FEATURE FINANCIAL PLANNING READY TO RETIRE? 6 risks to healthy retirement and how to mitigate them A BY MIKE MAGREEHAN plan for generating sustainable cash flow in retirement. If you have begun to think seriously about retirement, no doubt you have dreamt of a number of scenarios: travel, more time with family, volunteering for a cause. Facing retirement, you should con-sider the following: • Will my savings last as long as I live? • Will they keep up with the rising cost of living? • Can my investments endure poor or uncertain market conditions? • Will my savings take care of me for life and meet my goals? • How do I replace my “work” day with my “retirement” day? In our research, retirees face six key risks in securing lifetime retirement income. It is wise to consider these risks well before the onset of retire-ment, as well as during retirement. The consequences of ignoring them can be long-lasting. However, risks can be managed, provided you address them and take action with sound financial planning. Longevity risk. Canadians are liv-ing longer, and it is common to live 20, 30 or 40 years in retirement. The cen-sus reported that the fastest growing age demographic is centenarians (those living beyond age 100). s health-care profes-sionals, you spend your time helping Canadians make healthy choices to prepare them physi-cally for a productive life – but what about your financial health? Retirement planning is often delayed, or worse, it is left unmanaged where it falls subject to a wide range of risks and uncertainties. It is undeniable that Canada is un-dergoing a profound demographic change. What happens when the largest generation in history retires? Ten mil-lion baby boomers have now begun entering retirement, and this trend will continue over the next 20 years. According to the 2016 census, Canada saw its largest ever increase in the pro-portion of senior citizens, such that for the first time in history there are now more Canadians over 65 than under 15. The proportion of senior citizens was up 20 per cent while Canada’s overall population was up only five per cent. Yet many working Canadians: • do not know how much they will need in retirement; • fear they may not have enough to retire; • are concerned about outliving their nest egg; • have not done any significant plan-ning; • do not have a written financial MIKE MAGREEHAN is an investment and insurance advisor with Canaccord Genuity Wealth Management in Waterloo, Ont. Mike welcomes your comments and questions at 1.800.495.8071 or [email protected]. Visit www.LMwealth.com. 22 Canadian Chiropractor July 2017 Although living longer is good news, it does pose some challenges. Within your investment plan you might desig-nate a portion of your portfolio that will guarantee a regular stream of lifetime income, regardless of how investment markets perform, so that your plan does not succumb to longevity risk. Inflation risk. This is the erosion of purchasing power over time as it in-creases the cost of goods and services. Also, it can erode the value of assets set aside to meet those costs. In the last 50 years, inflation eroded Canadian’s purchasing power by 90 per cent. You might designate a portion of your long-term portfolio to include investments that have the potential to outpace in-flation, such as owning high-quality companies that pay dividends, and more specifically rising dividends, over time. Market ‘sequence of returns’ risk. The sequence of stock market returns at retirement, when you begin drawing income from your portfolio, are critical to the sustainability of your portfolio. A portfolio experiencing poor market returns early in retirement – when income is being withdrawn – can run out of money faster. On the other hand, a portfolio experiencing strong early returns will provide sustainable income longer. Asset allocation is the scientific mix of investment types in a portfolio with the intention to efficiently grow wealth over time and also protect a portfolio in times of market stress and sector rotation. In its most basic form, assets www.canadianchiropractor.ca
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