Posted By 
Is the Coronavirus-induced bear market reason to delay Retirement? Some suggest Baby Boomers may be forced to delay their Retirement by up to five years. My latest MoneySense Retired Money column looks at this in some depth. Click on the highlighted headline to retrieve full article: Should you delay your Retirement because of Covid-19?
Fortunately those with Defined Benefit (DB) pensions may not have to delay Retirement at all: “so long as the pension plan is healthy and well-funded their retirement plan should remain intact,” says Aaron Hector, vice president of Calgary-based Doherty & Bryant Financial Strategists.
But inflation-indexed DB pensions are increasingly rare. Those counting mostly on their RRSPs, TFSAs and non-registered savings “have more reason to be concerned,” Hector cautions, “Valuations have fallen and some companies will be forced to reduce or cut their dividends, which will put a damper on income sources. For them, it would come down to whether or not they had previously built up an adequate cushion to allow for this market correction.”
3 benefits to postponing Retirement
Fee-only financial planner Robb Engen, of the Boomer & Echo blog, says “there’s no doubt investors nearing retirement have been impacted by the Covid-19 crisis.” He sees three benefits to postponing retirement: more time to earn and save; fewer years of drawing down on portfolios; and stock investments have more time to recover their value.
My own advisor says clients over 60 should be no more than 40% in equities. If you’re in the Retirement Risk Zone, the old rule of thumb that Fixed Income should equal your age is not out of line. So I should be two thirds in Fixed Income and only a third in stocks.
But that’s too cautious, argues Adrian Mastracci, portfolio manager with Vancouver-based Lycos Asset Management Inc. He says stocks should equal 110 minus your age, so a 40-year old would be 70% stocks. Getting too conservative by cutting back on equity exposure too early is often “a critical mistake,” he says.
So we’re back to TINA: “There is No Alternative” to stocks, at least for the Growth part of a portfolio. But the pandemic laid bare the risk of putting too much into stocks. TriDelta Financial vice president and wealth advisor Matthew Ardrey was recently featured in a newspaper profile on a couple in their 50s who were 85% in Canadian stocks and 15% in preferred shares. Their portfolio (near $3 million) was down 33.5% with the market. That hurts, even if the market has since regained half its losses.
There’s nothing like a precipitous market crash to reveal our true risk tolerance. After an 11-year bull market run, many investors lost the sense of what their actual risk tolerance is, Ardrey says, so “they may have had an asset mix with a much higher equity weighting than would otherwise be advisable … There is no magic bullet in retirement planning. If a portfolio has lost value, it can only be made up through additional savings, higher returns and time.” If spending less in retirement is not an option, “then more time is likely part of the equation, unfortunately.”
Scary but important to rebalance in bear markets
In a recent blog that was republished here on the Hub, Toronto-based advisor Steve Lowrie said rebalancing in a bear market is “scary but important.” It’s also counterintuitive since a 50/50 stocks/bonds portfolio hit by a bear market means you would rebalance by selling some bonds and buying now-better-priced stocks.
But what if you have realize you let the long bull market lull you into higher stock exposure than you are now comfortable with? Recent rallies means it’s not too late to properly rebalance. Much depends on how fast (or if) equity markets recover.
