Tom Ivaskiv made sure the money wouldn’t fail him in retirement. Here’s how you do it too.
Tom Ivaskiv is not worried. This former software industry executive in Montreal retired at age 60 and now shares his life between a condo in Mont-Tremblant, Quebec, and a house in Longboat Key, Florida.
“We’re comfortable,” says the man who has built his retirement savings through registered and non-registered accounts and exercised employee stock options. “Retirement is great.”
However, to get there, he had to work hard and plan his finances well. Ivanka says he’s taken a multi-pronged approach to savings and continues to track his investments, including a stock portfolio that includes banking and tech stocks.
“I try very hard to diversify,” he says.
It used to be possible to build retirement income using stocks and bonds — primarily through fixed-income investment products that have historically generated returns of around 10%. Many people then also had a defined benefit pension plan at work that guaranteed them an income until the end of their lives.
These days, however, building an income that can last for decades (according to Statistics Canada, people are living longer than ever) requires careful planning. As a result, Mr. Ivaskiv is actively managing his retirement savings. Relying on the expert knowledge of his advisor with whom he has regular contact, he carefully monitors his stocks, rebalances his portfolio periodically, invests in real estate, and carefully withdraws funds from his registered retirement savings plan. (RRSP).
“If you don’t plan ahead of retirement, you run the risk of running out of money,” says Mark Arruda, assistant vice-president of strategic business development and marketing actuary at Sun Life Financial in Toronto.
Income until your death
Rising life expectancies and volatile markets are two of the main obstacles to the sustainability of retirement savings. Before, counselors made plans for a period that stretched up to 80 years. Today, this period can extend up to 90 years.
In addition, interest rates have never been lower, and it is becoming more difficult for savers to earn sufficient returns to meet their retirement income goals. Retirees, therefore, take more risks to obtain better returns.
However, some products can help overcome these obstacles. “Annuities, for example, can guarantee income to retirees throughout their lifetime. The insurance company will pay regular, predictable payments in exchange for a lump sum, regardless of how long the annuitant lives,” says Arruda.
