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In the simple act of trying to provide for her retirement, Margaret has learned some hard lessons. First, don't take the rosy forecasts that financial advisers use as gospel. Second, look before you leap from one adviser to another.

A few months before retiring from her government job last year, Margaret checked with her bank financial adviser to see if she would have enough money. The planner assured her she would. She had about $415,000 in savings, a pension of $2,085 a month and Canada Pension Plan benefits of $566 a month. She owns her condo outright and her living expenses are modest.

"I retired happy from my job at age 61 thinking that I was going to fulfill my dreams," Margaret says. "Instead, I'm losing sleep over my finances." Within six months of that meeting, the adviser called her in for a review with the bank's new software, Margaret says.

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"I was dumbfounded when the planner looked me in the eye and said, 'You don't have enough money for your retirement, and you need to go back to work until you are 65!'''

Since she didn't lose any money, Margaret could not understand what went wrong. What likely happened is the adviser lowered her forecasted investment return by a percentage point or two based on the outlook for interest rates.

That was just the beginning. Feeling angry, betrayed and anxious, Margaret sought help elsewhere.

"In my distressed state, I fell into the arms of a mutual fund sales person," she says. Soon this new financial adviser, too, said it might be helpful if she went back to work. She ended up with a portfolio of mutual funds that she feels are too risky, with deferred sales charges and an average management expense ratio of a whopping 2.7 per cent.

"Ten months into this nightmare, I've had time to do some homework," Margaret says. She's taken investment workshops and is reading the financial press. She's lost confidence in her adviser, and wants to manage her own money.

"I feel like I've had a bit of a wake-up call to start taking more responsibility for looking after my assets rather than handing them over to someone to manage," Margaret says. Naturally, she has questions, among them: Should she cash in her portfolio and start over? Should she open an account at a discount broker? Should she switch to exchange traded funds?

In the meantime, Margaret has landed a contract that she hopes will bring in $8,000 over the next year and she is looking for a part-time job. Fortunately, her idea of a happy retirement does not involve travel to far-flung and expensive places, but rather seeking peace and solitude in the mountains, hiking or camping with a couple good friends – "basically, being outside."

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We asked Adam Weinstock, portfolio manager at ScotiaMcLeod in Pointe-Claire, Que., and Allan Small, senior investment adviser and director of the private client group at DundeeWealth Inc. in Scarborough, Ont., to look at Margaret's portfolio and offer a few tips.

The Basics

  • $42,000 in credit union savings account
  • $14,000 in TFSA
  • $148,000 in RRSP
  • $212,000 in non-registered investments

Adam Weinstock's tips

  • “Ditch the high-fee funds,” Mr. Weinstock says, even though it will cost about $4,500. This can be done over time on market strength. Use the proceeds to buy blue-chip dividend-paying stocks with a record of steadily increasing their payouts. Many of these stocks are paying dividends of 4 per cent a year or more, he notes. Stocks could comprise up to half of her investment portfolio.
  • Margaret is holding some GICs in her taxable accounts and some equity funds in her tax-sheltered accounts – this is “highly inefficient from a tax perspective,” according to Mr. Weinstock. She should switch this around. “By taking advantage of the dividend tax credit and by sheltering her interest income, Margaret will be able to keep more of her investment income and will not need to increase her risk profile in order to fund her retirement needs.”
  • A laddered portfolio of GICs and bonds will yield from 2 per cent to 2.25 per cent. “So on average, she should be able to build a portfolio with a yield of 3 per cent.” A $376,000 portfolio generating 3 per cent will give her $11,280 a year in investment income. That 3 per cent is just income, he notes. Add in potential capital gains of 2 per cent a year on average and Margaret can expect a total return on her investments of 5 per cent. Her portfolio should be more than enough to sustain her $5,000 a year withdrawals – indexed to inflation – well into her 90s. She can leave the $42,000 in her credit union savings account for her planned house renovations, car upgrade and emergencies.

Allan Small's tips

  • Margaret may find it more difficult than she thinks to manage her investments, Mr. Small says. “It’s not as simple as buying index funds or ETFs.” Especially in volatile markets, investors have to differentiate among stocks and bonds, choosing those that stand up better than others. As for whether she should hire a fee-only manager, one of Margaret’s questions, he says her portfolio probably isn’t large enough to make the fees worthwhile even though they are tax deductible. If she decides to bail out and pay the deferred sales charges, Margaret should re-enter the market gradually, taking advantage of dollar-cost averaging.
  • As for investments, Mr. Small recommends preferred shares and corporate bonds, which offer yields ranging from 3.5 per cent to 4 per cent on bonds and 5 per cent or more on preferred shares. If Margaret would like to stay in the stock market because she needs a higher rate of return, “then right now I recommend staying defensive and purchasing dividend payers only.” Given the steep drop in stock prices, many Canadian and U.S. companies are yielding from 4 per cent to 6 per cent, he notes. Canadian banks and other financial stocks are just one example. “There are a lot of good quality names that are dirt cheap and paying a fantastic dividend right now.” However, Margaret has to keep in mind that such investments are not risk-free.
  • Although she has gone through the financial planning process twice, Margaret might want to do it again with any new adviser she might choose to make sure she understands how much of a return she needs to make on her investments. That number should be based on a clear grasp of how much money she needs each year to sustain her lifestyle, Mr. Small says. She may find she can get by with less.

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