So, you are nearing retirement –
maybe you are in your 50‘s 60‘s, or 70‘s
and you start to wonder
how to make sure you have enough to retire?
And besides from that
The more important question is:
How can you make sure that your
retirement saving are financially secured
so you don’t have to spend your days
worrying about it?
And that’s why in the next 10 mins,
I want to share my
retirement proof investment strategy
I will first share some common
retirement-investment mistakes
I see people make –
so you can learn from them
and avoid those mistakes.
Then I will talk about
FIVE retirement-proof investment assets
that you must have
in order to secure your retirement.
So at the end of the day,
YOU can live a happy retirement
without money worries.
Let’s get started!
Keep in mind that when it comes to retirement,
one of the most important things
is to start planning early enough.
We probably don’t think about our retirement in
our 20s or 30s because it just seems
so far away.
Plus we have more urgent financial goals
like getting a place or starting a family.
But guess what,
if we don’t treat retirement planning
as important as other financial goals,
then we will never have enough to retire.
For example:
in our 20’s,
we want to look for a better job opportunity.
In our 30s,
we might be looking for a place to live or
how to maintain the family expense.
And In our 40s,
we might need to focus on our children’s education.
Even in our 50s,
we become the sandwich generation
where we need to help our parents
and our kids might need our help still.
And by the time we are in our 60’s,
time is no longer on our side.
And we might become someone else’s burden
Therefore,
the sooner you start saving the better.
If you start early you can leverage
compound interest and
grow your savings until you retire.
And I mentioned a lot of times,
retirement is not the end of the journey,
more like a transition in life.
So the most effective way
to prepare for it is to create a roadmap.
A retirement financial plan.
Otherwise,
you might unexpectedly sabotage your own
retirement by spending too much or too little
The next one is ignoring health cost
When we talk about sickness or chronic diseases,
Most of us don’t want to deal with painful thoughts
or think that we could ever need medical help.
So we avoid dealing with it.
But according to research done by Fidelity,
the average couple in retirement
will spend $285,000 on healthcare.
You might think,
yeah the government can take care of me.
It’s true that we have a great health care system
but it’s not perfect.
A lot of things are not covered.
If you are sicked,
our health care system
won’t pay for your mortgage nor rent,
our health care system
won’t pay for nutrition supplement and certainly
the health care system
won’t pay for our senior care home.
So what’s your contingency plan
when you need extra healthcare?
It’s always better to have a medical saving’s plan
10 years Early than 1 Day too late!
As long as you work,
your tax depends on your income
and the tax bracket you fall into.
And that also applies to your retirement.
once you are retired,
your income will likely to shift
and it could be that you are in a
different tax bracket all of a sudden.
What’s more,
once you start withdrawing money from RRSP
and 100% will be paid out as regular income.
This can also mess with your tax brackets
and also your government benefits
While it is a bit confusing,
it’s possible to foresee most of this upfront
and you can plan your taxes accordingly.
If you need more information on this,
I have a whole playlist where I go over
the details of RRSP, TFSA, and their benefits.
You can click the button on the right corner
to Watch the playlist there.
I am sure you must hear the saying,
don’t put all the eggs in one basket.
Especially for your retirement portfolio,
you want to diversify.
However,
today let’s say you google,
how to diversify your retirement portfolio
The majority of the websites will only suggest,
hey instead of owning individual stocks,
or a term deposit
just invest in a different index fund,
buy fixed income.
And you will be in good hands
And then they start
to promote their funds or products.
If those so-called guru’s advice is true,
then the market recession back in 2008 or 2011
should not affect that many people's retirement life.
Studies show there were almost 2 trillion in RRSP
and pension funds back in Canada in 2007.
And then during the global collapse in stocks,
almost $300 to $400 billion
was gone in less than a year.
That means more than 20%
of your retirement saving was gone.
And you don’t have enough time to let it grow again.
So instead of investing in a diversified stock portfolio,
please start investing in a different asset class
which I will later share more about it.
The choices you make now
will definitely affect your retirement.
And now that you know
the common mistakes that people make.
Let’s talk about how to do you truly
diversify your retirement portfolio.
How do you make sure no matter
the stock market or the real estate market collapse,
you know your retirement portfolio is still safe.
I want to share 5 asset classes you must have
in order to secure your retirement.
The first asset I recommend you acquire
for your retirement is cash.
