Silver and Gold Magazine Autumn 2020 - Page 22

WHAT CAN SAVINGS PAY YOU? AND WILL IT LAST? – By Brian Weatherdon, MA, CFP, CLU, CPCA Here we’ll quickly touch on how to make your money grow – getting a healthy return on your savings – also what awaits if you miss this. What are the keys to financial comfort and success as the years continue? First, realize how inflation can poison our future wellbeing. Let’s say we’ve been seeing 2% inflation in recent years but no doubt you also see how some costs have jumped 10% to 20%. That’s massive! But even 2% takes a nasty bite: 2% drops your purchasing power by a fifth in ten years, and by a third in twenty years. What you’re buying will cost more in future, and without a plan to make money grow, people will miss out on the things they need. Second is a caution (with a promise) against spending all your income. We generally want to spend more when we retire, especially for travel, family, and entertainment. More than a few also catch a bug for “impulse buying”. Perhaps if you avoid such impulse you can travel about as much as you choose. It’s like the lesson of skipping fast-foods and miraculously saving $2000 a year. At least be aware of your spending: don’t let money fall through your fingers like sand through an hourglass. Your reward … and here’s the promise: you’ll have more for everything you need and truly desire. Third, learn about your investment choices. Don’t take as gospel what someone tells you in bank branches – they’re more limited now than ever! Learn about rates for GICs (guarantee investment certificates), bond funds, the power of dividends, and enhancing your income with other special assets that are all around us as I’ll mention below. The result will be higher income, less risk, and assurance of enjoying your money and the comfort it can provide. GICs – guaranteed investment certificates. Your mom and your grandmother owned these – they’ve been around forever. Big banks and insurers are paying 0.5% to 1.25% for terms up to five years. People used to enjoy the comfort of guaranteed interest at 9% or more but now it’s near 0%. Inflation more than cancels that return, and money shrinks further with every passing year. Bond funds There are many types – with government and corporate bonds and the commercial debt you can own here in Canada and globally. This and other positions I’m sharing with you today are not guaranteed but offer more flexibility and usually a 22 Read + hear more: higher return than GICs. Despite the challenges of Covid-19 and lowest-ever interest rates, strategic bond funds this year have offered growth at 2% to 5%. Owning this can reduce your risk because you’re likely to have a lot more money in five or ten years. It means having more spending power too. Dividend funds Canadian and Global – can support a higher income ranging from 4% to 6% or more. These funds invest in big bluechip companies, also successful smaller companies, which pay a healthy portion of their earnings as dividends. Utility companies, insurers, banks, industrial leaders and renewable energy firms fit nicely together here. Plus, these firms typically grow over time so your money (and purchasing power) may roughly double in a decade. Often, dividend-investing has paid the strongest return over inflation… helping people afford the lifestyle choices and comfort they need while aging. There are other investments that can help magnify income while reducing risks. A couple of resources to consider include Real Estate Income and Infrastructure Income. The basic idea is to invest in tangible and lasting assets that can pay you an increasing income for life. Picture in your mind if we have invested in a combination of major office properties, multi-family residential complexes, properties that house modern distribution centres; also railroads, telecommunications, solar and wind farms, gas and electrical grids, and so on. Each of these represents economic value, pay growing income, with results generally between 4% to 8%. Why settle for 1-2% if we may safely find returns nearer 4% to 8%? Investing as above to assure your comfort, your money can keep working and growing to fulfill your current and future needs. Carefully following this approach gives greater freedom to maintain your lifestyle and enjoy personal comfort all the years ahead. Reach me to speak together – and visit where I share more “money ideas” for LIFE at GuaranteedIncome4Life. Brian Weatherdon of Sovereign Wealth Management Inc., is a Certified Financial Advisor, Retirement Coach, and consultant on wealth and aging. 905-637-3500 The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation requiring appropriate legal, accounting, tax and other professional guidance. The views expressed are those of the author and not necessarily those of the issuer of any financial products for which the author may act as a distributor. Any names and/ or circumstances mentioned above are altered for confidentiality.