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 gradually 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.
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 Securities Inc. is a Member of the Canadian Investor Protection Fund. ®Credential is a registered mark owned by Credential Financial Inc. and is used under licence.

For more information on this or other retirement options,
contact Devron at 204-937-6557 or email devron.jakeman@catalystcu.com

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