The COVID-19 pandemic is showing far-reaching effects on the financial situation of everybody around the world, forcing people to reprioritize the plans they had with all their savings. If you are a would-be retiree or someone closing in on the best years of your life, you have to change your approach as well.
While the government has benefits like the Old Age Security (OAS) income and Canada Pension Plan (CPP), I know many Canadian seniors who don’t rely on them. After all, these plans merely offer partial coverage for your retirement income.
Preparing for your retirement under normal circumstances is not easy. A global pandemic can make things even worse.
You might want to change your plan
We are in a dilemma with the health crisis. If you were planning on retiring soon, you might have to delay your plans. Some of the current retirees are also thinking of returning to work due to the financial crunch. Early retirement has gone out of the window as an option because of the threat to secure income and health.
Suspending your original plan might be a smart move right now. You can reconsider your options while keeping your job (provided you have a means of income). Any income you earn right now can help you cover the living expenses while leaving you a sum to set aside as savings for when you retire.
Try to cut down on your spending as much as you can. Take another look at all your expenses and see what you can let go of right now. Put any vacation plans to the side, since you are stuck here for a while at least.
It might be tempting to leverage the low cost environment right now. However, you do not need any debt when you retire. If you can, pay off any outstanding debts, but do not borrow more. You do not want anything eating up your retirement capital.
Continue to hold investments
As part of your retirement plan, you might have made investments over the years. Ideally, your portfolio will be a diversified mixture of defensive assets like bonds and capital growth assets like equities. Many would-be retirees also hoard cash, but the potential to gain any growth is zero by holding on to currency.
Bonds are not the safety nets they typically can be since the yields are low due to the current situation. I would suggest reshuffling the deck and investing in defensive stocks with low risk qualities like bonds, but offer better returns.
To this end, I always go for the utility sector. It is a boring industry that does not offer fantastic capital growth. However, it does offer stability. Utility companies can weather harsh economic environments due to the essential nature of their business.
Fortis is a utility company that resists the volatility of the broader market. While that means it will not see soaring heights in a short time, it also saves your capital from the potential downside. The stability may be boring.
Still, it can keep growing your overall capital at a steady pace with the company’s growth. It also adds more to your portfolio through reliable dividends.
Most of Fortis’ revenue comes through long term and highly regulated contracts. It means that the pandemic and subsequent closures of businesses have made little impact on its income. A regular income means it can easily finance its dividend payouts.
To enjoy a happy life in retirement, you need a substantial nest egg. While you may have had plans to retire soon, the pandemic might force you to change your plans.
I would advise making slight changes and investing in high-quality assets like Fortis to weather the storm so you can enjoy retirement in peace.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.