Job Termination
Ten tips to help workers retire on time, with moneyPensions in perilThere is a growing financial education gap that's putting retirement investments at risk, according to T.E. Wealth. |
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 [ 2007-07-20 ] |
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And if employees fail to learn how to manage their own retirement funds as companies increasingly get out of the pension management business, they won't have the money they need to retire on, the financial planning firm says.
Lana Porter, a Calgary-based consultant with T.E. Wealth, explains that in recent years many companies have moved away from costly defined benefit pension plans where they assume the management and risk.
"They've moved to defined contribution pension plans and RRSPs, which put the risk and management responsibility of the funds in the employee's hands," she said.
However, in many cases, employees don't have the ability to properly manage the funds.
"What they risk is that when it comes time to retire, the funds just aren't going to be there to allow them to leave the workforce."
Porter's company has 10 simple tips for employees to help them retire on time:
1. Live off your retirement income for six months before retirement and do the renovations and new car purchases before you leave (or have money set aside).
2. Continue building assets as a reserve for events such as the rising cost of elderly extended care (and government cutbacks).
3. Watch out for taxation costs if you decide to move to another province or country.
4. If your retirement plan is just to work longer, leave a safety net for illness or family obligations that could incapacitate you.
5. Make sure your affairs are in order in the event of sudden death.
6. Remember inflation. At 3% inflation, your purchasing power halves in 24 years.
7. Hold a cash position in cash-equivalent investments and short-term bonds or high-dividend paying equities for immediate and ongoing cash needs.
8. Protect against outliving your money. A portfolio of 40% equities is considered to be a reasonable amount for retirees.
9. If you expect to have a middle-upper class income in retirement, do not count on Old Age Security when doing your planning.
10. A couple with their income evenly split between the two, rather than all with one partner, will be in a better position to avoid having their OAS clawed back.
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