For investors now approaching retirement age, turning 65 is a big deal in Canada. Many decisions will have to be made to guarantee the best possible pension in the long term.
And while the days of stock picking may be over (it may be time to think more about annuities and fixed income than growth), it’s also true that it can make sense to have some exposure to many of the stocks we’re talking about here. It all depends on a number of factors, including how long a person expects to live and which investment accounts certain stocks are held in.
Here are my top three things for people in this age range to consider to be their best tomorrow.
Make a budget
I think this is the most basic step in entering the retirement pool, and it may go without saying. But creating a budget that someone can live on in retirement is a big problem.
That’s because a person’s CCIP payments and other government pension payments will only go so far. Property taxes, general living expenses (food, utilities, etc.) and other fixed costs must be covered. Knowing how much someone will need to withdraw from their RRSP over time and potentially how much longer someone will need to work are all considerations that need to be made.
Having the facts in front of you can help you make the best decision for you and your family. For those who have been investing for a long time, knowing how much you can withdraw without risking running out of money is also a big step. There are still many calculations to be done, which brings me to my second point.
Talk to a financial advisor
Financial advisors do more than just do the work for you, so you don’t have to do it yourself. I think step one is an exercise best done by those approaching retirement. That’s because you know your expenses better than anyone else.
But figuring out tax-efficient strategies that require accounts to first withdraw capital, how to structure annuities or other products, or how to shift or reallocate capital can provide a very meaningful benefit over a long period of time.
Ultimately, having more people by your side who can advocate for your needs and give you the best possible advice is very rewarding.
Take the risk profile of your investments into account
This is the last step of the three, because I simply think the first two matter more. It doesn’t matter how you are distributed if you are already spending money like a drunken sailor or have no idea how the tax code works and do things in a very inefficient way. But once these two steps are in place, reallocating capital to asset classes that make the most sense for one’s lifestyle goals is a great next step.
Knowing how much someone owns of certain assets (stocks, bonds, real estate, art, crypto, whatever) makes sense. This allows investors to decide which assets to sell first, which to pass on to children or grandchildren, and what to do with the rest (philanthropy, etc.).
Being well informed and adjusting your portfolio from time to time can also be a useful move. But as always, it’s important to talk to financial experts about the best ways to achieve these strategies.
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