Q&A With Gordon Pape: When Is Cashing in on Your Mutual Funds a Good Idea?

Financial expert Gordon Pape advises a retired reader who’s considering cashing in his and his partner’s mutual funds.

QMy wife and I consider ourselves as financially comfortable in retirement. I have a small pension, and we each collect CPP and OAS. We rent and carry no debt. 

I haven’t read anywhere where financial experts address issues and make recommendations regarding seniors with limited savings who hold mutual funds, and little cash.

Is there a time when a retired couple in their mid-70s, each with a TFSA ($86k and $61k), all in mutual funds, should move the funds to cash in a TFSA high interest savings account to avoid fees and the uncertainty of the markets? – R.B., Windsor ON

A – If you think you will need access to the cash in the coming year, such a move would make sense. It might even be a good idea if you don’t expect to need the money. I suggest you look at what the mutual funds are returning and compare that with what you could earn from a high-interest savings account or a GIC. 

You can check the rates at ratehub.ca. For example, CIBC was recently offering 5 per cent to new depositors for 120 days in a high-interest account, with a minimum balance of $25,000. Several small financial institutions were offering one-year GICs in the 5 per cent range. These rates and promotions change constantly so make sure any deal that appeals to you is still available.

Comparing your mutual fund returns with guaranteed interest rate options will enable you to better understand the risk/return potential of your decision. – G.P.