It sounds silly but think about it.
You cannot literally eat your house
Or you cannot use your stocks to get groceries.
You still need cash as a medium
to pay for your bills,
Real estate or stocks are a
good place to hold your cash.
But you NEED cash itself
to purchase the things you want.
A lot of people don’t understand that
because prior to retirement,
we always aim for asset accumulation.
But the nearer you get to retirement,
the more you want to switch to
cashflow accumulation.
That’s because the long-term return
on investment of most assets becomes
less important in retirement.
You need money now and not in 30 years.
So make sure you have enough cash
in your checking or saving account
to cover your next 6 months of expense.
Then the rest can invest into different asset classes.
Then The next asset that is suitable for retirement is
what I call the paper assets
such as stocks, bonds, ETFs, mutual funds.
Things that look good on paper
but it’s not that tangible.
We need this asset class because of
it’s liquidity and the appreciation.
First,
it should be appreciated and able to beat inflation.
Plus You can acquire and sell them
pretty much anytime you want.
It’s much easier to exchange back to cash
compared to the next three asset classes.
Now you might wonder,
which paper assets exactly should you invest in?
It depends on your unique situation,
and if you want help with this,
it’s best to talk to a financial advisor
Depending on your situation,
I usually recommend have at least 30 – 50% of your
total assets in a well-diversified investment portfolio.
Now The third asset class is real estate.
I know,
when it comes to real estate, we all like it.
Because we can get the passive rental income,
and it has a steady appreciation.
However,
I have a totally different perspective
on this asset class.
When it comes to
real estate investing during retirement,
don’t aim too much on the rental income side.
Why?
Because there are too many factors
affecting this cash flow.
Maintenace, tax, mortgage payment, rentee turnover.
you don’t get much left at the end.
Therefore,
the main purpose of holding real estate
during retirement is to increase your chances
of getting money from a bank.
What do I mean by that?
Think about it this way:
During the market downfall,
You can’t take your stocks or your youtube channel
to the bank and ask for a loan.
It simply doesn’t work that way.
But if you own real estate,
you increase your negotiating power,
and getting a loan is much easier.
For example,
you can use a home equity line
or refinance your house.
You can then use the money to reinvest
in your stocks or other assets.
Any rental income you get is nice
but shouldn’t be your main goal,
so keep that in mind.
Let’s get to the next asset that will help you
bulletproof your retirement income
- it’s insurance!
Insurance is really pennies into dollars.
That’s because contributions are usually very
feasible and if anything happens you are covered.
There is a variety of insurance to choose from
- such as life insurance, medical insurance,
sickness insurance, and disability insurance.
In some cases,
it might be a good idea to have
two or several kinds of insurance.
And I know that most people want to avoid the topic
of insurance because it seems not very attractive.
Many of us also think that bad things happen
to others but not to ourselves –
so we think that insurance isn’t necessary.
But the truth is,
without insurance things can get expensive.
If someone in the family dies,
for example,
relatives have to deal with hefty tax fees.
(Btw I have a full video on the cost of death,
you can watch it here).
So,
having the right insurance definitely helps to
protect yourself and the next generation.
It helps in case you get sick, injured, or disabled
or if anything happens to your house.
And especially in retirement,
it’s a great asset to have.
If you are unsure what kind of insurance you need,
you can talk to an insurance advisor.
And the last Asset class that helps you have
a financially secure retirement is commodities
such as gold, silver, crude oil
and other precious things.
Now I am not talking about the gold or silver ETF.
Those are still considered as paper assets.
What I meant it’s the hard physical object that
you want to put it in the deposit box
or dig a hole in the backyard.
The advantage of commodities is that
their value is finite.
Therefore the price is semi-regulated.
If the market goes down,
your cash, paper assets and real estate go down too
- but commodities keep their value.
So,
in a case of emergency,
you can sell-off your commodities
and secure your livelihood that way.
But out of the 5 asset classes,
commodities are the least liquidate.
So I don’t recommend this until you have
acquired the previous 4 assets first.
Alright, how do you like this video so far?
I hope that this video made
your retirement planning a bit clearer.
If you are getting any value out of this,
make sure to press the like button
and subscribe to my channel.
And of cause,
If you are not sure where to begin
your retirement planning,
have a chat with me!
You can find all the info in the description.
I look forward to speaking with you soon
If not, then I will see you in my next video!