We know many Canadians are concerned about the impact of the COVID-19 pandemic on their retirement savings. During this time, it is important to consider the big picture before making any sudden decisions about your investments and savings plans.
If you are invested in a target date fund
A target date fund is an investment option that aims to minimize your exposure to risk over time. It does so by automatically adjusting your investments so you gradually take on fewer risky investments as you approach retirement. While this does not mean you will not experience any ups or downs in your account, it does mean you are in a diversified portfolio that should help to mitigate risk during a period of market volatility, as we are experiencing these days. As a result, investment changes may not be necessary in response to the current situation.
If you choose your own investments
Risk tolerance is the amount of variability you are willing to accept as you build your retirement savings. If you have chosen options that align with your risk tolerance, staying the course may be in your best interest – a long-term strategy will support your goals better than an approach that changes often. There are many tools to help you determine your risk tolerance, including a questionnaire available through your savings plan’s record keeper or trusted online resources. If you find your investment selection and risk tolerance do not align, it is important to get professional advice on changes you should consider to rebalance your account or to re-examine your risk tolerance.
Think about retirement plans before acting
While it may be difficult to focus on the long term during this period of market volatility, it is important not to lose sight of your ultimate goal: what you want from your retirement.
- Do you have a retirement date and annual income target in mind?
- Is your investment strategy aligned to help you reach those goals?
- Are you saving the right amount?
- Have you factored other sources of retirement income into your plans, such as government plans like the Canada Pension Plan/Quebec Pension Plan or Old Age Security?
Knowing where you are relative to your goal is the first and most important step you can take before making any short-term decisions.
Financial stress and mental health
Worrying about your finances can impact your mental health. A recent study showed that 38 per cent of people lose sleep over financial worries. It is especially important in these uncertain times that you remain focused on your overall wellbeing, even as you assess the potential financial implications of the COVID-19 pandemic. Think about the effects financial worries may be having on you, and consider reaching out to your Employee Assistance Program, if available to you, or another professional you trust for guidance.