From the get-go, where author Daryl Diamond describes his book as being a “do it properly” or “do it better” book on retirement income planning, rather than a “do it yourself” volume, a wonderfully written tome filled with valuable insights begins.

Your Retirement Income Blueprint makes great strides in explaining that retirement is not really “the back nine” of life. Retirement, he explains, is “not simply a continuation of the same thing (pre-retirement)… the playing field changes because there are such substantial differences between the planning approaches, investment strategies, risk-management issues and sheer dynamics of these two phases in someone’s life.”

There’s a lot to cover in a short review, so let’s look at some of Diamond’s retirement income gems.

Early on, Diamond explains the importance of having “a formal income plan, or blueprint, to show what your assets can realistically be expected to provide in terms of sustainable cash flow.” In other words, do you have enough income, from all sources, for an adequate retirement? Retiring without sufficient income, he warns, “can be a very unfortunate decision.”

On debt in retirement, he notes “ideally, you want to be debt free at the time you actually retire,” because otherwise, “you will have to dedicate income toward servicing the debt. And that is cash flow that could be used to enhance your lifestyle in other ways.”

Another great point, and this was one that Save with SPP personally used when planning retirement, is the idea of making a “net to net” comparison of your pre-retirement income versus post-retirement.

“That difference between your gross employment income and gross retirement income may appear quite significant, however, some analysis of your earnings statement may narrow this disparity. Compare what you are bringing home on a net basis with what your net income will be in retirement. You may find the difference in net pay is not as significant as you thought.”

The book provides a chart showing gross employment income being 33 per cent greater than retirement income – but only about 12 per cent different on a net basis, because the retiree isn’t paying into Canada Pension Plan (CPP), Old Age Security (OAS), a company pension or company benefits.

Diamond points out that the investment principles for retirement saving differ from the retirement income, or “using your nest egg” years.

“When people begin to draw income from their portfolios, their focus changes from ‘rate of return’ to ‘risk management,’” he writes. “Capital preservation becomes the number one issue, because with capital preservation, you also have sustainable income,” he adds. The goal is longevity of your income – meaning, not running out of money.  

Diamond sees annuities as a way to ensure you don’t run out of retirement income. The book shows how your CPP, OAS and company pension – along with an annuity purchased with some of your retirement savings – can create a guaranteed lifetime monthly amount for your core, basic expenses. The rest of your income can be used for discretionary, fun expenses, he explains.

Diamond isn’t opposed to the idea of taking one’s Canada Pension Plan benefits early. He advises us all to “assess whether or not there is merit to do so in your own situation.” He makes the point that while many of us live long lives, some of us don’t, so deferring a pension carries a risk.

He sees the Tax Free Savings Account (TFSA) as becoming “one of the great tools at our disposal. I look for ways to help retirees fund their TFSA accounts to the maximum, whether that be through taking CPP early, withdrawing additional amounts out of registered accounts or even moving other non-registered holdings systematically into them.”

He suggests that using one’s registered retirement savings early in retirement may be preferable to deferring them until the bitter end at 71. “Deferring all of your registered assets can create real tax problems in the future and could eliminate main credits and entitlements that you would otherwise have been receiving,” he explains.

Near the end of this excellent book, Diamond alerts retirees to what he calls the “three headwinds” that can “be a drag on” any retirement income solution – taxation, inflation, and fees. Attention should be paid to all three factors when designing a retirement income solution, he writes.

When you retire, Diamond concludes, it’s when “your ticket gets punched… and baby, you had better enjoy the ride.” The three commodities that will support a great retirement are your state of health, your longevity and “your income-producing assets and benefits.” Only the last commodity is one that you can fully control, he says.

This is a great book and highly recommended for those thinking about retirement.

Do you have a handful of different registered savings vehicles? Consolidating them in one place can be more efficient than drawing income from several sources. The Saskatchewan Pension Plan allows you to transfer in up to $10,000 per year from other registered vehicles. Those funds will be invested, and when you retire, your income choices include SPP’s family of annuities. Check out SPP today!

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By Sheryl Smolkin

Over the last weeks the stock markets have been bouncing all over the place and now we are told that the Canadian economy is officially in recession. While it is natural to be concerned, particularly if you are close to retirement, the general consensus from most experts is to have confidence in your financial plan and stay the course. Today, and in coming weeks we will provide you with information to help you weather the storm.

In How to make sense of markets gone mad, Toronto Star personal finance writer Adam Mayers says this is a market correction of significant proportions. It could be short and sharp, or it may be long and lingering depending on how the real economy reacts. It may be tough to take the gyrations, but what it does do is set the stage for the next big rise.

Rob Carrick at the Globe and Mail says It’s decision time for your ‘dead’ money. If the summer market decline hasn’t stoked your appetite to buy stocks, he suggests that all the cash piling in your account is pretty much dead money. That’s true if you’re leaving the money uninvested, and also if you’ve taken the good sense step of keeping your cash in a high interest investment account.

MoneySense authors Jessica Bruno and Dean DiSpalatro consider What the recession means for your portfolio. They interviewed Jay Nash, portfolio manager at Roberts Nash Advisory Group, National Bank Financial, in London, Ontario. Nash’s message to clients is straightforward: The recession was largely focused in the energy sector, with other areas of the economy performing well. Most importantly, June’s solid data—pushed along by consumer spending—was better than expected.

Protecting your retirement income from the stock market by Wayne Rothe is on Retire Happy. Rothe reviews “Your Retirement Income Blueprint,” by Winnipeg financial advisor Daryl Diamond. Diamond writes about the impact of market gyrations on the “retirement risk zone.” This is generally the five years immediately before and after retirement age. A big drop in the value of your investments during this period can be disastrous.

And finally, Michael James on Money questions How Much Diversification Do You Need? He says, “Diversification is simple for indexers like me. We own all stocks for as low a cost as possible. There is no such thing as ‘di-worse-ification’ because we have no opinions about one stock being better than others. There is no reason to fret over active mutual funds because index funds are cheaper and cover the same asset classes.”

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