6 Retirement Risks and How to Mitigate Them

Fee-only Retirement Income Planning, Calgary

Are You Retirement-Ready?

No one wants a nest with no eggs! Many Canadian's retirement dreams quickly turn into sleepless nights as they worry about outliving their money. If you are 65 years old you have a 50% chance of reaching your 90th birthday. In fact, StatsCan projects that by 2040 there will be more than 80,000 people in Canada over the age of 100.

Retirement poses a lot of questions:

How long will my money last?

How do I generate enough income from my retirement savings?

What kind of investments do I need?

What kind of investments will generate the best income?

You have questions and you need answers. Here are 6 of the biggest risks to consider as you prepare.

What are the 6 big risks to Your Retirement?

1.) Longevity Risk - Outliving your money. Half of 65 years olds will live into their 90's. This means that your retirement income plan needs to last for 30 years or more. No one wants a nest with no eggs! Many Canadian's retirement dreams quickly turn into sleepless nights as they worry about outliving their money. If you are 65 years old you have a 50% chance of reaching your 90th birthday. In fact, StatsCan projects that by 2040 there will be more than 80,000 people in Canada over the age of 100. if you have several million dollars of assets or a good work pension, this is not a huge concern for you, but if you have less than $1 Million of retirement savings you have to consider creating as much guaranteed income as possible with as little stock market exposure as possible. The best way to do this is to allocate an amount of your savings into some kind of an annuity. There are numerous ways you can do this. We specialize in annuities so feel free to give us a call to discuss.

2.) Inflation Risk - Your money buys less. The Bank of Canada aims to keep inflation around 2%, but there is no guarantee of that target. Health care inflation is even higher. One strategy you can use to offset inflation is to grow some additional reserve money inside a TFSA. The benefit of the TFSA is that your money grows tax-free and the withdraws are not included in your taxable income.

3.) Market Risk - Losing money due to market performance. Volatility is a huge risk to generating retirement income. If you have to take money out of your investments when the markets are down, you have less money to work with to build your investment fund back to a sustainable level. There are several ways to deal with this but I'll give you one. Asset allocation with your investments. Most funds and investors in Canada tend to divide their investments into 60% equity and 40% fixed income. The problem is compounded if most of your investments are in the Canadian markets which represent less than 4% of the world's wealth. A better approach s to diversify into several assets classes like consumer staples, information technology, banks, industrials, energy, and real estate, to name a few. The next key to diversification is spreading your investments all over the world. The US represents about 50% of the world's markets and an investment plan needs to begin here and then include Asia, Europe, and Canada.

4.) Health Risks - Changing health needs over time. Advances in medicine mean that people are living longer but not necessarily healthier. With living longer comes increasing healthcare costs. 

5.) Mortality - An untimely death of a spouse or partner. It isn't a whole lot cheaper for one person to live than two. However, the death of a spouse or partner could mean a major hit to the household income being generated. The surviving spouse may not be entitled to the pension money that their partner had previously. There is no survivor benefit with the OAS pension and a possible 60% benefit from a deceased spouse's CPP.

6.) Taxes - History has proven that taxes go nowhere but up. All over the world, we are seeing increased taxes. There are fewer working people contributing to the tax base, which only means that taxes will go up. When you consider the aging population in Canada and the costs associated with that, it will require more taxes from everyone. 

It is important to have a plan in place and not be taken by surprise by the changing retirement landscape. This plan needs to be updated on a regular basis, simply because your circumstances are always changing. At Langford Financial Inc. we specialize in helping our clients with a quality Retirement Plan that is individually customized to ensure more predictable outcomes.

Want to retire in the next few years? Learn more about our flat-fee and all-inclusive planning services.

Retirement Income, Investment & Tax Planners,

Willis J Langford BA, MA, CFP

Nancy R Langford CRS


Share This Post:

Related Posts

Latest Testimonial

My wife and I realized a long time ago the value of a financial planner over just a bank representative. We just felt like a number to the banks as every year it seemed we saw a different adviser with a different view. But finding a trusted, knowledgeable and personable financial planner took a lot of time and effort. It just seemed, so many large corporate Financial Planners were more concerned about what they could make off of us rather than what they could make for us.
What we wanted, was not just reasonable returns now, but good personal advice in our preparation for retirement and what happens when retirement actually arrives. We wanted someone who would be walking with us, guiding us on our way to retirement.
From the first time, we found the web site for Langford Financial Inc, we could see the knowledge of Willis and Nancy and a real effort to educate and pass on their knowledge through seminars, workshops and their personal service. Once I reached out through their web site for more information, Willis was quick to respond, offering and giving whatever information I was looking for and never was there pressure to commit to anything.
The feeling of comfort and ease when talking with Willis was inviting enough for us to want to meet with Willis and Nancy, just to see firsthand if there was a connection and what working with them would look like.
And when we did meet for the first time, that feeling of comfort and ease was very evident. It was a unique experience for us to be able to sit down and get to know a financial planner (or a team of both Willis and Nancy) and not have any sales pressure on us. Just getting to know Willis and Nancy was important for us. We needed to be comfortable with them and see their competence in the business, and it was obvious that Willis and Nancy wanted to know us better so they could know how best to help us.
Once we decided to move our accounts over to Langford Financial, we found their process was comforting and refreshing as Willis and Nancy first worked at evaluating our complete situation. They dug down to get a complete picture of where we were at, where we wanted to be and how to get there. This took some reflection on our part but once we saw how they put it all together in our “Financial House In Order” binder, we were confident we made the right decision to go with Langford Financial.
Since the time we started working with Willis and Nancy I have attended many of their seminars and can say the information they have been teaching has been amazing. Always relevant, and consistent with their desire to help those coming up to retirement, and covering so many different situations as everyone has a different life situation. I know more than one of the tax-saving strategies they taught at their seminars will work for my wife and I, so we are very happy about that.
We would definitely recommend Langford Financial, not just for all your retirement planning needs, but they have great ideas on savings for your grandchildren too!
Paul and Elaine Radder

Paul & Elaine Radder
Long-term Clients

Contact Us

Questions? Comments? Call us today at 587-755-0159 or fill out the form below:

Have Questions? Call Us Today At

Call Us

Join Our Newsletter