Life expectancies in Canada have been on the rise for the past few decades. The latest Statistics Canada report reveals the average life expectancy is now 80 for men and 84 for women. Put another way, that means we should be preparing to live 15 to 20 years beyond our last day of work.
This is great news made possible by increased awareness about the importance of eating healthy and exercise as well as life-saving health care innovations. Even better, it’s happening at a time when we have more access to knowledge and data than ever before – thank you Information Age.
With knowledge comes opportunity. In this case, the ability to acquire more wealth. Of course, this can only happen if you incorporate longevity expectations into your financial plan.
It Is Possible To Be Too Focused On Low Risk Investments
Many Canadian investors choose conservative portfolios during their retirement years. They're looking for low-risk investments for a few key reasons:
To Protect Investments
Understandably, retirees want to protect the investments they’ve worked so hard to build over the years. So they stick with low-risk investments that yield low returns.
Many people I meet believe they don’t have a lot of time left to be in the market and make money - especially if there is a prolonged and severe drop in equities. They're worried that their time horizon is not long enough to make back any potential losses.
To Avoid Risk
Market, currency and interest rate risk all impact today’s portfolios. Even if a retiree were to put money into low risk investments, there are still risks associated with that.
Here’s What Savvy Retired Investors are Doing
To protect as much as possible against market, currency, and interest rate risks, some retirees are diversifying their portfolios to include Canadian and international investments, stocks, mutual funds, bonds and other fixed-income products.
Investing for the Long-term
My clients understand they don't need all their money at once. Instead, they invest in products that will be able to support their lifestyle during retirement. With a span of 15 to 20 years to invest beyond retirement, there is actually a lot of time to diversify and grow a portfolio.
Taking on Moderate Risk Investments
Low risk investments are not paying enough. You cannot grow your wealth making less than 2%. Diversifying into some selective moderate risk investments will help preserve and build wealth by decreasing your portfolio’s overall exposure to any given asset class, including just low risk fixed income (bonds, GIC's) products.
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read all articles in Allan Small's Worry Free Retirement Series ----------
Worry Free Retirement - An Overview
Canadians Are Living Longer. What Does This Mean For Your Portfolio?
Are Your Investments Keeping Up With Inflation And Taxes?
Did You Know That People Who Work With Financial Advisors Make More Money?
Protect Your Investment Assets
Avoid These Top Mistakes Retirees Make When Investment Planning
What Do You Want Your Money To Do For You In Retirement?
The Art Of Creating A Portfolio For Retirees
Estate Planning: Passing Wealth From One Generation To The Next
Can Buy And Hold Still Work For Retired Investors?
Active Investing Key To Worry Free Retirement