Wealth Insights - December 2016

Wealth Insights

December 2016

Resetting expectations for retirement

As you get older, your investment focus should change from building wealth to preserving what you’ve accumulated – especially as you near retirement.

However, some may have difficulty with that shift – particularly if you’ve had a high risk tolerance. Instead of seeking high investment returns you’ll be focusing more on income and security — and therefore lower returns. Here are some ideas and strategies for us to discuss to help you make that shift.

Income and security take the spotlight

While maintaining some growth in your portfolio will still be important, income generation and capital preservation will come to the fore. After a lifetime of planning for investment gains, approaching retirement or living in retirement is not the time to take risks with the money you’ve worked to accumulate.

As part of a shift in focus, we would likely concentrate more on income-generating investments, which are by nature more conservative and which you’ll need in retirement to provide regular income.

Think of it as a tradeoff – you lower your returns expectations so your money will be better insulated from potential losses. That’s a big change from a strategy driven by the desire to earn high returns to build wealth for retirement or other purposes. But preservation of capital and high returns do not go hand in hand, and income investments are desirable for their lack of excitement.

Simply put, retirement signals the time you get to use what you’ve saved. Mitigating risk, generating income, and protecting your money means a greater focus on more conservative investments.

For example, you might rethink how much of your portfolio you should have in equities. You could also consider a gradual increase to the proportion of income and secure investments. But keeping a portion of your portfolio in higher-return investments, such as equities, is key for protection against inflation to help maintain the purchasing power of your money.

Focus on your changing goals

Think of “going conservative” as a positive step. It will give you the peace of mind that comes from knowing that your money will last through a potentially lengthy retirement.

There are reasons other than retirement to make the shift from capital accumulation to preservation. For example, you might be concerned about leaving an inheritance for your children. Focusing more on preservation of assets will ensure that your estate provides for your heirs.

As retirement gets closer, you’ll be ready to move further away from the accumulation stage and further into the preservation stage. We can prepare you for that shift and put into place a strategy that works for you.

Make the most of working with a financial advisor

Your financial advisor is responsible for acting in your best interests, making recommendations consistent with your objectives and risk appetite. But remember, it’s a partnership. Here are a few tips for getting the most out of your relationship.

  • The more your advisor knows about your financial situation the better they’ll be able to serve you. Be open to sharing details about your investments, tax situation, income and liabilities.
  • Together, set out a plan for monitoring and reviewing your investments, and agree upon the benchmarks you’ll use to assess performance.
  • Know where you stand. Keep on top of statements, tax slips and other key documents you receive.
  • Inform your advisor when there’s an important change in your personal or financial situation, like marriage, divorce or birth of a child. These changes can significantly impact your financial and investment plan.

Get the right advice

Want to learn more about what a Westminster Savings financial planner can do for you? Call us at 604-517-0100 or send us your question online and we'll respond to you within one business day.

The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete and it should not be considered personal advice. ® Credential is a registered mark owned by Credential Financial Inc. and is used under license.


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