Invest Now for Your Retirement Income
A key aspect of preparing for your financial future is working to ensure you will have sufficient income after you retire. Most people generally will need between 70% and 90% of their pre-retirement income to maintain their standard of living, though some may need more or less than that, depending on their particular circumstances.
A portion of your retirement income may come from reliable sources like a pension plan, government benefits, annuities and perhaps part-time employment. But after that, you may be counting on your personal retirement savings. Most people need to withdraw some money from their portfolio, so having the right mix of investments to generate sufficient income and growth is important.
Also consider consolidating your accounts. It can help you gain a clearer picture of your retirement savings and the withdrawal amounts that may be needed from both your registered and non-registered accounts.
Generating Retirement Income
Whatever your retirement will look like, you’ll need income to pay for it. The amount you withdraw from your portfolio can depend on factors such as your age, risk tolerance, how your money is invested and the desire to leave a legacy. Everyone’s situation is different, but retirement can last 20 years or more, so an initial withdrawal rate of 4% can be a good place to start. A moderate withdrawal rate allows you to be more flexible because your income needs may rise and fall.
Your portfolio should provide two types of income:
- Reliable Income – Fixed-income investments, including Guaranteed Investment Certificates (GICs) and corporate bonds, can help provide current, predictable income. We suggest that your bonds and GICs be laddered according to maturity dates to mitigate the effects of interest rate fluctuations. Some people decide to invest only in GICs because they provide income with less risk. But GICs alone won’t provide a return that can keep pace with inflation over the long term, especially in an environment of low interest rates.
- Rising Income – This type of income comes from stocks and mutual funds that have a history of paying dividends and increasing them over time. Although equities possess more risk relative to bonds, their rising income potential can help protect against inflation.1 To help reduce risk, we recommend buying quality, diversifying your investments and holding them for the long term.2
Consider Life Annuities and Guaranteed Minimum Withdrawal Benefit Plans
Life annuities may be another option.3 In essence, you would entrust money to an insurance company in exchange for a guaranteed, lifelong source of income. The amount of income is based on a number of factors, such as the total amount invested, your age and your gender. Keep in mind that with life annuities, there are trade-offs to take into account, such as access to your principal. Guaranteed minimum withdrawal benefit plans can also be customized to provide a lifetime of income. I can provide you with more information about income guarantees provided by insurance companies.
Contact your financial advisor soon to help you create a long-term strategy that can help meet your needs today and into the future.
1 Dividends can be increased, decreased or totally eliminated at any point without notice.
2 Diversification does not guarantee a profit or protect against loss.
3 The information folder and contract contain information about fees and expenses, as well as information about obtaining any statements of additional information from the insurance company or underlying investments. You should read that information carefully before investing. You should consider the investment objectives, risks, and charges and expenses carefully before investing. Your Edward Jones advisor can provide this information. Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec), Inc.
