Q: I turned 71 this year and I am pulled between GROWTH & DIVIDEND stocks in my RRIF starting in January. Am I wrong in thinking that it does not make a difference, if: (I do have growth stocks in my Cash & TFSA accounts).
My Tech & other Growth stocks appreciate by 6% or more and I withdraw 6 % via my RRIF, or
Withdraw 6% of my Dividend stocks? Compounding does work, as I bought $20K of RBC a few years ago @ $112 & is now @ $172. Tried the same with TD which did not work.
Obviously, the idea is to not deplete my assets by the RRIF withdrawals? Am I right in my thinking?
Thanks!
My Tech & other Growth stocks appreciate by 6% or more and I withdraw 6 % via my RRIF, or
Withdraw 6% of my Dividend stocks? Compounding does work, as I bought $20K of RBC a few years ago @ $112 & is now @ $172. Tried the same with TD which did not work.
Obviously, the idea is to not deplete my assets by the RRIF withdrawals? Am I right in my thinking?
Thanks!
5i Research Answer:
Growth and dividend stocks will act quite differently at different times. But we would prefer a mix. From a tax perspective in a RRIF it does not matter, as withdrawals are taxed as income regardless of where performance comes from. Generally speaking, growth stocks should have 'more' upside potential. So if one is OK with their risk profile, we find it better to withdraw dividend stocks, leaving more room for tax-free growth from the growth companies. But in a market correction of course growth companies can decline more. So we do like to maintain at least some balance between the two.