One guarantee promises to return of 75 to 100 per cent of principal after 10 years or at death. Such provisions help guard against the depletion of your retirement funds. They can also be an estate planning tool: if the holder dies during a trough in the stock market, beneficiaries will get at least 75 to 100 per cent of the principal - and without incurring probate fees. Other advantages include the ability to reset the guarantee as the investment goes up in value. A major drawback is that fees are higher than those of regular mutual funds.
Some "have poor or expensive guarantees, some have high management fees, and some have poor performance. Competent and independent advice … would be helpful," cautions Nepean, Ont. financial adviser, Robert MacKenzie. He recommends Standard Life's Ideal Segregated Fund Family. They "have good performance, management fees that are about the same as those of comparable mutual funds, guarantees on capital of 75 per cent after 10 years or 100 per cent at death and a lower-fee Platinum no-load option for accounts of $250,000 or more."
5. Afraid of outliving your money? Go bargain hunting!
The Only Investment Guide You'll Ever Need by Andrew Tobias first came out in 1978. A main theme was that you would be hard pressed to find a better return on your time and money than buying merchandise at the best possible price. Former personal-finance guru Brian Costello also was an advocate of bargain hunting, as highlighted in a classic 1979 television appearance.
"A dollar saved is two dollars earned," Roy Miller quips in David Chilton's The Wealthy Barber . Mr. Miller elaborates: "If by buying at a liquidation sale, Tom saves $200 on the price of a VCR, it amounts to pretty much the same as a $400 bonus [after tax] Many people would work overtime on a holiday weekend to earn a $400 bonus but those same people can't be bothered to spend three hours comparison shopping."
These days it takes much less time and effort to find deals thanks to websites like RedFlagDeals.com, shopaneer.ca, CouponClick.ca, SaveLand.ca, SmartCanucks.ca, and FrugalShopper.ca. What once took three hours now takes less than an hour. The returns to be earned on comparison shopping are higher these days.
6. Diversify with work that interests you
In retirement, most of your wealth will be in financial assets. But many retirees, especially those still in their sixties, may still have human capital that remains an asset in their total wealth picture. They may want to consider working full or part time at something that interests them - either as an employee, consultant, or business person.
Indeed, deployment of human capital in retirement years can be an integral part of life-cycle wealth management, argues York University professor Moshe Milevsky in Are You a Stock or Bond? . If your portfolio has a significant weighting in equities and the scheduled start date for your retirement coincides with a bear market in stocks, you "have the option of delaying retirement."
Even if there is no bear market, you may still wish to keep occupied with work that absorbs you. It can be beneficial for health reasons as well as for diversifying your financial portfolio against longevity, inflation, and other retirement risks (see previous instalments of this series).
7. Accumulating assets in retirement
We normally think of retirement as a time to draw down savings but many seniors may still want to save for various reasons. One of the few ways to do so on a tax-deferred basis after the age of 71 is to make contributions to a younger spouse's registered retirement savings plan (RRSP). A more recent channel is the tax-free savings account (TFSA), which allow returns to compound tax-free and do not have to be collapsed by the holder. Withdrawals also don't impact eligibility for income-tested benefits.
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