While you can’t control world events that impact investment markets, when it comes to your retirement planning, smart strategies can mitigate the risk.
The sequence of returns is the order with which investments produce positive or negative returns – the order that those results happen can in turn affect the longevity of your retirement income.
In retirement, the sequence of returns is more important, as withdrawing during a market downturn can seriously impact the overall health of your investments.
The importance of starting strong
The question for investors approaching retirement and planning for cash flow should be: “What are my chances of success?” suggests Stu Tunheim, a consultant with IG Wealth Management in Courtenay.
“We don’t know what the market is going to do; we just don’t,” Tunheim says. “However, we can develop a cash flow plan that will be able to survive and flourish under any market condition. Our proprietary software can stress test this plan to measure the chance of success. This provides our clients with the clarity and confidence they want in their retirement.”
Robust analysis & strategies
To better analyze potential outcomes for retirees, a more robust approach is needed – in both analysis and action.
“We do things differently, running the plan through several different permutations to see what could happen. We need to look at how the plan holds up and how successful it is,” Tunheim explains.
With the analysis in hand, a course of action individualized for the client can follow.
“To beat this, and prepare for those unknowns, we use different strategies to plan for cash flow,” Tunheim says, pointing to the cash wedge strategy that incorporates investments of different risk levels to mitigate the impact of making withdrawals during a downturn.
“We want to have a balanced portfolio that will keep capital safe for the short term and out-pace inflation in the long term. And because of this approach, we can get a sense of confidence, no matter what happens.”
The takeaway:
It’s essential to have these discussions with your advisor as you’re approaching retirement, and plan for your individual situation.
“This is going to be different for everyone, and it has to be in line with their profile and time horizon for their investment to ultimately achieve the goals in their plan,” Tunheim says.
“If this isn’t something your advisor has discussed, or they don’t check in as often as you like, it might be time to get a second opinion.”
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Courtenay’s IG Wealth Management team is working remotely, but you can reach Stu on his cell at
Investors Group Financial Services Inc.
Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations. This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Stu Tunheim is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.