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November 30, 2021

A different take on retirement planning

Exactly what it means to retire “comfortably” has probably changed over the years. Most people’s standards of living have increased, taking expectations for the lifestyle that retirees are entitled too along with them.

But one thing hasn’t changed at all. Everyone has a sustenance level of income or wealth that they simply must have, no matter what. 

And that means you have to separate your needs into two groups: “absolute must-haves” and “wouldn’t that be nice”, says York University prof Moshe Milevsky, the author of Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life.

And the amount that you absolutely must have has to be immunized with the safest investments possible, he adds – no matter how large a chunk of your money that represents. 

So, instead of starting with a set blend of stocks to bonds, you’d be better off starting with a needs analysis and work your way backward from retirement.

As a result, someone 10 years from retirement should expect to hear the following from their advisor, Milevsky says: “Here's the amount of government pensions you can expect; here's the amount of personal pensions that you may or may not have, and here’s the gap. How do we fill that gap?”
You don't fill that gap with expectation, Milevsky says. You don't fill it with average. You don't fill it with high probability. You fill it with absolute certainty. And that means making sure that you have enough money today to buy a guaranteed investment that will generate that amount for the rest of your life – not a commonly held view within the retirement planning community.

Retirement is just one point in the your life cycle, not the end, says the other side. People live well into their retirements and need to ensure that they don’t outlive their money. And the best way to do this is by investing a fair chunk of your wealth in high-quality stocks.

What do you think? If you ever do retire, will there be stocks in your future?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...