Cash flows from investments must keep pace because the cost of living is likely to rise even faster than the average rate of inflation over time. Otherwise, investors risk dipping into their capital.Capital preservation is top of mind for most retiring Canadians. Yet, some financial advisors say investors are looking at the issue of funding their retirement through the wrong end of the lens.
Mr. Coleman isn’t the only expert who thinks an advisor’s primary role is to build reliable, growing income for what could be a retirement of 30 years or more. “For the average person, their cost of living probably goes up between 3 to 5 per cent per year,” he says, noting food, rent and transport typically outpace the Bank of Canada’s target of 2 per cent inflation.
For example, he says that even a $500,000 portfolio yielding 4 per cent – a high average yield from a dividend portfolio – will only generate $20,000 a year in income. Mr. McMillan adds that many advisors look to segregated funds, which provide a combination of strategies such as guarantees on income, protection of capital and the ability to defer payments.“As far as the different products are concerned, advisors have a lot of options,” says Meghan Meger, regional president, Prairies region, at BMO Private Wealth Management, in Calgary.
globeinvestor Living a good life while you still can, should be a priority. I don't see being able to afford a chi-chi retirement 'residence' memory care unit as the goal to my life. See too many seniors who skipped living to preserve income.
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