March 20, 2020
Financial planner David Field wants to help people who are approaching retirement or already retired and worried about their finances. And why wouldn’t they worry? Stock markets have plunged in recent weeks, and interest rates are falling. On top of that, there’s an expectation of a recession to come.
Mr. Field, a certified financial planner, has come up with a list of six ways to reduce your financial anxiety about retirement:
Create or maintain a cash reserve: Mr. Field recommends that his clients keep enough cash on hand to cover three years of retirement expenses. “This is ready, accessible cash that is not based on whether stocks or bonds are going up or down.” Having a cash reserve means you don’t have to sell your stocks or equity funds at a low point to cover living expenses. For parking cash, he uses high interest savings accounts and savings account ETFs.
Sell bonds, not stocks: If you do need to sell investments, give your stocks time to recover and instead sell your bond holdings. Mr. Field says government bonds are the ones to target because they’ve held up the best in the recent stock market turmoil.
Postpone your retirement date: If you’re looking ahead to retirement in the months ahead, Mr. Field suggests you delay where possible. “Retiring in such uncertainty just adds way more stress and reduces your options,” he said. “Not everyone has the luxury, but if you do, then I would postpone until the future is a little clearer.”
Cut spending: If you reduce your household need for cash, you can withdraw less from your retirement savings. Mr. Field suggested it may be easier than usual to lower spending because we’re supposed to be self-isolating to halt the spread of the virus.
Get your 2019 tax refund as soon as possible: Need cash? File your taxes if possible and collect your refund.
And, finally, remember that the Canada Pension Plan and Old Age Security are solid. Payments from these government programs do not rise or fall with financial markets.
This Globe and Mail article was legally licensed by AdvisorStream.