With just one more week before the RRSP deadline for this year, here is an interview generating invaluable information with experienced Certified Financial Planner Michael Preto:
1 -What might you identify as a myth that still prevails around investing for retirement?
That once you retire, you need to make your portfolio much more conservative. But in reality this is wrong because doing so will prevent you from being able to counter inflation and to live the lifestyle you want. Optimally, it’s best to approach retirement by positioning one’s balanced portfolio in such a way that you will never have to sell a portion of it when it’s in an unfavorable downturn. Further to that, it’s best to have a portion of your well-structured portfolio be less conservative to maximize its outcome and enable you to remain ahead of inflation.
- What is the most common mistake you’ve seen for saving and investing for retirement?
Most people don’t know how much they need to save in order to reach their retirement goals. They tend to do it in a half-hazarded manner; they may save some amounts but have no way of knowing what exactly they need and might even save too much in some cases. In order to know where they’re going, they need firstly to know where they are now. What is important is figure out what their lifestyle costs them today and to use that as a benchmark for how much they want to spend in retirement.
- What would you suggest as the one most important strategy for someone in their 40’s just starting to plan ahead for retirement?
To make sure that, if they are homeowners, they will have it paid off by the time they retire. One suggestion is to line up their retirement date with mortgage payoff time. If they don’t own a home, knowing how much they will need and deal with this now is important. Above all, do not procrastinate on getting started with retirement planning, lest regrets are likely to arise in a few years. As a Financial Advisor, I’ve certainly seen many clients wishing they had started earlier.
- What could be a fall back option for a person who is, say 55, and has been unable to save and invest because of financial setbacks such as divorce, ill health or job loss?
One thing such a person can do is start from scratch; treat their situation like a new opportunity and embrace a “fresh start” mindset. Whatever the lifestyle was before the setback, start fresh, and realize that it’s never too late! A person in that situation would also be wise to be prepared to work beyond 65. So it’s important that they find ways to enjoy their work, re-evaluate their priorities and save/spend accordingly. Lastly, learn to better appreciate the smaller yet often more meaningful things in live; most of which are costless and priceless.
