about a bucket approach where you hold 1-3 years worth of spending ($30,000 per year) in cash + GICs, and then invest the remaining funds in a balanced portfolio (could be VRIF with the distributions re-invested, or could be VBAL, for example)?

      Best to talk to a planner who can run some of these scenarios for you.

  22. Dragonfly on September 19, 2020 at 8:53 am

    I’m very interested in your thoughts on using VRIF for a particular situation. I need to set up a trustee account for an estate beneficiary who is entitled to income from the estate but cannot receive capital (I realize a portion of VRIF would be capital gains and potentially ROC, but I think we can work within that). Would this be an effective solution to maximize the income to the beneficiary or are there other approaches that would be more effective? I am prioritizing income over capital growth. I like the simplicity and hands-off nature of the asset allocation models but payouts on VBAL/VGRO aren’t very good.

    If not VRIF, then would CUD/CDZ or other ETFs make better sense? I realize you can’t give specific advice but if any could offer suggestions for me to research I’d be grateful.

  23. Catharine on September 20, 2020 at 12:08 am

    I am concerned about preserving capital. I understand if it underperforms capital will be used to make up the 4%. If the fund increase by 7% would the payout be 4% plus using the 3% to purchase more capital? Any help making this clearer is appreciated.

  24. Graeme on September 21, 2020 at 11:04 pm

    Thanks Robb, this is definitely an interesting sounding product that solves some major behavioral problems, although I’m wondering how realistic Vanguard’s “5% annual return target” is? Obviously predicting future returns is difficult and there’s different approaches, but from Justin’s analysis of the asset allocation ETFs back in June, a 50/50 portfolio would only be expected to return somewhere around 3.55% nominally (taking midpoint of VBAL and VCNS nominal expected returns). The exact holdings and methods will impact this number somewhat, but any idea how Vanguard came up with 5%?

  25. Graeme on September 22, 2020 at 1:23 am

    One other thing I just noticed: what’s with that bond mix (looks nothing like VBAL)? In Canada, it goes almost entirely with corporate (I guess that will help a bit with returns, but added risk/volatility seems a bit odd in retirement-focused product). And for global, US is almost entirely ignored in favour of lower-yielding and arguably riskier international bonds.

    Definitely an interesting idea, but some of the details have me scratching my head.

  26. Catharine Ho on October 3, 2020 at 5:26 pm

    CDZ versus VRIF ? Can anyone offer pros and cons? Looking for a retirement income without touching capital. thank you for your opinions in advance.

  27. Jill on November 6, 2020 at 11:16 am

    Hey Robb, Wondering (for my retired parents – 76 and 72) if this would be a good option for some estate income they just recieved. they would just be getting into ETF but wanted to put this additional money to “work” but low risk work. High interest savings and GICs are just not worth much.

    • Robb Engen on November 6, 2020 at 11:21 am

      Hi Jill, it’s tough to say without knowing more about their situation. In general, you should not be replacing safe GICs and cash with an ETF like VRIF. Those should be two separate buckets.

      VRIF is most appropriate when held in a non-registered (taxable) investment account and when you will be spending the monthly distributions.

  28. Stephanie on November 11, 2020 at 8:11 am

    Hi Robb, Just wondering if I’m understanding this correctly? I’ve got a TFSA invested in VBAL at the moment. If I moved it into VRIF would this now be considered a RIF and subject to RIF regulations and mandatory yearly withdrawals? Is there a ETF product on the market I could keep my investments as a TFSA and still get a monthly income similar to this product?

    • Robb Engen on November 12, 2020 at 11:11 am

      Hi Stephanie, no that would not be the case at all. VRIF is simply an ETF product that pays a 4% monthly distribution. It has nothing to do with a RRIF (you can hold it in an RRSP, RRIF, TFSA, or taxable account).

      You could hold VRIF in your TFSA and receive the monthly income. I think this could be potentially problematic, though, especially if you also contribute to your TFSA (tracking contribution room would be a headache). VBAL is still entirely appropriate and you could just sell off ETF units to create the income you need.

  29. Deb on October 31, 2021 at 9:34 am

    Hi Robb,

    Any suggestions for someone who only has TD Mutual Funds available to them?

    Trying to establish a steady cash flow for retirement income.


    • Robb Engen on November 1, 2021 at 12:11 pm

      Hi Deb, I think you’ll be challenged to find an appropriate monthly income fund from the TD mutual fund family. There’s the TD Monthly Income Fund (A series), but it comes with an MER of 1.46%. Also, there’s the issue of where best to hold this type of product. The consensus on an income fund like VRIF is that it’s best when held in a non-registered account when the investor is retired and spending the monthly distributions.

      It’s tough to say without knowing more about your income needs in retirement.

      • Deb on November 2, 2021 at 3:27 am

        Thank you Robb!

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