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Retirement

Age 60 +

Navigating the Retirement Phase: Protecting Your Wealth and Securing Your Future

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As Canadians approach retirement, they often face significant challenges, particularly when market conditions are unpredictable. During recent downturns, many retirees who had heavily invested in equities saw their retirement savings diminish by as much as 35% within a single year. This painful experience highlighted the critical importance of sound financial planning and asset allocation.

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The Importance of Proper Asset Allocation

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In retirement, ensuring your assets are allocated appropriately is key to protecting your financial future. Relying too heavily on equities or taking excessive risks with your savings can expose you to significant losses. A portfolio that is 100% in equities may seem like a good idea in a booming market, but it is generally not advisable for retirees. The risk of market volatility can threaten your ability to generate steady income without depleting your principal.

The optimal asset allocation for each individual varies, depending on personal circumstances such as risk tolerance, income needs, and long-term financial goals. Understanding your risk capacity is crucial when planning for a secure retirement.

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Generating Reliable Income in Retirement

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One of the primary concerns for retirees is whether their savings will be sufficient to support their lifestyle throughout retirement. The goal is to generate reliable income without eroding your savings prematurely. Determining how to balance withdrawals with a prudent investment strategy is essential to maintaining financial security.

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A financial advisor can provide invaluable assistance in this area, helping you develop a strategy that aligns with your needs and goals while considering factors like inflation and market fluctuations. Even the most seasoned investors benefit from professional guidance to navigate the complexities of retirement income planning.

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The Role of a Financial Advisor

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Think of your financial advisor as the captain of your financial ship. While you may be experienced in managing your personal finances, a financial advisor serves as a trusted partner, providing the expertise needed to steer you through turbulent market conditions and toward a secure future. They help you make informed decisions, manage risk, and adapt your strategy to meet evolving needs.

Preparing for the Golden Years

As Canadians reach the age of 60 and beyond, the focus of their financial planning shifts toward securing their retirement and ensuring their wealth lasts throughout their later years. This phase of life is often about balancing enjoying retirement with managing risks, healthcare, and legacy planning. Below are the key financial priorities for Canadians in this stage:

1. Managing Retirement Income

  • Creating Steady Income Streams
    One of the primary goals as you transition into retirement is ensuring that your income will support your lifestyle. Whether it's through government pensions like CPP or OAS, RRSP withdrawals, or income-generating investments, a well-balanced strategy is crucial to maintain consistent cash flow while minimizing taxes.

  • Balancing Withdrawals
    It’s important to manage how and when you withdraw from your savings. Withdrawing too much too soon can risk depleting your resources. A tax-efficient approach to income withdrawals from TFSAs, RRSPs, and other accounts can help maximize your retirement income.

2. Protecting Against Healthcare Costs

  • Healthcare and Insurance Planning
    As you age, healthcare costs typically increase. While public healthcare covers many essential services, there may be additional expenses for prescription drugs, private treatments, or long-term care. Having supplemental insurance and planning for potential out-of-pocket costs can help protect your savings from unexpected healthcare expenses.

  • Long-Term Care Planning
    It’s wise to consider long-term care options. Whether through insurance, personal savings, or a combination of both, planning for the possibility of assisted living or home care is essential to ensure that you’re well-supported if the need arises.

3. Estate and Legacy Planning

  • Updating Your Will and Power of Attorney
    Having an up-to-date will, powers of attorney, and healthcare directives is essential as you enter this phase of life. This ensures your wishes are respected, and that your loved ones are supported during difficult times.

  • Tax-Efficient Legacy Planning
    Work with your financial advisor to minimize taxes on your estate. Strategies such as gifting, charitable donations, and tax-efficient investment accounts can help pass on more of your wealth to your beneficiaries.

4. Debt Management

  • Paying Off Outstanding Debt
    Entering retirement with little or no debt is one of the best ways to ensure financial peace of mind. If you still carry a mortgage or other significant debts, prioritizing their reduction can provide greater financial freedom in your retirement years.

  • Managing Lifestyle Expenses
    Retirees should assess their current lifestyle expenses and adjust them accordingly. Downsizing a home or reducing unnecessary spending can provide more financial flexibility and enhance your quality of life.

5. Reviewing Investment Strategy

  • Asset Allocation and Risk Management
    As you approach or enter retirement, adjusting your investment strategy to reduce risk and maintain a diversified portfolio is crucial. Ensuring your assets are properly allocated between low-risk investments and those that provide income, such as bonds or dividend stocks, can help preserve wealth and ensure stability.

  • Longevity Planning
    It’s essential to plan for the possibility of a longer retirement, especially with advances in healthcare and increasing life expectancy. This includes ensuring that your investment strategy is designed to generate income for potentially decades to come.

6. Enhancing Social Connections

  • Financial Support for Family and Friends
    Many individuals in this age group may wish to provide financial assistance to children or grandchildren, whether for education, home buying, or other needs. However, it's important to balance supporting loved ones with securing your own financial independence.

Primary Disclaimer

The information contained herein is for Alberta residents only and does not constitute an offer to sell or solicit sales in any other Canadian or Foreign Jurisdictions.

Mutual Funds are available through Global Maxfin Investments Inc. Insurance Products including but not limited to” Segregated funds, HISA, Insurance GIC’s, Life, Disability, and Critical Illness Available through Global Insurance Solutions Inc.

This publication is not an offer to sell or a solicitation of an offer to buy any of the securities. The securities discussed in this publication may not be eligible for sale in some jurisdictions. If you are not a Canadian resident, this report should not have been delivered to you. This publication is not meant to provide legal or account advice. As each situation is different you should consult your own professional advisors for advice based on your specific circumstances.

Dual-Licensing Disclaimer

Global Maxfin Investments Inc. is registered as a Mutual Fund Dealer with the Provincial Securities Commissions and as such our Associates are entitled to sell mutual funds and other approved securities as permitted under our registration. They may also be able to provide other services or products to you through their own business. As a member of the Mutual Fund Dealers Association of Canada ( MFDA) Global Maxfin Investments Inc. is obligated to disclose to you that you may be dealing with companies other than Global Maxfin Investments Inc. When purchasing services or products from your Associate ( remuneration to your Associate may also come from various sources depending on the services or products purchased). For example, your Associate may offer any one or more of the following through a separate business, which would not be the responsibility of Global Maxfin Investments Inc.:

• Deposit Instruments: High Invest Savings Accounts and GICs;

• Financial planning services—including Fee-for service financial planning;

• Estate Planning;

• Tax Planning or Income Tax Preparation;

• Insurance: Life, Accident, Sickness, Disability, General.

Please be sure that you have a clear understanding of which company you are dealing with for each of your services and products. Your Associate would be happy to provide any clarification you require.

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Subject to any applicable death and maturity guarantee, and part of the premium or other amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value according to fluctuations in the market value of the assets in the segregated fund.

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All products and services recommended through Northern Asset Management are through the appropriate licensing bodies. Derek Schaefer as a multi licensed individual through MFDA and the Alberta Insurance Council presenting mutual fund and insurance related products.

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