With a strategic approach throughout your lifetime, and by understanding the following success factors, you can enter this period of life with all important financial security.
- Withdrawal Rate: Increased market volatility highlights the need for conservative withdrawal rates. Retirees who make annual inflation-adjusted withdrawals of more than 4-5% of the original value of their portfolio at retirement run the risk of running out of money.
- Longevity: We are living longer and healthier lives therefore we need to plan for a retirement last 30 years or longer.
- Healthcare: Retirees list health concerns as one of the top reasons they retire. Individuals need to understand what health care costs are and which of those costs are not covered by government healthcare programs, and what their own needs could be and plan accordingly.
- Inflation: We need to structure our portfolios to keep up with inflation – even if we have modest inflation of 2% it can erode our purchasing power by 40% over a 25 year retirement.
- Asset Allocation: The global financial crisis heightened our anxiety about the equity market, but historically equities have provided the long-term growth that is critical to a retirement plan. A diversified portfolio that includes equity and a Bomb Shelter provides growth and protection against market volatility.
A remarkable 88% of Canadians are unaware that 60% of their investment income during retirement can come from growth that takes place after they retire.
Source: Russell Investments // Canada Retirement Research Report / January 2010
What is the Behaviour Gap?
A respected columnist, Carl Richards, uses sketches to help make complex financial concepts easier to understand. We at The Delfino Group share many of his philosophies and his sketches below are great visual representation of some of the key concepts used in our investor behaviour consulting and The Financial Peace of Mind Program.