Creating A Well That Never Goes Dry

You may be approaching retirement and feeling cheated that you don’t have a pension plan simply because you are self-employed or your employer doesn’t offer one.  Did you know you can create a pension income for life? Throughout your lifetime, you may have been building equity in your business or contributing regularly to a Registered Retirement Savings Plan (RRSPs).  One of the challenges you may face is creating a lifetime income.    

For example, George and Mabel recently sold some farm land.  They are reluctant to invest their money into mutual funds. Because they had taken risks throughout their farming career, they are not willing to gamble with the money from the farm sale. Yet they are unsettled about today’s low GIC (Guaranteed Investment Certificate) interest rates.  They simply want a comfortable retirement and to be able to fulfill their retirement dreams.  Their biggest concern is outliving their income. They are both healthy at 65 and know they have a very good chance of living beyond 90.  

Situations like George and Mabel’s are common.  Looking for suitable investment options can be a difficult task.  It’s like trying to find a comfortable pair of shoes that fit and feel right for the activities you are planning.   But here lies the answer. You could have more than one activity planned for your retirement.  You don’t wear dancing shoes for golfing; you don’t wear gardening shoes for travelling.  This means one thing: you have different shoes for the different activities.  This is also true with your retirement investment products.

Let’s say you are committed to the idea of having a guaranteed income stream for life.  You simply don’t want to outlive your income.  In other words, you don’t want the “money” well to run dry.  You may also like flexibility. You are not sure exactly when and how much you will spend on travel in any given year or whether the desire to own a new vehicle has even made your dream list.  Having money on hand to pay for these luxuries is important.  

The blog, Can Investing Really Be Easy, describes how to diversify your investments appropriately using asset allocation.  From a slightly different perspective, now the discussion is about diversifying your investments into different products.  Product allocation isn’t something new.  People may actually be implementing this strategy unknowingly by having multiple investment products.  Others may believe in using only one investment product. It’s about matching the right strategy and the right product to fit your unique situation.

For those who are uncomfortable about investing and are primarily focused on an income for life, the solution may be the purchase of an annuity with a portion of either non-registered or registered investments.  In essence, you are trading a lump sum of cash for an annuity which will provide a series of income payments guaranteed for a specific period of time or a lifetime.  You may have seen Sun Life Financial’s Money for Life television commercial. This is exactly how you create an income for life . . . with the purchase of annuity.   If your primary fear is running out of money, then considering an annuity might be a good fit for your needs.  The path then branches further to determine the right type of annuity for you.  This decision cannot be taken lightly.  It’s a conversation you want to share with a CERTIFIED FINANCIAL PLANNER^® professional.

In my encounters with clients, the scenarios are complicated.  We have had to decipher what they really want from their retirement nest egg.  Are they more concerned about providing a lifetime income for themselves or are they more concerned about preserving the principal for their children?  They are sometimes confronted with a tough choice.  Depending on their desires, then other products, like insurance, may be introduced into their financial plans to satisfy multiple needs.  All of these are relevant to cost and whether the clients are insurable.

Your retirement is intended to be your most enjoyable time of your life.  Your retirement should provide you with freedom to do the things you have longed to do without the hassle of worrying about finances. Creating the appropriate financial plan with the right investment products equals the ideal retirement lifestyle of your dreams. It’s time you stopped feeling cheated.    

The Dangers of Coasting: 5 Ways to Get in Gear

Has anyone asked you lately for your opinion on a specific subject?  Do you remember how you felt? I felt honored when Caroline Horcher, Manager of Public Affairs from FPSC (Financial Planning Standard Council), asked me to comment on this statement, “If I’m generally moving in the right direction, my financial goals will take care of themselves.” From our conversation, Caroline generated a five-point guide to help people get in gear towards their goals, dreams, and aspirations.  Below you will read excerpts and the five tips derived from our interview. 

The Dangers of Coasting: 5 Ways to Get in Gear

“If I’m generally moving in the right direction, my financial goals will take care of themselves.” Are you guilty of this financial planning misconception?

Coasting—even in the right direction—doesn’t necessarily mean being on track, says Delores Moskal, a CERTIFIED FINANCIAL PLANNER® professional based in Yorkton, Saskatchewan.

Delores says that not having specific goals is like driving at night without headlights. “You kind of know the road and can steer your vehicle in the right direction, but you’re never really sure.”

“You’re moving along, but you might get to the end of the road and find out you’re at the wrong destination,” she says, “whether that means you can’t buy your dream house, fund your children’s education or rely on your retirement income.”

Try Delores’ tips to stop coasting and start accelerating toward your financial goals today.

1.     Target your destination: Many people put off setting specific goals, intimidated that the next step—actually having to start working toward them—might be difficult or stressful. It can seem easier to trust that everything is progressing fine without your attention. But don’t fall victim to this fear-based procrastination: make your goals inspiring enough that you’re willing to put in the time and effort.

2.     Use a GPS: Have an honest talk with yourself. Are you doing the best that you can with what you have? If the answer is no, or you’re not sure, consider getting the help of an expert. A qualified financial planner can help you devise a road map to your goals, immediately putting you in a better position to reach them and keeping you on course as you make progress.

3.     Chart your current location: To get where you want to go, you need to take an accurate snapshot of where you are right now. A financial planner can help you take into account all relevant areas across your financial life.

4.     Know your end point: One of the benefits of planning is that you can choose your ideal outcome, rather than seeing what happens automatically (or settling for the only option left). Be detailed in your goal setting and consult with your family to be sure you’re all on the same page.

5.     Pick up speed: There’s no time like the present to start to design your financial future and make progress toward your goals. The sooner you start, the sooner your dreams can become a reality.

It may seem intimidating or time-consuming to put a targeted focus on your financial goals. But when the real danger of coasting is that you might not reach your dreams at all, isn’t it worth putting in the time and getting the help you need?

Find this article and other valuable information at FinancialPlanningforCanadians.ca and Globe and Mail Financial Planning Special Feature websites.