are allocated between some mixture of stocks, bonds and cash. As markets move between undervalued and expen-sive, an effective asset allocation plan rebalances the portfolio on an ongoing basis to reflect the nature of your in-tended allocation. Studies have shown that asset alloca-tion is responsible for over 90 per cent of a portfolio’s returns. This is espe-cially true when you are still accumu-lating assets for retirement. Once you retire, ‘product’ allocation plays an important role in determining the suc-cess of your retirement plan. Product allocation includes invest-ments beyond the traditional stock and bond allocations, which may include products that offer guarantees, such as annuities, variable annuities and invest-ment funds offering guarantees by way of principal protection and guaranteed lifetime income. Excess withdrawal risk. How much you withdraw or spend from your savings on a regular basis will dramat-ically affect how long your savings will last. As studies have shown, withdrawal rates over four per cent to five per cent begin to increase the likelihood that you will run out of savings in your re-tired years. www.canadianchiropractor.ca It is critical to own high-quality in-vestments that pay a regular cash flow into your portfolio (i.e. dividends, in-terest, rents, distributions, etc.). This provides a buffer so that you are not selling assets when markets decline in order to fund your lifestyle expenses. Through a properly crafted financial plan, you can determine a prudent withdrawal rate in order to extend the life of your portfolio, and match your portfolio’s cash flow to your expenses. Health-care expenses. While Canada’s health-care system provides coverage for basic medical needs, it doesn’t cover everything. There is some concern on the rising cost of health care, and Canadians may have to bear more of the burden of rising costs in the future. This is especially true as 10 million baby boomers transition to re-tirement over the next 20 years, placing a strain on the funding and sustainabil-ity of the public health-care system as we presently know it. As best practice, you might want to include future health-care costs in your retirement planning. Extra savings and/or insurance may give you more choice and peace of mind. Include family members and loved ones in your discussions. Demise of guaranteed pension plan. Years ago, Canadians could turn to guaranteed income from their com-pany’s “defined benefit” pension plans for their retirement security. With this type of plan, employees were guaran-teed income based on their earnings and the number of years they worked, with all the risk borne by the company. As a result of the higher costs to maintain these programs, many com-panies have phased out these pension plans, shifting the onus -and the risk – for retirement savings onto the em-ployee, in what are known as defined contribution plans and group RRSPs, which do not guarantee a predeter-mined amount of income in retirement. Instead, the retirement income depends on the performance of the investments, which the employee chooses. Retirement is a major life destination, and one that demands attention. Cana-dians typically spend more time plan-ning for a vacation than their future. The earlier your retirement planning is evaluated and addressed through a spe-cific process, the greater your chances of success. By working with a qualified team of retirement experts, you can approach retirement with confidence and peace of mind. July 2017 Canadian Chiropractor 23
Chiropractic + Naturopathic Doctor July 2017: Page 23
