According to a recent Desjardins Group retirement survey, many Canadians remain in retirement planning limbo. The survey found that Canadians who lack confidence in financial institutions and advisors were more likely to feel that saving for retirement was confusing and difficult. They also tended to have lower incomes, fewer savings and were less likely to seek financial information in main-stream media. As a result, they were more likely to feel that their own financial security is poor.
If you were to compare your situation against these results, how would you rate your retirement planning confidence on a scale of one to five, if one was the lowest? Are you like the majority of respondents who find it very confusing? What would it take to overcome your fear and finally start investing in your future? Similar to starting a diet or quitting smoking, it usually takes a shock to your system to make critical behavioural changes. For example, maybe your parents or grand-parents have to keep working past their ideal retirement age because they didn't save enough or suffered investment losses. They're likely scared and feeling desperate. "That's not going to be me," you tell yourself even though you're afraid it just might be.
Put your money where your emotion is
Instead of hitting your financial rock-bottom, why not decide to put your money where your emotion is? You can set up a plain and simple saving plan that is so automatic, you won't even notice you're saving. One easy option to consider is to contribute to your employer-sponsored retirement savings or pension plan.
- The pay-yourself-first concept: Your contributions are made automatically through payroll deductions, so it's virtually painless. If you don't have it, you won't spend it.
- Tax savings: Your contributions can be deducted before taxes. This means you're lowering your taxable income and your contributions can grow, tax-deferred.
- Matching employer contributions: Depending on the features of your plan, your employer may also contribute to your plan. This means that you could double your savings.
- Choice of investment options: You may have access to a variety of investment options that have been carefully selected by experts.
- Lower investment/No transaction fees: Take advantage of group buying power, lower investment management fees and possibly no front-end, back-end or deferred sales charges.
- Home buyer/life-long-learning possibility: Depending on your plan, you may be able to use some of your savings to purchase a house or return to school.
- Portability: If you leave your employer, you should have the option of transferring your plan to another investment vehicle or savings plan.
There's so much information about retirement saving that it's easy to feel overwhelmed and avoid it all together. Instead, try this approach: meet your fears head-on. Make regular retirement saving your goal and you'll end up changing your financial future for the better.
6 Tips To Rescue Your RRSP From Volatile Markets
Have A Plan(01 of06)
Open Image ModalThe experts CBC News spoke to were unanimous on the need for a plan that takes volatility into account."I meet so many people who don't have an investment plan - who won't have an intentional allocation to bonds, stocks, cash," says Edmonton-based financial educator Jim Yih.Having a plan is one of the best ways to increase your probability of investment success in the long run, he says."It's hard not to pay attention to the swings," Yih acknowledges. But having an overall investment strategy and target asset mix makes it easier to avoid being caught up in the emotions of a plunging market.Sticking to that plan, of course, is a critical part of coping during the big slides. (credit:Alamy)
Risk Tolerance(02 of06)
Open Image ModalYih also says investors would be well advised to figure out their risk capacity - how much risk they need to take to reach their goals. This is not the same as the usual risk tolerance measures financial companies use, which he says "test how much risk you want to take."In addition to a financial plan, some advisers we talked to mentioned the importance of having an investment policy statement (IPS). This document determines how investment decisions are made."The IPS gives you your rules for managing your investments, and when you believe in your rules, you will be better able to manage your response to wild market swings," says Warren MacKenzie, CEO of Weigh House Investor Services.But he notes that an IPS still isn't offered by many financial advisers, so you may have to hunt around.David Chilton, author of The Wealthy Barber Returns, points out that people often think they can handle a lot of volatility - in other words, a lot of risk. That is, until the market actually undergoes a severe correction."Figuring out how much volatility you can stomach ahead of actually experiencing that volatility is an inexact process," he writes. "For most of us, it's less than we think." (credit:David G. Klein)
Revisit 'Buy And Hold'(03 of06)
Open Image ModalIs the investing concept of "buy and hold" through thick and thin really dead? Some advisers think it's time to at least revisit this familiar maxim."Buy and hold is a great strategy if you are in a bull market," Warren MacKenzie says. "But if we're in a secular bear market - and I believe we are - buy and hold is the worst strategy."Now is the time to hire a professional manager who can buy and sell to take advantage of that volatility, MacKenzie says."You must realize that to be a successful investor, you have to buy when the news is bad and when other investors are selling," he adds.Look at volatility as an opportunity to make money, MacKenzie says, because most people sell when the market drops and buy when it's near the top.Hiring someone to carry out your buying and selling also allows that third party to be the sober second thought your first impulse to panic needs - someone who isn't as emotionally involved with your money as you are. (credit:Alamy)
Buy On Dips(04 of06)
Open Image ModalSome advisers aren't quite willing to entirely write off the buy and hold philosophy, but do agree that market dips can uncover good quality stocks that have gone on sale."Volatility can represent a buying opportunity if the fundamentals are sound and the price has dropped," says Cherith Cayford, a principal with Victoria-based CMG Financial Education.Cayford isn't ready to declare buy and hold dead just yet. "It still makes sense for quality blue chip investments."But she adds that it's vital to have cash available for those market opportunities that dips can produce.The buying doesn't have to be an all-or-nothing process, either. Instead of biting off more than you may be able to chew, you can nibble - investing a portion of your cash when the investment drops to an attractive level. (credit:AP)
Seek Out Less Volatile Investments(05 of06)
Open Image ModalThere are plenty of other investments that historically don't tend to move as dramatically as the stock market as a whole. So don't be surprised if your adviser suggests an increased allocation to alternative products or asset classes to reduce the riskiness of your portfolio. Government bonds, for instance, tend to be much less volatile than equities. But be aware that even long-term government bonds aren't yielding much these days.Utilities, telecoms and real estate investment trusts (REITs) are all less volatile than the dominant TSX sectors of energy companies and financials, while still paying reasonably high dividends. Preferred shares also fall into this category. (credit:Getty)
Ignore The Daily News(06 of06)
Open Image ModalFor some investors who can't escape the daily litany of depressing economic stories, some advisers suggest that turning a blind eye to the latest swings may be the best coping strategy."Headlines can certainly be disconcerting," admits Marc Lamontagne. "You have to focus on your long-term goals.""In some cases, I have recommended clients stop opening their quarterly statements."This is, he points out, not a good long-term strategy for people who don't have a professional managing their investments.These days, the do-it-yourselfers need to pay even more attention. (credit:Alamy)