Can I still afford to retire?

Scenario:

Elizabeth, a 62-year-old real estate agent who is in excellent health, has two adult children and two grandchildren. She has no pension but a decent income and a healthy investment balance.

Elizabeth is thinking about retiring soon. She’d like to travel and wants to support her grandchildren’s education. She currently has $700,000 in retirement savings which, prior to the recent market decline, consisted of almost 80% equities and 20% fixed income. She believes she needs to save over $1,000,000 in order to retire, and wonders whether this is feasible given the current market situation.

Jack Courtney, Assistant Vice-President, Advanced Financial Planning Support and Mike Turenne, Senior Personal Financial Planning Specialist say:

With her Investors Group Consultant, a meaningful discussion of Elizabeth’s life goals and her objectives would start the planning process, which would help to put her investments and portfolio into proper perspective.

A detailed Personal Financial Review would be completed to identify all relevant financial information required to complete this analysis. The Investors Group planning software is particularly useful in identifying whether Elizabeth’s multiple goals can be realized, whether retirement income can be sustained over her expected lifetime, what the impact of a serious illness would be, and whether alternative strategies should be used to help Elizabeth realize her goals.

If there’s a shortfall between retirement income needs and sources, all is not lost. In Elizabeth’s situation, her Consultant would model different “what if” scenarios to identify her options and help develop a long-term plan. For example, we would explore whether additional savings are required to meet her goals, whether she needs to defer her retirement or wind down her business gradually. We would also look at the effect of possible modifications to both her current situation and/or her retirement lifestyle expectations. Projecting several scenarios will provide Elizabeth with options and the ability to make educated decisions based on her priorities.

Projections would also illustrate the effect of our recommendations. The planning would incorporate the benefits of tax-efficient investments such as the new Tax-Free Savings Account (TFSA), in addition to her RRSPs, and RESPs for her grandchildren.

And, her Consultant would help Elizabeth review her estate planning requirements, including the need for a Power of Attorney, a health care directive and a tax-planned will to ensure that her estate will be distributed in the most tax-efficient manner in accordance with her wishes.

If Elizabeth has a need for permanent life insurance she may be able to benefit from the tax efficiency, strong historical investment returns, and accessibility of the investment component of a participating life insurance policy.

With regard to her investment portfolio, an Investment Profile Questionnaire and discussion would identify Elizabeth’s comfort levels with investment risk. An assessment of her portfolio could then be performed using our proprietary strategic asset allocation software, to identify an appropriate investment portfolio that will best match Elizabeth’s risk profile, time horizon and need for income.

The timing of any changes to her portfolio will also need to be considered.

An Investors Group Consultant has the tools and the team needed to help Elizabeth get from here to there.

Jack Courtney, BA, LLB, CFP®, TEP
Assistant Vice-President, Advanced Financial Planning Support

Jack is a lawyer specializing in tax and estate planning. He manages a team of tax and estate planning experts who provide specialized training and support to Investors Group Consultants.

Mike Turenne, B.Sc., CFP®, FMA
Senior Personal Financial Planning Specialist

Mike provides specialized training and support on the Investors Group financial planning software used by Investors Group Consultants to prepare personalized plans and projections for clients.

This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.