Disproving a Common Fear
A common fear of many soon-to-be retirees is retiring at a “bad time” when the stock market is “down”. This fear is currently a hot topic in Canada, as over the past year falling oil prices have hurt our economy and the Canadian stock market as a whole. However, the fear is unfounded for two reasons.
The first is the vast majority of soon-to-be retirees are not truly “down” with their stocks and they aren’t selling many (or any) of their investments during this “bad time”. It’s quite common that most plan members are fully engaged with their retirement plan until they are close to retiring. However, once retirement age approaches, the soon-to-be retirees begin keeping tabs on the amount of their accumulated savings, which becomes their reference point against future gains and losses. In truth, any plan member who started investing 10 to 40 years is certainly very “up” over the long term.
The second reason why retiring at a “bad time” is not a fair assessment is because most retirees will not sell their investments all at once. Group retirement plan assets form part of the nest egg (the lump sum) intended to support members throughout retirement. The CPP and Old Age Security (OAS) are two other sources of retirement income, in addition to group retirement plans, accumulated throughout your career and personal savings.
While you will likely have to transfer your group retirement savings out of your employer plan once you retire, you should ensure that you immediately reinvest the funds so that the growth of your investments can financially support you for the rest of your life.
If you are not comfortable making your own investment decisions or deciding how much you will need to withdraw from your retirement savings, consider engaging a financial advisor to ensure you’re prepared and ready for retirement.