Make room for readers | Anxiety triumphs over retirees

That financial markets start the year marked in red, along with an inflation rate we haven’t seen in 30 years, is worrying retirees, if we are to believe the emails readers send to Journalism The day after last Monday’s stock market crash, when North American stock markets fell another 2 to 5 percentage points.

Posted at 5:00 am

Andre Dubuque

Andre Dubuque
Journalism

“We are experiencing an extraordinary moment,” agrees Robin Antoine, portfolio manager at Tulett, Matthews & Associés, in an interview with Journalism. In a balanced portfolio, the role of bonds is usually to resist when the stock market begins to decline. However, this time around, stocks have a negative yield, bonds have a negative yield – those with long duration are down 20% – and even cash has a negative yield with inflation we know. »

To minimize unpleasant financial surprises in retirement, “The solution lies in cashout planning,” says Fabian Major, financial planner and wealth management advisor at Assante Capital Management, Team Major. “When we make a financial plan, we’ll tell the person: This is your income and here is your field. A person who has no idea where their room for maneuver is, should quickly review their financial plan,” he advises.

Journalism I called four readers whose retirement plans have been turned upside down as the markets turn.

What do you do in case of unexpected expenses?

“Were it not for the situation that forces me to spend a huge amount of money to help my daughter, bear markets wouldn’t bother me too much,” Therese Nadeau, a retired psychologist and veteran independent investor, tells us.

Her daughter has just separated and she must buy back her ex-husband’s share of the apartment. Our reader from Saint-Hyacinthe is proposing to make a down payment of $25,000, which she intended to pay by taking profits from her portfolio, which she has managed very carefully for more than 20 years. She views her county government pension plan as the “fixed income” portion of her estate.

Rather than materializing losses in her portfolio, she plans to borrow $25,000 on her mortgage margin, even if that means only paying interest while waiting for markets to reclaim lost ground. It’s also toying with the idea of ​​selling shares of the pharmaceutical company Pfizer, which has held up better thus far than the overall market. Stocks in his TFSA account.

Based on the parcel information at his disposal, the financial planner Fabian Major suggests to M.I Beaulieu should have a disbursement plan prepared based on the two scenarios she considers before deciding on anything, “to minimize the impact on her future retirement income.”

Does his plan hold up?

Danielle Beaulieu, 66, began receiving her state pension only last April. Last year, she decided to move her locked retirement account from Épargne Placements Québec to the company of her new financial advisor. He made a plan to spend $15,000 a year in his savings for the first years of his retirement. Assuming an annual return of 4%, his savings will run out at age 92. She worries about inflation as neither she nor her husband receives an indexed pension.

Fabian Major believes that if her plan is drawn up with a probabilistic analysis that takes into account exceptional events, and if the inflation assumptions used are judicious, then I’m not worried about it. We should not worry too much about the extraordinary events we are currently experiencing.


Photo by David Boyle, Press Archives

Fabien Major, Financial Planner and Wealth Management Advisor at Assante Capital Management, Team Major

2022 is not over yet, the financial planner continues. We cannot expect that we will lose 22% every six months in the US markets. It doesn’t work like that. When it goes down quickly, it can go up even faster. »

Country house to renovate

Dentist by profession, retired Richard J. * last year.

“I have a concern about the downturn in the stock markets, because after our recent retirement, our investment in the stock market to fund our retirement is clearly going down, and inflation is playing against us,” we were told. Written on Tuesday, the next day the markets bled.

The 65-year-old manages the budget for the major renovation of his Magog vacation home himself, as he explained to us in an interview. He wants to receive his five grandchildren while they are in good health. His plan was to pay half the bill in cash and fund the other part of his mortgage line. Unfortunately, his portfolio values ​​have fallen since the beginning of the year and the funded portion will cost him more as mortgage rates rise. “Rates shouldn’t increase by another two percentage points, we’ve maxed out a bit,” he sighs.

“When you have a choice,” Mr. Major says, insisting that he is speaking in general, knowing neither the financial situation nor the investor’s profile of the master, “we will pay and the highest price is the price we go to keep for ourselves.

He adds: “After a 20% loss in the markets, the return probability for next year on his portfolio will probably be greater than the mortgage margin at 3, 4 or 4.5%.”

Retirement plans suspended

Sylvie H wrote. *, who worked as an inspector for the Canadian Food Inspection Agency: “It’s worrying because I’m a young retiree.” “Seeing your investments go down to this point is still a bit stressful. Seeing as the majority are already investing in private management in a balanced portfolio.”

On the phone, Sylvie tells us of her dismay. “Since January, the situation has started to decline. However, I have plans for a young retiree: landscaping my new home, a road trip to Florida, replacing an SUV with an electric car. Fearing the global situation, I decided to postpone everything for two years. at least.

Live as a couple. Only one adult is fortunate enough to have a guaranteed retirement income. It has savings covering two years of add-ons. She has been dealing with a financial advisor for a year. Her withdrawals are estimated at $30,000 to cover recurring expenses and private retirement plans.


PHOTO MARCO CAMPANOZZI, PRESS ARCHIVES

Robin Antoine, portfolio manager at Tulett, Matthews & Associés in Montreal

“Where there are private expenses, agrees Robin Antoine, the choice is often to borrow, which becomes riskier as interest rates rise, or materialize its losses by selling its shares. In the current environment, says the portfolio manager, deferring discretionary spending is not an option.” bad.

To get out of this dilemma, Mr. Antoine is accustomed to identifying the short-term financial needs of his clients, including extraordinary expenses, and securing amounts in secured vehicles that are easily accessible.

*First names are fake but cases are real.

Exchange plan, why?

A payment plan is about maximizing the assets set aside for retirement by ensuring that savings continue for as long as needed. The disbursement plan focuses on the standard of living at retirement and recurring income. He also plans special expenses that are sure to pop up during retirement. It identifies the shortfall and compensates for it by disbursing the amounts allocated for retirement in an effort to reduce the tax impact. The plan makes conservative assumptions about annual returns and inflation. It provides flexibility and should be reviewed periodically.

Source: Assante Capital Management, Team Major

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