When you’re no longer earning an income during retirement, you’ll want to put your assets to work for you. With the right investing strategy, you can do exactly that.
Conventional wisdom has largely been about building capital for retirement, and then drawing from that capital over 20-30 years. However, as inflation has the potential to lower the value of your savings over time, and the cost of living rises, you may want to look at diversifying your investments and alternative options to help offset the difference.
When many people think about income in their retirement, they think about savings, pensions and their real estate to leverage. A lot of retirees will often downsize their home to create funds that they can use throughout their retirement. Let’s say you have a $1,000,000 portfolio. With a 4-point return, it will yield about $40,000 of annual income. This means you will have $2,000 monthly income over the course of 20 years, and $500,000 to rely on for other living expenses.
Now is a good time to think about what age you plan to retire and then contrast that with the average life expectancy of Canadians. The average retirement age in Canada is just over 63 and a half years. The average life expectancy of Canadians continues to rise and has now reached just over 81 years. This means that you may need a strategy that protects your capital and ensures income for 20 to 30 years, or longer.
Use this retirement planner calculator to help you determine the amount of savings that you’ll need to retire. It’s an amount you will need to know to build a successful retirement income plan. By flagging any shortfalls or surpluses early, you’ll be able to adjust your retirement plan accordingly. You may also be able to determine a target amount you want to achieve through investing, which you can speak to an advisor about.
An advisor can help you sustain your capital, and even grow it. They can help you do this by creating a portfolio with the right balance of investments that create an income for your retirement while encouraging growth within another component to sustain and offset the withdrawals of assets. Within each component, your advisor will look to ensure there is enough diversification by looking at different geographical, industrial, sectors and styles for opportunities.
Fixed income investing doesn’t have to mean restrictive. For your monthly budget to make sense for you, this is going to require a robust and flexible strategy — and professional advice.
The standard of “stocks to build wealth, bonds to protect it” no longer applies. The former appeal of long-term bonds was their solidity and their steady return. Considering both inflation and cost of living rise, the demands outpace long-term bond performance. Shorter term bonds, however, can be an appropriate part of your asset mix. The most important part of this mix? Relationship.
Your wealth can be deployed in a way that makes sense for you and your retirement. This is a plan that is unique to you and your financial situation. You’re going to need a trusted, accredited advisor throughout this process as new opportunities and challenges arise. You want your retirement income to be as engaged as you are, and your advisor will be right there with you.
Let us work with you to understand your overall investment strategy and make recommendations on the right mix of investment solutions for your financial goals. Talk to an advisor.
Learn more investment tips, strategies and best practices by reading our Wealth Advice articles. These featured articles are great for related insight about retirement income planning:
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