By: Rubina Q. Karim of Edward Jones
Ten Principles for Living in Retirement
Like everyone, you hope for a comfortable retirement. That’s why you should put money away for your retirement. But once you reach retirement, which financial and investment strategies should you follow to help yourself enjoy the lifestyle you’ve envisioned?
You may want to consider these 10 principles to serve as a roadmap on your journey toward retirement:
1. Map out your goals. Although the word “retirement” means something different to each person, everyone shares the need to enter retirement with a strategy in place. Accordingly, you’ll find it helpful to write down what you want to do in retirement. Then you can determine how you’ll pay for it. As a starting point, list all your income sources (such as your RRSP and other savings) and your expenses (such as mortgage, utilities, food and travel).
2. Plan for a long and fulfilling retirement. You could spend decades in retirement. Keep this type of longevity in mind when you create investment strategies for your retirement.
3. Start smart with your spending. Obviously, you don’t want to outlive your resources, but withdrawing too much in the early years or retirement could put you in a difficult position down the road.
4. Inflation doesn’t retire. If you spend 25 years in retirement, prices could more than double, assuming a three percent annual inflation rate. Investments with growth potential can help fight inflation. That’s why you might find it’s important to own equity investments, even in retirement.
5. Prepare for the unexpected. Unexpected financial issues relating to your family or health can crop up during your retirement years. To prepare for them, make sure you have set aside adequate “cash” reserves. If the market has a few bad years early in retirement, you can withdraw money from cash and short-term securities rather than your investment principal.
6. Don’t “reach” for yield. To boost your cash flow, you might think about investing in high-yield bonds or in stocks that promise abnormally high dividends. Try to resist this temptation – you can find other, more prudent investment strategies for adding to your income during your retirement years.
7. Maintain a healthy portfolio. Health-care costs are a major concern for retirees. Take steps, such as exercising and maintaining a healthy diet, to keep yourself in good shape. At the same time, strive to maintain adequate health insurance.
8. Keep retirement from being taxing. Many retirees have investments in both registered and non-registered accounts. There should be a strategy in place to withdraw from these accounts in a tax-efficient manner. To manage your tax situation effectively, consult with a tax advisor*.
9. Define your legacy. Work with a qualified legal advisor to make sure your estate plans and the appropriate documents and arrangements – beneficiaries, will, power of attorney, etc. – are up to date. A proper estate plan can help ensure your wishes are carried out exactly as you intended.
10. Remember your annual check-up. Consult with your financial advisor at least once a year to make sure your investment strategies are still on track.
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The above article is provided by Rubina Karim, a financial advisor with Edwar Jones in White Rock, BC. She welcomes you rquestions and comments at 604-542-2788.