Personal Finance

Winnipeg Free Press - PRINT EDITION

Investors wise to revise strategy

Assess plan as retirement looms

By: Denise Deveau

Posted: 02/8/2012 1:00 AM | Comments: 0 (including replies)

As soon as she began her career in her 20s, Shelley Pringle was contributing to an RRSP. Back then, it was a simple matter of putting a few extra dollars aside each month.

"I knew I needed to get in the game as soon as possible. But when you're young, it's hard to think seriously about it," says the Toronto-based PR consultant.

Marriage and a mortgage changed the investment picture once she hit her 30s. "Other things took a higher priority. But as the years went on and the house was off the list of things we had to save for, we began to think more about our RRSPs," she says.

Now in her 50s, she is "starting to take retirement more seriously."

As investors change, so do their plans.

"Everyone is different. But everyone ages one year at a time," says Gaetan Ruest, assistant vice-president of strategic investment planning for Investors Group in Winnipeg.

The first stages of planning should begin in your 20s, a time when many are experiencing the changes that a new job, new income and in some cases, new student debt bring. At this stage, retirement planning is barely in the picture.

Putting aside even a little bit of cash for your RRSP can go a long way, despite the temptation to spend all your new-found income, says Katrine Clark, financial adviser with Edward Jones in Vancouver. "People need to get the message that starting early makes a huge difference in terms of compounding. It's also a great time to take advantage of any company plans."

Ruest suggests trying to put aside about 10 per cent of your income every month, including any company pension fund contributions. "The earlier you start investing, the more time you have and the less money you need, because you can allow it to grow over time."

Once you hit your 30s and 40s, things get more complicated and new realities set in. Family expenses, mortgages and careers become competing priorities for your hard-earned dollars. "Expenses go up, and even if your career is going well, your disposable income is probably less," Ruest notes.

That's the time to consider what's most important in your planning, he adds. "You shouldn't overlook paying down your mortgage or funding your children's education. Hopefully, you've put enough money aside in the early years to create significant growth in your portfolio and can take a break from contributions if you have to, so you can meet your priorities."

While there are many pressing things to spend your money on, you should still try to do what you can on the contribution front, Clark advises. "It's especially important in this time of your life to not lose focus on your retirement goals."

If all goes well, a 50-something will likely be at their peak earning years and nearing the end of their mortgage payment and supporting their children. With more cash flow, it's time to get serious and play catch-up, Ruest says.

"You're now at the final hurrah towards retirement, so you need to make sure you're on track to meet your needs. And if you took a bit of a break in your contributions during your 30s and 40s, this is the time to make up for it."

At this point, it becomes increasingly important to protect your savings. That means rethinking your risk tolerance and working on building a balanced portfolio, Clark says. "You should be adjusting your portfolio and finding the best places to utilize the income."

Even when your retirement date approaches, the planning isn't over, Ruest cautions. "This is when you take any risk in your portfolio off the table. You need to be more defensive and conserve that value you built over the years by reducing your equity exposure. Don't take risks with that nest egg, because it has to last a long time."

-- Postmedia News

Republished from the Winnipeg Free Press print edition February 8, 2012 E2

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