Team collaboration - Retirement planning with guarantees

The Role of Guarantees in Retirement

Building a sustainable, predictable income for life.

Beyond Accumulation: Creating Lifelong Income

Retirement planning has evolved. It is no longer just about accumulating a nest egg; it is about creating a sustainable, predictable, and lifelong income stream from that nest egg. For modern retirees, two of the biggest financial risks are longevity risk (the risk of outliving your money) and sequence-of-returns risk (the risk of a major market downturn early in retirement).

This is where investment products with built-in guarantees, such as segregated funds and annuities, play a crucial role. At SG Wealth, we use these tools to build a foundational layer of security into our clients' retirement income plans.

Mitigating Sequence-of-Returns Risk

Imagine a retiree who has their entire portfolio invested in the market. If a major market crash occurs in the first few years of their retirement, they are forced to sell assets at a low price to fund their living expenses. This can permanently impair the long-term viability of their portfolio - a phenomenon known as sequence-of-returns risk.

Segregated funds help mitigate this risk through their maturity guarantee. By holding a portion of your retirement assets in a segregated fund, you have a contractual guarantee that at least 75-100% of your principal will be intact at the maturity date, regardless of market performance in the interim. This allows you to weather market volatility with confidence.

Conquering Longevity Risk with Guaranteed Lifetime Income

As Canadians live longer and healthier lives, the possibility of outliving one's savings has become a primary concern. A traditional investment portfolio has no built-in protection against this risk.

This is where annuities and segregated funds with a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider come in. An annuity converts a lump-sum premium into a specified income for the rest of your life. A segregated fund with a GLWB allows you to draw a guaranteed percentage of your investment base each year for life, even if the market value of your fund drops to zero. This provides both the security of a guaranteed income and the potential for market growth.

Building a Resilient Retirement Income Strategy

The Security Bucket

Filled with guaranteed income products like annuities and segregated funds. Its purpose is to generate a predictable income stream to cover your essential needs for life - housing, food, healthcare, and utilities.

The Growth Bucket

Holds a diversified portfolio of stocks, ETFs, and other growth-oriented assets. Its purpose is to provide long-term growth, protect your purchasing power against inflation, and fund discretionary expenses like travel and hobbies.

This balanced approach provides the best of both worlds: the security of a guaranteed income for life and the potential for long-term capital appreciation. At SG Wealth, we can help you quantify your income needs, analyze your options, and build a portfolio that balances security and growth, ensuring you can retire with confidence. Explore our investment solutions to learn more.