That’s why a financial planner is so useful. They can help break down investing basics in-person or by phone and offer you and your family personalized advice.
Charmaine White fields plenty of questions as an investment advisor at Prospera Credit Union, which operates 16 branches from Vancouver to Kelowna, plus a local call centre. Here are answers to some of the most common questions that she encounters.
1. How much do I need to retire?
Many experts bring up the 80 per cent rule, which means your retirement income should be 80 per cent of your salary by the time you retire. So, if you’re earning $120,000 when you retire, you’re aiming for $96,000 after exiting the workforce.
But the truth is, there’s no set dollar figure because everyone is different, White says. “When a client asks how much they need to retire, we look at their situation, what their pension is going to be and what their retirement goals are,” she says. “It depends on what lifestyle and what income sources they have.”
This is why Prospera creates a financial roadmap with you. Their tools help you figure out whether you’re ready for retirement, and if not, what you need to get there.
2. Should I invest money or pay down debt?
White says she most often encourages people to pay down debt, but it depends on the interest rate. For instance, if your only debt is a mortgage and the interest rate is 2.75 per cent, it might be a good idea to invest more of your money instead.
“Consider risk tolerance,” White says. “If you have a lower risk tolerance, I would suggest paying debt. I have never had a client regret paying down debt.”
A good rule of thumb: if you’re paying a higher rate of interest on our debt than you’re making on your investments, always pay down debt.
3. There’s so much talk about climate change. Is there anything I can invest in that will make an impact?
Yes, and it’s called socially responsible investing. That means investing in mainstream, multinational companies based on their financial performance and environmental, social and governance (ESG) factors.
“It’s more than screening for ‘good and bad’ companies,” White says. “It’s actively working with them to improve their performance.”
When you invest in socially responsible funds, the key advantage is corporate engagement, White says. Fund managers used those funds to help companies make improvements to their ESG performance and to encourage management to champion sustainability in their respective industry.
4. Why is managing investments and making those decisions particularly challenging for the “sandwich generation”?
The so-called “sandwich generation” are people typically in their thirties to fifties who are raising their own kids while taking care of their aging parents. White says understanding each of their needs is the biggest challenge when managing investments. Getting to know the parents and the kids will make for better recommendations and will often lead to intergenerational planning. White says, “planning works best when an advisor knows the entire family.”
5. How do you know which investment products are right for you?
It really depends on your situation, White says, which is why a certified financial planner is such an asset.
“My first step with every new client I meet is to do a road map and financial plan for them so that I can understand the whole picture for them,” she says.
“This morning I had two appointments with clients and it was just a review. But I always go back to their road map to make sure everything is on track.”
If you want more personable, quality advice, consider booking a meeting with one of Prospera’s certified financial planners. They’ll deliver advice tailored to you and your family’s needs, so you can spend less time worrying about retirement and more time enjoying your life today.