Q. Where do I even start with all of this? I read things like “portfolio” and it seems in order to retire I need huge numbers and I am way, way, way behind the eight ball. I’m single, own my own home and have a small

registered retirement savings plan (RRSP) but the numbers were never properly explained to me on exactly how it works. All I can recall is that the person said, “Okay, so if you lock your money in and don’t invest in these companies, we say your RRSP is ‘extremely conservative.’” This stuff makes my head spin, even though I am a smart and educated woman, living a middle-class life. What are my first steps?

—Emily FP Answers: Emily, echoing you: Where do I even start? Since you didn’t mention how old you are or how much time you have left before you retire, I will begin with the four obvious options regarding being able to retire comfortably: 1. save more; 2. invest more aggressively; 3. retire later and 4. prepare for a lower quality of life in retirement.

The mix of investment products depends on both your risk tolerance and risk capacity. Most people have a moderately accurate sense of where they land based on intuition. You should ramp up your investing immediately. If your income is high, you should put as much as you can into an RRSP. If it is low (say, less than $60,000 a year), then you would likely be better off maximizing your tax-free savings account (TFSA). As a practical matter, most people should only consider options 1, 3 and 4, with 4 being a last resort if options 1 and 3 fail.

However much you are saving currently, you should try diligently to save more. Not only does it increase the size of your nest egg, it allows you to grow accustomed to a more frugal lifestyle (in anticipation of likely having to deal with option 4 at some level). For many people, especially white collar knowledge workers, delaying retirement is often the most practical solution. That’s especially true because longevity is one of the most under-appreciated elements of

financial planning . Many people are likely to live longer than they think and will therefore need more money than they think. Having more than 20 years in retirement ought to be plenty and there are lots of people who are 70 today who will live another 20 years.

The last thing I would say is that if you are still confused or overwhelmed, you should seek professional advice. A few paragraphs in the newspaper will only go so far and there are many elements of your personal life that may be material considerations that are beyond the purview of this Q&A. At the very least, having finally recognized the urgency of the situation, you need to act with focus and discipline, effective immediately.

Q. I’m 92 years old and hold the stock Platinum Group Metals Ltd. (a company that buys, explores and develops a group of precious metals used in industrial applications such as catalytic converters and electronics). It’s my largest holding. I also have a lot of losers in the

marijuana sector. As I sell off my Platinum Group Metals at a profit, I would like to buy convertible debentures for the rest of my days. However, finding appropriate convertible debentures is very time consuming. Do you know of any current listing of Canadian convertible debentures? Also, what are your views on my investment strategy? Pros and cons?

— John in B.C. FP Answers: John, it seems as though you’ll have an opportunity to forego any taxes on the gains you would otherwise realize for Platinum Group Metals. Reducing concentration risk and doing what you can to minimize taxes or simplify the settlement of your estate are all laudable by-products of your strategy. As with anything, the need to diversify remains paramount. I would be uncomfortable with anyone putting 100 per cent of their assets into one asset class.

I have no personal experience regarding convertible debentures, which are a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period. So I don’t believe I can assist you with the second half of your question. What I can say is that whatever investments you choose, they should be in keeping with your risk profile. In terms of specifics, I believe the major benefit of your strategy is that it is simple and something that you would be likely to follow. The drawbacks, however, are more numerous. It sounds as though you’ll be exchanging concentration risk from one product for concentration risk in one asset class. That’s essentially the same problem. Furthermore, you’ve already mentioned that it’s difficult to find good information and current listings for convertible debentures. That strikes me as an obvious concern as well. I think you would be better off with a more diversified portfolio that is in keeping with your risk tolerance and risk capacity.

  • What is the impact of two full-time jobs with a combined $230,000 income on what I owe the CRA?
  • Cancer hit this couple’s finances. Should they cash in RRSPs to maximize OAS and GIS?

John De Goey is a Portfolio Manager with Designed Securities Ltd, regulated by the Canadian Investment Regulatory Organization and a Member of the Canadian Investor Protection Fund.