SPRING 2 0 1 8
BUILD WEALTH FOR
ENJOY A WORK-
BY: Maili Wong, CFA, Smart Risk Investing
FOR MOST of us, work is a necessity rather than a choice.
In an ideal world, it would be great to have the option of
not working as we grow older, and there are steps you can
take to try to make this goal a reality. In this scenario,
your income would be generated from your investments – a
wisely apportioned, closely monitored portfolio of assets that
could include stocks, bonds, real estate, private businesses
or other interests. Savvy investors will start the process
early, as it takes time to amass a portfolio large and stable
enough to withstand a long retirement period – especially
during the inevitable market downturns that will occur.
Here is how I delineate the four stages of saving for retirement
and appropriate action steps with my own clients. You may be
able to relate these recommendations to your own situation and
research best options to building your own savings portfolio.
STAGE 1. WANTING IT ALL.
With 20 to 30 years before retirement, it’s typical to have
multiple goals, including specific career ambitions, paying down
a mortgage and saving for your kids’ education. Despite the
multiple demands on your cash flow at this stage, it’s still very
important not to neglect the need for retirement savings. A good
first step is to develop a financial plan that projects the impact
of current saving and spending habits on potential retirement
goals. Try to get the ball rolling at a young age, preferably via
automatic monthly contributions to an investment portfolio.
Another good strategy may be to purchase insurance against
serious illness or disability, to build a financial safety net.
STAGE 2. TIME IS RUNNING OUT.
When you are about 3 to 10 years away from retirement, you may
start thinking more seriously about the amount of savings you
will need to maintain an active lifestyle. This is a good time to
step up your regular contribution amounts if you haven’t already
done so, and review the status of your existing insurance policies,
wills and estate plans. It also might make sense to find a trusted
investment advisor to help oversee and guide your planning.
STAGE 3. WORK-OPTIONAL LIVING.
At retirement, you can begin to experience work as a choice,
rather than a necessity. Many in this category are active
travellers who remain engaged in numerous other activities.
To sustain this lifestyle, it is ideal to work with a professional
who can help balance your cash flow needs against the
need to preserve capital. If it is necessary to cut expenses,
your advisor can help you determine the right strategy.
STAGE 4. GIVING BACK.
This phase is often characterized by self-reflection and decisions
about leaving a legacy for your family and others. It is important
to consolidate your assets at this time to simplify the process of
succession and estate planning. Keep your financial documents
up-to-date in case of any potential loss in memory or function.
Though the plan-ahead process may seem daunting, you
will get the best results if you start early. For help in
getting the ball rolling, see what savings options may be
available through your employer or contact an experienced
investment advisor or Certified Financial Planner (CFP).