Exploring your income options leading to retirement
We all worry about money. We work hard during our lifetime, save for retirement and worry that we will have enough.
Finally, retirement day arrives and we are free from worry for the rest of our lives.
Well, actually, the worry about money never stops. Will we have enough? Who will receive it when we die? The worry about investments never stops.
So now we worry that a bear market and low interest rates brings us less income for retirement. Maybe so, however there are options to explore.
Here is a summary of income options to explore. I will start with the least risk and move to more riskier ways of generating income.
GICs and term deposits, we all know and understand, however spreading maturities across different dates may increase your income yield. If you’re over age 68, annuities may be an option to explore further.
They have become more flexible than ever and guarantee your income for your life and have options for your estate.
Next we have bonds and bond funds. The risks and returns can vary from government guaranteed bonds to corporate bonds and debentures, but there is a potential for higher income from different types of bonds and bond mutual funds.
Look into short term bonds for liquidity and short term needs, say one to five years. Then learn about bonds and bond funds that invest for longer terms, say five years or more.
The next income category is dividend income funds which hold dividend paying stocks. High income funds hold Income trusts, royalty trusts and real estate investment trusts (REITs) which are income-producing securities and you can also find high yield bonds in high income funds.
The next option up the ladder is balanced funds which sometimes are designed like pension funds with half of the investment holdings in bonds and the other half in blue chip dividend producing Canadian or international stocks.
Balanced funds don’t usually pay a regular income or yield but can generate monthly income through systematic withdrawal plans.
One category that is widely compared and misunderstood is income funds. This can mean bonds in one portfolio and stocks in another.
Income does not necessarily mean you will receive a monthly check, so I didn’t include income funds in the list because many companies use that term and it can mean different holdings in the portfolio.
If you are worried about your retirement income, maybe you should explore all the options available to you.
Prepared by: Grant W. Hicks RDB, C.I.M., FCSI, Investment funds advisor with Manulife Securities Investment Services Inc. in Parksville / Qualicum Beach. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. The views and opinions contained in this article are those of Grant W. Hicks and not Manulife Securities Investment Services Inc. Comments or questions Grant can be reached at 954-0247 or 1-866-954-0247. E-mail: firstname.lastname@example.org. Web: www.ghicks.com. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.
Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.