Ask the Money Lady,

To My Money Lady Readers,

From many of your emails, I have noticed that a lot of you are invested in GICs, and I know this is something that you want to do to ensure you do not lose any money and maintain your capital.  Because the rates of return are now so low, GICs no longer keep up with inflation and when you factor in the taxes – you are actually paying the banks to hold your investment.


This is a question we should all be asking as we approach or enter our golden years of retirement bliss.  If inflation averages 3.5% to 4% per year over the next 25 years, your $50,000 retirement income today will need to grow to approximately $132,400 by the year 2045.  Guess how much your Starbucks Latte will be at that time?  A whopping $13.65 !!  So, are you prepared?  Is your pension indexed against inflation?  Do you feel you have saved enough?

Life expectancies have been steadily improving over the last 50 years and many more people today will exceed the age of 90 years old; much more than in past generations.  According to Statistics Canada, a 65 year old man can expect to live an additional 18.2 years to age 83, while a 65 year old woman today can expect to live an additional 21.4 years and celebrate her 86th birthday.  It is always been the magic question: How long will I live?  How many years should I plan to save for?  No one really knows how long they will need to rely on their retirement savings, however we now know it is much longer than most would anticipate.  Add to this the wild card of long-term care as you age, many may find they should alter their retirement plan or perhaps resign themselves to living with less when they finally make their hard stop to working.

Health care expenses in Canada are rising more rapidly than inflation and there is a general trend of services now that are being excluded over time by public and private sector healthcare insurance providers.  As more Canadians live longer into retirement, the need for long term care facilities and services will grow exponentially and it is likely that the costs will grow too. So, what should you do?

Plan, Plan, and Plan again!  Consider directing a portion of your retirement savings into investments that offer a guaranteed lifetime income.  Make sure to start the retirement planning process, at least ten years before your retirement date, so that you can implement the correct income planning strategies and reposition your portfolio for planned drawdowns in retirement.  As well, make sure you have made plans and concessions for unpredictable market risks or unforeseen future expenditures.

Talk to your advisor and choose investments that will deliver returns above inflation – not GIC’s.  Choose products that will provide inflation adjusted incomes.  If you can, set aside a portion of your savings to budget for health care costs or long-term care in the future.  Let’s face it, everyone has spent years of working and can’t wait to finally retire.  To secure the retirement lifestyle you are dreaming of, make sure you consider the future risks of inflation and longevity.  We want to be comfortable and happy in retirement and not be stressing about money.  It should be your goal to live longer, live healthier, happier, and more financially secure than ever before, now that you are in retirement.  Remember that material things will not be as important as they were when you were young.  Aging is an inescapable process, one that you owe yourself to consciously do well.  Make sure you plan for the changes that are to come and plan to be happy and financially secure well into your 90’s.  We all should want to get there!

Good Luck and Best Wishes,
Money Lady

Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy”  Follow on Facebook & Instagram

Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy”  Follow on Facebook & Instagram

If you have a money question, please email: