Market uncertainty: Keep your retirement savings on track


Want to know a simple way to save more money? Create a written financial plan. According to recent research from Hearts and Wallets, an independent U.S. research firm, 52% of households with written financial plans save at least 10% of their income for retirement, while only 36% of households without a written financial plan manage to save that amount.

But simple doesn’t mean easy. Most investors don’t have a written financial plan, while others aren’t sure of how to use that plan when markets get frothy and volatile.

Given the recent slide in the stock markets in the first few months of 2023, investors need to consider how to position their portfolios in the upcoming months. Here are six critical questions every investor needs to answer before making their next trade.

Q1. How has my portfolio performed during the current economic climate?

Investors must review their portfolios to determine their performance during the current economic climate.

The investment app or brokerage should have a number of tools that allow you to review your portfolio and benchmark its overall performance against industry standards. For instance, the S&P 500 is the most commonly used benchmark for determining the state of the overall economy, with many investors using the S&P 500 as a benchmark for their individual portfolios

As part of your review, you may find that your current stock trading platform doesn’t offer the tools or insight you require. This is the best time to start shopping for another investment brokerage. These days, there is an investment app to match virtually any type of investor – from stock trading apps that focus on low trading fees to trading platforms that offer real-time quotes. To find the best stock trading apps, check out Finder’s guide on trading platforms.

Q2. Is my plan still set up to maximize upturns but protect the downturns?

In the Finder: Bear Market Blues report, nearly one-quarter (24%) of Canadians have no confidence in the stock market, and, according to a Financial Planning Standards Council survey, more than half of Canadians (52%) lose sleep over their finances. More than a third (39%) admitted that money was their primary stress, while 1 in 3 Canadians (31%) realized financial stress had led to health problems.

Remember, the goal of a financial plan is to create an appropriate portfolio based on your investment timeline, your financial needs and your comfort with risk. The idea is to minimize losses in downturns and maximize gains in bull markets. This is typically achieved through a balanced asset allocation. However, changing market conditions can impact your investment plan and throw the balance off. By reviewing all assets and holdings and comparing this with your overall financial plan, you have an opportunity to spot where asset mixes no longer match your needs. This should prompt you to take action and rebalance your overall portfolio.

If you find you’re constantly trading in order to rebalance, you may need to take further action. Either you will need to review and update your investment plan – to eliminate frequent trading – or you will need to find an investment platform with lower trading fees, or high-frequency trading discounts. Good options include National Bank Direct Brokerage, as well as Wealthsimple trading. For more options, check out the guide on the best trading apps in Canada.

Q3. Do I need to make any changes to my plan?

Based on your current plan, do you have enough to meet major goals, such as saving for a child’s education or retiring at a specific age?

A portfolio review can help you determine whether you can meet these major milestones or not. If you are falling short in any way, you may need to take action. This could include saving and investing more, cutting trading expenses, modifying your investment plan, or even seeking out the help of a professional.

Q4. There’s been a significant change in my life. Will this affect my goals?

Quite often, life events will alter your financial plans, and this may impact your investment decisions. Getting married, for instance, or having a baby, will significantly change your overall financial plan and your investment goals. When things change significantly in your life, it’s a good idea to review your investment plan and your portfolio holdings – and ask yourself if the current portfolio matches your needs.

Q5. Is my plan making the most of tax strategies?

According to data from the Fraser Institute, the average Canadian family pays more than $39,000 in taxes each year. In order to minimize the amount owed on earnings from your portfolio, it’s critical for investors to review the tax efficiency of their portfolio.

At least once per year, review the type of investments held in each registered and non-registered account. If you find you are paying a lot of tax on your investment income, consider adjusting where each investment is held.

For instance, fixed income, such as GICs and bonds, should be held in registered accounts, such as the Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA). Interest-earning investments are taxed at your highest tax bracket, but these earnings can be sheltered from taxes owed when held in a registered account.

Investments that offer tax advantages, such as Canadian dividends, or grow in appreciation, such as stocks, can be held in non-registered or registered accounts, depending on your investing time horizon and goals. When held in non-registered accounts, these assets will trigger tax, but at a more favourable rate than fixed-income assets. For more, read the Finder tax guide for Canadian investments.

Bottom Line

Taking proactive measures while working with a financial professional are two critical steps to creating financial stability and confidence in the future.
Evidence shows developing and following an investment plan can help alleviate much fear and uncertainty. Answering these six critical questions will help you better understand your current investments and whether you are on track for future financial goals. And that sort of confidence is worth a bit of effort.

About the Author

Romana King is the Canada Group Editor at Finder and a personal finance expert. As an award-winning personal finance writer and real estate expert, she has spent almost two decades helping Canadians make smarter money management decisions. Her first book, House Poor No More: 9 Steps That Grow the Value of Your Home and Net Worth, launched in November 2021, continues to be an Amazon bestseller and won the Excellence in Financial Journalism Book Award in 2022.

This article originally appeared on FinderCA and was syndicated by MediaFeed.

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