Melissa Arenas , CFP | ATB Wealth

Retirement planning is a multi-year journey with a similar but unique destination for each retiree . You might envision leaving the workforce forever to travel the world or see retirement as an opportunity to transition into another profession . Your dream retirement lifestyle is up to you , but a detailed plan is key to making it a reality .

There are three key details in your retirement and investment plan : income goal , time horizon , and risk tolerance .

Set a realistic income goal . Expenses can easily creep up when not frequently reviewed . Tracking spending prior to retirement will help set a realistic income goal and ensure you can maintain your preferred lifestyle . A detailed retirement budget takes all the financial guesswork away . You may need seventy per cent of your pre-retirement income to fund your retirement lifestyle , but this will drastically differ depending on post-retirement debt levels , spending habits , and family considerations .

Outliving savings is one of the greatest risks to retirees today . If you retire in your mid sixties , your time horizon , or period your savings need to last , is likely twenty or thirty years . Staying invested over this period provides your nest egg the opportunity to grow and keep pace with inflation , and reduces the risk of depleting it too quickly .

Naturally , with the transition into retirement the level of risk and portfolio fluctuations you feel comfortable with will decrease . The goal of your portfolio will also change from growth to income and preservation . These changes should guide your shifting investment strategy .

A diversified portfolio that focuses on balancing your nest egg ’ s stability and an acceptable level of risk is key to investment success . Investors ’ emotional response during volatile markets can feel like a rollercoaster . Political changes , interest rate movements , widespread disease , and civil unrest can all trigger an urge to make a change . But aligning your portfolio with your risk tolerance is key to keeping emotions in check and stopping impulsive , emotional reactions

that could negatively impact your plan . A timeline strategy can reduce the stress around normal market fluctuations . For example , funds providing income in the short term may follow a conservative investment strategy while funds providing long-term returns follow another . Having a cash reserve for emergencies provides flexibility and peace of mind . Properly done , diversification allows your portfolio to grow in positive markets while reducing losses during market downturns . Investors are often drawn toward investment fads , shares in an employer ’ s company , or companies based in their own country . Having a portfolio concentrated in one company , one sector , or even one country could be catastrophic to your plan in the event of a downturn . Diversification opens the door to opportunity and is achieved by investing in different sectors all over the world . Ultimately , a retirement plan should be a basis for decisions , allowing flexibility and reflecting your lifestyle . The investment strategy is an extension of that plan aligned with your risk comfort level . Once in place , retirement goals become reality and success comes from the ability to use this guide to navigate this chapter of life .

Melissa Arenas is a Certified Financial Planner ® and Senior Financial Advisor with ATB Wealth . For over ten years , Melissa has helped Albertans and their families navigate the world of investments and financial management .

This article is a summary by Melissa of a presentation she made to ARTA ’ s Pension and Financial Wellness Committee .

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