For investors now nearing retirement age, turning 65 is a big deal in Canada. Plenty of decisions will need to be made to ensure the best possible retirement over the long term.
And while one’s stock-picking days may be over (it may be time to think more about annuities and fixed income than growth), it’s also true that holding some exposure to many of the stocks we talk about here may make sense. It all depends on a number of factors, including how long one expects to live, and which investment accounts certain stocks are held in.
Here are my top three things for folks in this age bracket to consider doing to ensure their best tomorrow.
Create a budget
I think this is the most elementary step in entering the retirement pool, and it perhaps goes without saying. But creating a budget for one to live off of in retirement is a big deal.
That’s because one’s CCIP payments and other retirement payments from the government will only go so far. Property taxes, general living expenses (food, utilities, etc.) and other fixed costs will need to be covered. Knowing how much one will need to pull out of their RRSP over time and potentially how much longer someone may need to work are all considerations to make.
Having the facts in front of you can help in making the best decision for yourself and your family. For those who have invested for a long time, knowing how much one can withdraw without risking running out of money is a big step as well. There are plenty of calculations to be done, which brings me to my second point.
Talk to a financial advisor
Financial advisors do more than just put in the work for you, so you don’t have to do this yourself. Indeed, I think step one is an exercise best done by those heading into retirement. That’s because you know your expenses better than anyone else.
But coming up with tax-efficient strategies for which accounts to pull capital out of first, how to structure annuities or other products, or how to shift or reallocate capital, can provide very meaningful upside over a long period of time.
Ultimately, having more folks in your corner who can advocate for your needs and give you the best advice possible is very worthwhile.
Consider the risk profile of your investments
This is the last step of the three, because I simply think the first two matter more. It won’t matter how you’re allocated, if you’re already spending like a drunken sailor or have no idea how the tax code works and are doing things in a very inefficient manner. But when those two steps are taken care of, reallocating capital to asset classes that make the most sense for one’s lifestyle goals is a great next step.
Knowing how much one owns of certain assets (stocks, bonds, real estate, art, crypto, whatever) is meaningful. This will allow investors to decide which assets to sell first, which to pass down to the kids or grandkids, and what to do with the rest (philanthropy, etc.).
Being well-informed and adjusting your portfolio from time to time can be a helpful move as well. Though, as always, talking to financial experts about the best ways to go about achieving these strategies is important.
