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Ensure your adviser rebalances your portfolio on a continuous basis to maintain a strategic target asset allocation. This will guarantee your portfolio is realigned properly to your risk tolerance, age and future goals.
3. Most advisers will tell you to keep maximizing your RRSPs until you retire. While this is OK advice, I am not a big believer in having all your investments in registered retirement savings plans.
Of course, they do have their place for tax savings, but I still believe everyone should also max up their Tax-Free Savings Accounts (TFSA). All Canadians over 18 should consider getting a TFSA and if you are close to retirement and just starting one, you could contribute up to $75,000 per person in 2021.
4. Once in retirement, many will go through the “Honeymoon Stage,” which is usually a time when new retirees who are still young and vibrant spend too much during the first 1-2 years. Try and delay portfolio withdrawals for as long as possible to allow a recovery to equity prices and portfolio values.
Also curb major purchases in the first year of retirement. Use your portfolio to generate income from interest and dividends rather than selling securities that have declined in value.
5. If you are in retirement and required to take the minimum withdrawal from your RRIF during a volatile market, you may want to consider an in-kind withdrawal instead of selling the stock and withdrawing the cash. You will still have to pay the tax on the market value of the securities that you withdraw.
However, you would not have to sell them at an unrecoverable loss at that time. When the value of the securities eventually recovers, you then cash them out and the increased growth will be treated as a capital gain outside of your RRIF and taxed at half the rate normally applied to a RRIF withdrawal.
— Christine Ibbotson is author of Don’t Panic: How to Manage Your Finances and Financial Anxieties During and After the Coronavirus and How To Retire Debt Free & Wealthy. She also writes the Moneylady column. askthemoneylady.ca