Being ready for change is the key to planning for retirement

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Risk management is a major issue

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“Retirement is the most vulnerable stage in a person’s financial life,” says Faisal Karmali, partner at CIBC Wood Gundy’s Popowich Karmali Advisory Group, a group specializing in helping families and business owners transitioning to or living in retirement.

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“You depend on your savings to live your lifestyle, which is completely different from when you were working full time.”

Willis Langford, a retirement income planner with Langford Financial Group, agrees.

“When you retire, it’s really more about managing risk than anything else. Risks are constantly changing. A year ago we were dealing with a boiling stock market, and now there’s a war in Ukraine, inflation we haven’t seen in three decades, and the stock market is down 10% or 15% .

While some aspects of retirement are fun to think about, all factors must be considered. According to Karmali, “When people first come to us, they focus on the first 10 or 15 years of retirement — the ‘fun years’ — but they have to think about the next phase, the ‘less fun years’. . years”, when they start to slow down, and the last phase, which can be very difficult. »

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Langford advises against counting on a windfall like an inheritance, because while you’re certain it will happen, you don’t know when. He also suggests that you consider the equity in your home as a resource for the final stage of your retirement years – to cover health care and assisted living costs. He points out that reverse mortgages, which are very popular, can certainly help you access the equity in your home, but so can a home equity line of credit.

“This element of risk management needs to be constantly reviewed,” says Langford. “Are we facing too many risks? Don’t we have enough risk? The risk-free rate of return is currently 1.25%, similar to a GIC. With inflation at 6%, that means you’re still losing ground. The more sources of income you have, the better you can manage your risk. He adds that “annuities are now more popular” due to their improved performance.

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Encore Lifestyles Faisal Karmali
Faisal Karmali, a partner in CIBC Wood Gundy’s Popowich Karmali Advisory Group, says that with people living longer these days, many of those retiring are also continuing to work part-time. Christina Ryan

Karmali tells her clients to think of four different income “slices” for mutually exclusive goals: A goal is to provide income or cash flow to meet day-to-day needs. Another is for growth, to increase your wealth over time to fight inflation. The third is the “health bucket” to cover health care costs. Fourth, “the inheritance bucket”, what you want to give to your loved ones or to a charity.

The fact that we are generally living longer and healthier lives has redefined retirement, with another important benefit to consider: your ability to leverage your skills and experience to supplement your income. An avid golfer could earn extra money as a golf marshal. A retired office worker could use their DIY skills to run a small home improvement business.

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“It’s absolutely the new way to think about retirement,” says Karmali.

Another strategy is to make your life easier, or “size up.” Some retired couples find that living with less, like a smaller, more manageable home, is the key to a happier life.

Retirees should also try to simplify their investment portfolio where it makes sense. For example, many Canadians have similar portfolios, such as mutual funds, but with many different financial institutions. It is better to simplify this and put them all in one. This strategy facilitates investment management, including the distribution of an estate by an executor.

However you envision retirement, the key is to plan for it. As Langford points out, “We have no control over events in the markets or in the world. But if you have a plan, you can rest assured that no matter what, everything will be fine. »

This story was created by content worksthe commercial content division of Postmedia.

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