It’s not that market risk or volatile markets are necessarily bad. In fact, higher risk tends to bring higher rewards with some investments. It is also technically correct that over time, securities markets outperform many other investment savings choices. But market rewards are gained at random times that don't match income requirements.
For those who will be taking income from savings - an erratic or poor sequence of returns 5+ years before and or during early retirement years in particular can be financially devastating.
Thankfully there are a variety of guaranteed investments that take the risk of time out of your future financial plans.
- Can lifetime expenses be covered by your current pensions, savings and government retirement benefits?
- If the market drops 20% (or any number you'd wish to explore) during income years how long will savings be expected to last?
- Will there enough money to take care of dependants?
- How do future travel plans and other bucket list items fit in?
- If we eventually need to convert a nest egg into a guaranteed-for-life income stream, what are the best available options and do they suit our needs?
- Are long-term care costs factored into this equation?
- After we’re gone, will we have enough to cover the needs of our survivors, bequests and the charitable legacies that we wish to leave behind?
Knowing that we'll never run out of money for the rest of our lives is very helpful for most of us who like to sleep well at night. Control and access to our investment savings in case of emergencies are also important for many.
- Guaranteed growth of future income during savings years.
- Plans that allow you to participate in the upside of the markets while also guaranteeing an income for life.
- Income payments that are guaranteed for life!
- Other guarantees. For RRSPs and RRIFs in particular, your initial investment is the guaranteed minimum you'll be able to withdraw over time, even if the market value drops below your initial deposits.
- Control and access over your investments anytime. Just in case.
- Loss of control options that will pay a higher contractually guaranteed for life income are also available when suitable.
- Joint accounts, for the purpose of guaranteed income continuation for a surviving spouse.
- Avoid probate. Note: If your wish is for your estate to avoid probate delays, taxes and fees - in most Canadian provinces, it is unnecessary to set up joint accounts with these types of guaranteed investments.
- Transfer of residual proceeds to your beneficiaries can be delivered over time and/or as lump sums, as you see fit.
Jack Bergmans CFP