Is your retirement income at risk
Throughout your career, you have been investing your money on a regular basis into your retirement savings plan (RRSP), and think you have saved enough income to last your entire retirement. If you have planned properly, your RRSP, group plan, old age security (OAS), and Canadian Pension Plan (CPP) should meet your personal income requirements. Yet, there are many factors that can erode your retirement income faster than expected.
Market risk can have a large impact on your RRSP or Retirement Income Fund (RIF). Poor performing stock market returns can impact your savings, amounts regardless of long-term rates of return. For example, losses in the first few years of retirement will have a larger impact on your retirement income than losses later on.
Inflation risk will erode away your purchasing power as time goes on. This is a major concern for anyone on a fixed income, as a period of high inflation can be devastating. Relying on guaranteed income certificates (GIC) alone will not keep up with inflation with interest rates as low as they are now. A balanced portfolio with GIC’s as well as fixed-income funds is important to keep up with inflation at the least.
Longevity risk or outliving your money is a growing concern for many people. As life expectancy continues to increase, retirement income will need to last longer and longer. This means that planning for retirement needs to go beyond the typical life expectancy timeline; otherwise, there is a high chance your income will run out by age 90.
Withdrawal rate risk and spending too much income can limit your lifestyle later in life. Striking that perfect balance between over limiting your income and overspending is a delicate act.
Investment behaviour risk related to making quick decisions emotionally can derail any retirement plan. Emotions play a large part when talking about finances; fear or greed can each have impacts on your savings and the end goal.
These are just some of the risks that need to be addressed with building a financial plan for retirement. Working with a financial advisor can help find the correct investment strategy, support you through the financial roller coaster ride, and work to ensure your money can last. Book an appointment with us to review your current retirement plan, or help build one for you.