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Some investors view retirement day as the day their work is done. Whilst you most definitely deserve big congratulations for successfully reaching such an important milestone, your work is just beginning. In fact, unless you plan to hire someone to help manage your nest egg, retirement may present you with a new job—Chief Financial Officer (CFO) in charge of your retirement investments, budgeting and strategy! Of course, you may have been managing your finances and investments for decades, but retirement presents new responsibilities and challenges. In retirement, it will be up to you to decide not only how you will manage your hard-earned wealth, but also how you will pay yourself over what is hopefully a long and happy retirement. This can be challenging and full of difficult trade-offs. Below we share some high-level strategies to guide you in your new job as CFO.

Understand your situation

Now that you’re CFO, a great place to start is by getting a clear understanding of your income and expenses. Your income may include pensions and bond-coupon payments, whilst your expenses include both needs (food, utilities, housing) and wants (travel, hobbies and other discretionary purchases). If you don’t already have a good estimate of your monthly expenses, tracking what you spend can help you better gauge how much you need. Breaking out your non-essential or discretionary expenses from your required expenses can also help you determine your capacity to reduce your monthly expenses, should you ever need to do so.

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If your expenses are greater than your income—as they are for many retirees—then you’ll need to figure out how to cover that difference or potentially reduce your expenses. Retirees tend to rely on their savings and investment portfolio to cover shortfalls in annual expenses. To do this effectively and sustainably, you’ll need to identify an appropriate long-term asset allocation and estimate a sustainable withdrawal level that accounts for how long you need your money to last.

Estimate a sustainable annual salary

As CFO, what salary should you pay yourself? Some investors may assume that, since global equities have historically returned around 10% annually, they can withdraw 10% each year without drawing down their account.[i] There are two main flaws with such thinking. First, although equities have annualised returns of around 10% , there is a great deal of year-to-year variability—meaning some years are much higher than the average and others are much lower. Second, making withdrawals when the market is substantially down can magnify the negative impact on your portfolio. For example, consider an investor who has a $100,000 portfolio that falls -20% one year to $80,000. If she withdraws 10% ($8,000) from her portfolio now valued at $80,000, her portfolio would need to gain 39% just to get back to its initial value of $100,000.

Unfortunately, there’s no hard-and-fast rule that can tell you with certainty how much you can withdraw sustainably. The answer will depend on market performance—always unpredictable in the short term—as well as how long you need your money to last and your mix of investments or asset allocation. In Fisher Investments’ experience, a reasonably safe annual-withdrawal level for many retirees is often under 5%.

When markets are down, consider a pay cut

Depending on your employer and profession, your total compensation may have varied substantially year to year. That may have had to do with your performance, your company’s performance or the state of the economy more generally. Now that you’re retired and your own CFO, you may want to consider reducing your pay or withdrawals when markets are substantially down. Why? For the reason mentioned previously—a market decline coupled with a hefty withdrawal is a potent one-two punch. Withdrawals in big down years can substantially reduce the size of your portfolio. This new and smaller number can be upsetting to look at, but, even more importantly, it means your portfolio will benefit less from subsequent gains. The next big up year, when the market climbs, say, 20%, your portfolio must grow off a smaller base, giving it a bigger hurdle to overcome to recoup its previous highs.

You can safeguard your portfolio if you have the ability to decrease your spending and your withdrawals when markets are down. Even small adjustments can make a meaningful difference. For example, you might hold off on that big trip, or cut back on some other discretionary expenses.

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Don’t be afraid to outsource

Successful CFOs often engage consultants to provide advice and services in areas they are less familiar with or just to save time. You can do the same. You may not be an expert at retirement investing and cash-flow planning across market cycles. Or perhaps you’ve just got other retirement priorities, whether spending time with friends and relatives, travel, working in the garden or whatever you find meaningful and fulfilling. If you decide to seek advice, it is a good idea to do your due diligence before engaging an adviser or wealth manager.

Consider asking any prospective adviser or wealth manager the following questions:

  • Aside from what I pay you directly, what other fees might I pay?
  • What sorts of investment products, such as mutual funds, ETFs, etc., will you use in my portfolio? What fees might I have to pay for these?
  • How often can I expect to hear from you and what sort of help and support will be available?

Of course, you can remain your own CFO when you retire. Some people enjoy that new role. But if you don’t think you will or you’re hoping to spend your retirement doing other things, you may find value in engaging a trusted adviser.

Fisher Asset Management, LLC does business under this name in Ontario and Newfoundland & Labrador. In all other provinces, Fisher Asset Management, LLC does business as Fisher Investments Canada and as Fisher Investments.

Investing in stock markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. International currency fluctuations may result in a higher or lower investment return. This document constitutes the general views of Fisher Investments Canada and should not be regarded as personalized investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments Canada will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.

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[i] Source: Global Financial Data, as of 21/02/2020. Based on annualised MSCI World Return Index, 31/12/1969–31/12/2019. Presented in Canadian dollars.


Investing in stock markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. International currency fluctuations may result in a higher or lower investment return. This document constitutes the general views of Fisher Investments Canada and should not be regarded as personalized investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments Canada will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.


This content was produced by Fisher Investments Canada. The Globe and Mail was not involved in its creation.

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