Seeking Retirement Guidance: Key Steps for a Secure Future

A reader recently expressed her concerns about falling behind on retirement savings and sought guidance on the first steps to take. The individual, referred to as Emily, detailed her situation, highlighting her status as a single homeowner with a small registered retirement savings plan (RRSP). She indicated that despite her educational background, she found the financial terminology overwhelming and was unsure how to proceed.

In response to Emily’s inquiry, financial advisor John De Goey outlined several essential strategies to improve her retirement outlook. He emphasized the importance of understanding both her risk tolerance and capacity when evaluating investment options. Emily, like many individuals, may have an intuitive sense of her financial standing but would benefit from a structured approach.

Four key options emerge for those seeking to enhance their retirement readiness: first, save more; second, invest more aggressively; third, consider delaying retirement; and fourth, prepare for a potentially lower quality of life in retirement. De Goey suggests that most people should focus primarily on the first three options, reserving the last as a last resort if the others are insufficient.

For Emily, an immediate priority should be to increase her savings. This not only enlarges her future nest egg but also helps her adjust to a more frugal lifestyle, which may be necessary as she approaches retirement. If her annual income exceeds $60,000, he recommends maximizing contributions to her RRSP. If it is lower, a tax-free savings account (TFSA) may be the better option.

The concept of longevity is crucial in retirement planning. Many individuals underestimate their lifespan and, consequently, the funds they will need. De Goey points out that it is common for people to live over 20 years after retirement, making it vital to ensure adequate financial resources for this period.

If Emily continues to feel overwhelmed, De Goey advises seeking professional financial advice. While general guidance can be helpful, personalized strategies are essential to address unique circumstances that influence financial planning.

In a separate inquiry, a 92-year-old investor, John from British Columbia, expressed his intent to sell shares in Platinum Group Metals Ltd. to diversify his portfolio. He is interested in investing in convertible debentures but finds the process of locating suitable options time-consuming.

De Goey acknowledged John’s strategy to sell his profitable stocks as a means to reduce concentration risk and minimize tax implications. However, he cautioned against concentrating too heavily in one asset class, as doing so could replicate the risks he currently faces.

While convertible debentures can offer certain advantages, such as simplicity and potential yield, they also come with challenges, particularly in sourcing reliable information. De Goey suggests that John consider a more diversified investment portfolio aligned with his risk profile instead.

As individuals navigate their financial futures, understanding personal circumstances and seeking informed guidance can significantly impact their retirement security. As De Goey notes, recognizing the urgency of the situation and acting with discipline is essential for anyone looking to secure a comfortable retirement.