In our Living in Retirement blog, a recent retiree chronicles the ups and downs of her real-life retirement journey.
I didn't sleep well last week. I wonder how many retirees did. The TSX and the Dow Jones stock markets entered correction territory on Tuesday. On Wednesday, the TSX had dropped 169 points by mid-afternoon; at the same time on Thursday afternoon it had risen by 253 points. It closed Friday's session up 174.71 points.
The Dow was even more volatile. On Wednesday it plunged 460 points before recovering and closing near neutral territory on Thursday.
Although I was tempted to sell, I resisted. I've become accustomed to watching my retirement change shape and colour with the recurring ups and downs of global stock markets.
Last week, I couldn't help but question how much I am to blame for the lacklustre performance of my investment portfolio. Since 2001, there have been a number of market plunges: there was the time the dot.com bubble burst, the stock market crash of 2008, the August 2011 U.S. debt crisis, and now, last week's tumble among global indexes.
In the meantime, I've made a concerted effort to construct a balanced portfolio. I re-balance on a regular basis. My investments are mainly in Canadian dividend-paying exchange-traded funds and balanced mutual funds with low-cost management expense ratios (MER). There is an international component. I am not paying more than 1 per cent in management fees on any of my accounts.
Yet it's not really working for me, not the way I was assured it would when I was in my fifties. Any notion that I could steadily realize 7 per cent yearly returns - a projected growth figure recommended by a conservative financial adviser back in 2008 - from my portfolio was dispelled four times since 2000 and this time I'm not willing to shoulder the entire blame.
In a recent column, the Globe's Ian McGugan wrote that "the final half-decade of your time in the labour force can set you up for a comfortable retirement or leave you far behind where you thought you would be–in both cases, for reasons entirely out of your control."
The serious upheavals in world markets have played havoc with my retirement plans. I retired in 2013. As Mr. McGugan pointed out, most of us don't amass any sizable amount of investable cash until our mid-fifties. I was 57 in 2008, and armed with a sensible plan to retire in 2013.
By the end of that year, that plan was history. As Lehman Brothers descended into insolvency, my original retirement dreams evaporated. My investments were down by 35 per cent. The Toronto condo I'd purchased from builder's plans was in danger of never being built. Aspirations to travel or to write full time, without working part time, went out the window, where they remain.
Only three things held steady during that dark time: my pay cheque, my defined benefit pension plan and the price of my Oakville home, which dipped for a short time, as stock prices went south, and then recovered.
Last week as I watched the gains I made in this year's bull market slip away, I began to review the choices I've made during the last ten years.
Upon reflection, here are some of the lessons I've learned:
1. Early retirement might not be in the cards for you - it wasn't for me. Working longer than you had originally planned is increasingly the norm for Canadians, as no amount of clever planning can control the turmoil in world markets.
2. If you are planning to retire, develop a second career before you leave your workplace, or negotiate part-time hours with your current employer. You might need the income.
3. Try to enter retirement debt-free. While you are still working, pay off your mortgage and keep your home in tip-top shape. Resist the urge to draw on home equity to fund your life style.
4. It will cost you more to educate your children than you can expect, particularly if they study away from home. The price of education is going nowhere but up so make sure you save for that ahead of time.
5. Health care is also increasingly expensive so purchase critical illness insurance while you are healthy. If you have a dental plan, use it. If you hold a job with a health care plan that you can extend into retirement, don't even consider leaving.
6. Disregard those who advise you not to read your investments statements. Head in the sand doesn't work in today's volatile climate and even a short snooze can cost you dearly.
7. If you're going to depend primarily on equity investments to fund your retirement, be prepared to accept that events beyond your control will affect your best laid plans.
I'm intending to sleep soundly this week, but the thing I have learned, is not to bank on it.
Follow Joyce Wayne on Twitter: @JoyceWayne1951