Make way for the readers | Worry wins retirees

The start of the year in red on the financial markets, coupled with an inflation rate not seen in 30 years, is worrying pensioners, if we are to believe the e-mails that readers have sent us The press the day after last Monday’s stock market crisis, when North American stock markets fell another 2 to 5 percentage points.

Posted at 5:00 am

Andre Dubuc

Andre Dubuc
The press

“We live in an unusual moment,” agrees Ruben Antoine, portfolio manager at Tulett, Matthews & Associés in an interview The press. In a balanced portfolio, bonds’ role is usually to provide resistance when the stock market begins to fall. However, this time stocks have negative yields, bonds have negative yields – long duration ones are down 20% – and even cash has negative yields in inflation as we know it. »

To minimize nasty financial surprises in retirement, says Fabien Major, financial planner and wealth management consultant at Assante Capital Management, Team Major, “The solution lies in payout planning.” here is your leeway. Anyone who has no idea of ​​their room for maneuver should quickly check their financial plan,” he advises.

The press contacted four readers whose retirement plans have been turned upside down by the market turnaround.

What to do with unexpected expenses?

“If there weren’t a situation that forced me to spend a lot of money to help my daughter, bear markets wouldn’t bother me any more than necessary,” says Thérèse Nadeau, a retired psychologist and veteran independent investor.

Her daughter has just separated and needs to buy back her ex-spouse’s share of the property. Our reader from Saint-Hyacinthe proposes to advance a deposit of $25,000 that she intended to make by taking her profits from her portfolio, which she has managed with great care for more than 20 years. She views her provincial government pension plan as the “fixed income” part of her wealth.

Rather than realize the losses on her portfolio, she plans to borrow $25,000 on the mortgage margin, even if it means just paying the interest while waiting for the markets to regain lost ground. She is also toying with the idea of ​​selling shares in the pharmaceutical company Pfizer, which has so far held up better than the overall market. The shares are on his TFSA.

Based on the package information available to him, financial planner Fabien Major Mme Beaulieu to have a payout plan created based on the two scenarios she considers before deciding anything “to minimize the impact on her future retirement income.”

Will his plan work?

Danielle Beaulieu, 66, has only been receiving her state pension since April. Last year, she decided to transfer her suspended retirement account from Épargne Placements Québec to her new financial advisor’s firm. He has prepared a plan to pay out $15,000 a year from his savings for the early years of his retirement. Assuming a 4% annual return, his savings will be gone by age 92. She fears inflation as neither she nor her spouse receive an indexed retirement pension.

“If their plan was created with a probability analysis that takes extraordinary events into account, if the inflation assumptions used were conservative, then I’m not too worried about them,” believes Fabien Major. We shouldn’t worry too much about the extraordinary events we are witnessing.


PHOTO DAVID BOILY, LA PRESSE ARCHIVE

Fabien Major, Financial Planner and Wealth Management Advisor at Assante Capital Management, Team Major

“The year 2022 is not over yet, the financial planner continues. We cannot assume that we will lose 22% every six months in the American markets. That will not do. If it goes down fast, it can go up even faster. »

A country house to renovate

Dentist by trade, Richard J.* retired last year.

“I’m concerned about the stock market slump because we’ve recently retired, our stock market investments to fund our retirement are declining and inflation is also playing against us,” we were told, he wrote on Tuesday, the day after bleeding of the markets.

The 65-year-old manages the budget for the major conversion of his holiday home in Magog himself, he explains to us in an interview. He wants to conceive his five grandchildren as long as they are healthy. His plan was to pay half the bill in cash and fund the other part from his mortgage line. Unfortunately, his portfolio has been declining since the beginning of the year and the portion funded will cost him more as mortgage rates rise. “The courses shouldn’t rise by another two percentage points, we’ve pretty much reached the limit,” he sighs.

“If you have a choice,” says Mr. Major, insisting he is speaking in general terms and does not know Mr.’s financial situation or investor profile, “we will pay, and we will keep paying the highest rate to ourselves.”

“After a 20% loss in the markets, he adds, his portfolio’s probability of a return next year is probably greater than a 3%, 4% or 4.5% mortgage spread. »

Retirement plans put on hold

“It’s worrying as I’m a young retiree,” wrote Sylvie H.*, an inspector at Canada’s Food Administration. “Seeing your investments drop to that point is still a little stressful. Because in a balanced portfolio, the majority is already invested in private management. »

On the phone, Sylvie shares her dismay with us. “It has been going downhill since January. However, I have plans for a young retiree: landscaping my new house, road trip to Florida, replacing the SUV with an electric vehicle. Concerned about the global situation, she decided to postpone everything for at least two years.

They live as a couple. Only one of the two adults is lucky enough to receive a guaranteed regular retirement income. She has savings for two years of extras. She has been working with a financial advisor for a year. She estimates her withdrawals at $30,000 to cover recurring expenses and special retirement plans.


PHOTO MARCO CAMPANOZZI, PRESS ARCHIVE

Ruben Antoine, portfolio manager at Tulett, Matthews & Associés in Montreal

“In the case of special issues, Ruben Antoine agrees, the choice is often to borrow, which becomes riskier as interest rates rise, or to take losses by selling shares. In the current environment, according to the portfolio manager, deferring discretionary spending is not a bad choice.

To get out of this dilemma, Mr. Antoine is used to determining his clients’ short-term financial needs, including extraordinary expenses, and securing the sums in easily accessible guarantors.

*First names are fictitious but cases are real.

A payout plan, what for?

The payout plan is about maximizing the wealth put aside for retirement by ensuring the savings last as long as needed. A payout plan focuses on retirement living standards and recurring income. He also plans special expenses that will certainly arise in retirement. It determines the shortfall and compensates for it by paying out pension provisions in order to minimize the tax burden. The plan makes conservative assumptions about annual returns and inflation. It offers flexibility and should be reviewed regularly.

Source: Assante Capital Management, Team Major

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