Rethinking your retirement plans during the pandemic

If you’re approaching or already in retirement, you’re not alone if you’re wondering what to do about your nest egg investments. Should you stick with your existing position, or sell some of your investments now? Will your savings last through retirement, regardless of any other periods of market volatility?

“Questions like these come up often during times of economic uncertainty,” notes Rick Lowes, vice-president of retirement strategy at RBC. “To make sure your investment portfolio isn’t unduly impacted, it’s important to take a step back, and revisit the goals and objectives in your financial plan.”

Don’t have a plan yet? Don’t fret. This all starts with a conversation with a financial advisor around what truly matters to you and how you want to spend your time when you’re retired to determine how much money you will actually need to last through retirement.

A common strategy to address this uncertainty is called “bucketing,” Lowes adds. “Dividing your investments into three main time horizons or buckets can provide short-term protection during market fluctuations, generate income over the medium term and give you long-term growth to help sustain your wealth.”

Here’s how to fill up each of your three buckets.

SHORT-TERM BUCKET: Consists of savings and short-term investments, such as GICs and money market funds that mature between one to five years. These assets provide secure, stable income to meet your immediate basic and lifestyle needs in retirement.

MEDIUM-TERM BUCKET: Holds income-generating investments that mature anywhere from six to 10 years, including fixed-income mutual funds and stocks that can pay a portion of earnings or dividends. This bucket can also top up the short-term bucket or help you manage unexpected expenses.

LONG-TERM BUCKET: Holds potentially high-risk investments like growth equities maturing in over 10 years, giving your assets time to recover from periods of volatility.

A financial advisor can help you explore your options to see if bucketing is the right strategy to help you meet your income needs and so you can enjoy your retirement, regardless of what the market is doing.