Most people are concerned about having enough money to meet their obligations at or in retirement. Using traditional planning methods such as buy term and invest the difference, and live off the earnings and retain capital are the most common methods used today.
This type of planning only works if you follow a regimented plan and you don’t spend the difference. If you fail to invest the rest… it lessens the quality of life that one should be able to enjoy in the active years of retirement! It is upside down and backwards!
With our low-interest rate environment, it’s difficult to find sustainability in your portfolio. One way to extend the life of your capital is to consider equities in the form of dividend earning stock.
This tends to be a source of hedging against tax, inflation, fees and other wealth transfers, however, using equities means taking more risk.
Who wants to take more risk leading into retirement?
If you would like advice on reducing the risk, or with what type of investment vehicle may be best for your situation please contact us at info@Henleyfinancial.ca
Visit us at at Henley Financial and Wealth Management
If indeed you are investing in equities please understand the risk involved within your investable assets. Investing in equities will depend on your risk tolerance and the reality of the situation. During retirement, you should lower the amount of Equities within your portfolio to protect you against the volatility of the markets. Leading up to retirement Equities can help build your portfolio but you must be able to accept the risk of volatility which the markets will provide.
Guaranteed Lifetime Withdrawal Benefit products offer a guaranteed income bonus and can provide a stable environment for investments moving forward with the option of a guaranteed lifetime income. This takes the guess work out the planning and provides you with a pension like asset.
Another strategy is to have adequate permanent life/asset insurance that frees up other assets such as non-registered savings, investment property equity or retained earnings in a business.
Having enough life insurance allows one to spend down taxable savings RRSP’s or RRIF’s during early/active retirement years (age 60-75) whereby you’re actually reducing the tax burden overall.
By deferring the use of RRSP’s and RRIF’s the tax on these assets is actually growing as invested capital. By using the funds sooner, rather than later, (yes you are paying more tax now) but you are paying a known tax, you have control over what the tax amounts are. If you wait long enough the government dictates the amount of tax owed yearly. Meaning if you defer too long, one conceivably can pay a much greater tax than ever saved by using the registered plan strategy!
Access equity sitting dormant in your paid off or very low debt home could also be a strategy that you could use during retirement. The reverse mortgage has been a component of retirement planning over the last few years based on the low-interest rates on borrowed money. Again this strategy requires some professional advice.
Life insurance lowers the pressure of the capital to perform and lessens market volatility risk. It also lessens government control risk. Meaning, by using a registered plan strategy you absolutely are in a partnership with the government. RRSP and RRIF products are very much a controlled revenue source for the C.R.A. your strategy will dictate the how much income they will receive on your behalf.
If you are interested in creating more spendable income during the early retirement years without fear of running out of money we can show you how. For the most part, we can increase your spendable income into and during retirement without any additional out of pocket expense!
If we can recover 1%-5% of gross income from dollars that are unnecessarily being transferred away from you through tax, fees and other opportunity costs which can be redistributed to your retirement plan and increase lifestyle along the way. Would you be interested?
Let us provide you with an overall review of your entire investment and financial plan. We will do this with no obligation from you to move forward with any recommendations we may have, or we may find that you are well on your way and continue on that path. Either way, a second opinion never hurt anyone.