How can I build a retirement income portfolio while building a better world?

Good Money™ understands that a happy retirement is one of the great financial goals in life. But building a retirement income portfolio isn’t always easy, particularly when you want that portfolio to do well for you, and for the community.

Here are some frequently-asked questions about retirement income planning. The answers should help you enjoy a long and fruitful retirement, while leaving a legacy for your family and your community.

Q: I plan on retiring within the next 10 years. How can I prepare?
A: Think about what you want to do in retirement: explore other interests, hobbies and projects that provide fulfillment. You might consider working part-time or occasionally, or perhaps volunteering. If you want to travel, consider budget-friendly options like exchanging your home with another retiree, house-sitting in other parts of the country or world, and combining travel with an educational program or volunteer work. If you plan to move, consider amenities and programs for retirees, including medical care, in your new community.

Q: What about financially? What should I be doing?
A: Take some time to assess your current finances. Review your cash flow and net worth. Assess your retirement savings, such as RRSPs, pensions, TFSAs and other investments, and start building an emergency fund for unforeseen financial stresses. Consider whether Spousal RRSPs and/or Pension Income Splitting would help save tax, now and/or in retirement.

Q: How can I ensure I won’t outlive my retirement portfolio?
A:  While you cannot control market volatility or interest rates, you can control how much you invest, and in what. Combining the right mix of investments might help you better sustain your desired level of investment income throughout retirement. 
 
Q: What should my retirement portfolio look like?
A: That depends on your personal circumstances. Generally, you’ll want enough money in short-term investments like savings accounts or other liquid, stable investments to cover your first year's income needs. Set aside other money to mature at the end of retirement years 1, 2, 3 and 4, to cover the income you'll need in those early years. For the remainder, use a diversified strategy appropriate to your time horizon and risk tolerance that will generate income for future years’ withdrawals.  

Q: What if markets go down during retirement?
A: In a declining market, consider withdrawing your required income from maturing guaranteed investments or cash reserves (rather than variable/volatile investments). Replenish these guaranteed investments with income generated by your other assets. You might also consider making withdrawals "in kind" of investments that declined in value: by withdrawing them without selling them first, you can hold the investments outside your RRIF until their value recovers, and you will be taxed on their growth as a capital gain, for less tax than if you leave them in the RRIF and withdraw them after they recover.

Q: How much should I withdraw from my RRSP/RRIF every year?
A: It’s often best to take a conservative approach here. Keep your withdrawal rate appropriate to your age, length of retirement, size and dependability of your other income sources, health/longevity, etc.

Q: How often should I rebalance my retirement portfolio?
A: If you withdraw more than 5% of your portfolio annually, consider rebalancing annually. If you withdraw less than 5% annually, rebalance at least every 4 years. You may wish to avoid automatically readjusted portfolios, which can over-compensate for investment market changes—talk to your Vancity Investment Professional to see what strategies make sense for you.

Q: How can I prevent my Old Age Security (OAS), Guaranteed Income Supplement (GIS) or Allowance benefits from being clawed back?
A: If you are certain you’ll be eligible for GIS or Allowance, consider saving for your retirement in a TFSA rather than an RRSP.  If you’ve already saved in an RRSP, the key is to manage your RRSP/RRIF withdrawals carefully. There are many strategies to buffer your OAS and GIS supplements from being clawed back.  

A Vancity investment professional  can help you determine which strategy is right for you.

Q: How can my retirement portfolio make an impact in my community?
A: When you do business with us, we invest in your community: through loans, mortgages and support for emerging businesses and projects that improve your neighbourhood socially and economically.

Interested in learning more? A Vancity investment professional can help you explore your retirement income options, and create a retirement portfolio that fits with your personal financial goals. When you’re ready, call 604.877.7000 or toll-free at 1.888.Vancity (826.2489) and we’ll be happy to set up a personal retirement income consultation.

The response set out above is for your information only and is based on general assumptions. While our goal is to offer current, accurate and clearly expressed information, Vancity does not warrant the accuracy, adequacy or timeliness of this information. Changes to the assumptions or facts or to any applicable laws or regulations could affect the validity of this information.  The information is not intended to be investment, legal, accounting, tax or other advice and you should not rely on it without seeking the advice of professional advisors to ensure your particular circumstances are properly considered. Vancity is not responsible for loss or damage that results from reliance on this information.
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