|How to avoid becoming a victim in your retirement
Wednesday December 12, 2012
You no doubt are aware of the rule that your RRSPs must be
collapsed or rolled over into other vehicles at the end of the
year in which you turn 71. But planning for a successful and
stress-free retirement involves more than deciding what you
do with your RRSPs. Lots more, including making sure you don’t
become a victim of the ever-growing number of financial frauds,
scams, and schemes that prey on the growing pool of vulnerable
elderly retirees. And now, that risk affects more and more people
every day – eventually, the entire baby-boom generation.
We have all heard about the huge wave of baby boomers set to
retire. I read recently that 10,000 people a day were turning
65 in that North America. This great wave of elderly has many
implications: less consumption; more travel and golf; demand
on vacation properties; redeeming investments rather than adding
to portfolios; and so on. But there’s a darker side to this
demographic wave. And it involves financial advice. In the past
couple of years we’ve already seen several giant ponzi schemes
and confidence swindles come apart, including the infamous Bernie
Madoff scheme, destroying the life-savings and retirement plans
of thousands of people – most of whom were at or near retirement.
The question is, “How can we avoid this happening to us or our
As people age, there’s always the danger of being preyed upon
by unscrupulous financial advisors (or family members) looking
to make a fast buck from someone whose mental capacities are
diminishing due to Alzheimer’s disease, or other forms of dementia,
and other ailments that can leave the elderly fragile and vulnerable
to swindles. And, unfortunately, this phenomenon will grow as
the Baby Boom generation ages.
Here are a few tips I’ve compile to help those who ready to
retire or who are already retired – and their families – deal
safely and securely with this new phase of their lives.
Stick with a known quantity. If you have worked
with a good financial advisor whom you trust in your pre-retirement
phase, don’t make a change in retirement unless it’s for a very
good reason. Don’t assume that the next one will be as trustworthy.
A history and long association is important in matters of trust
– much more important than searching for a better return.
Simplify. As you age, simplify your portfolio
over time so you always understand what it consists of. Move
slowly from stocks to low-fee mutual funds. Brokerages that
make too many trade will cost you money. The brokerage firm
usually earns a commission on every trade, and if your statements
aren’t showing growth, who is benefitting from all the trading?
Beware account churning. Have your adult children
or your accountant look at your statements to ensure all is
above-board. Frequent trading, churning of mutual funds, and
borrowing to invest are probably the most common offences. Watch
for large and frequent redemptions. Find out why there are frequent
Don’t make drastic changes in retirement.
As you move into your 50s, 60s and 70s, your portfolio should
slowly move in a safer direction. Sell some equities when markets
are good and increase fixed-income exposure. But don’t make
these changes while markets correct, or you could wipe out years
of growth and jeopardize your retirement income in the process.
Power of Attorney. Talk to your children about
establishing powers of attorney, and consult a lawyer to set
this up before it’s too late. There are various types of powers
of attorney, so legal advice is essential.
Resist sales pressure. Watch for smooth fast
talkers that pressure you to make a quick decision. Your nest-egg
has taken over 30 years to grow, but it can be lost very quickly
with one hasty decision.
Watch for expensive insurance purchases in retirement unless
they are needed for estate-planning purposes. Is your estate
large enough that this type of estate planning is necessary?
Get a second opinion if uncertain. Are any internal bells ringing?
Don’t sign anything if it makes you uncomfortable.
Ask for a copy to think it over, and go over it with your children
or accountant. Watch for forged signatures. Is there a large
transaction you don’t remember signing off on? Go to the branch
manager of your advisory firm first.
End discretionary accounts. If you have agreement
with your financial advisor or broker where they can make trades
without your signature, end this with a signed letter as you
enter retirement. This protects you if you become mentally diminished
in any way. In addition, you may take trips out of the country
and don’t want to return and find 40 trades were made in your
Be wary if your financial advisor asks you to redeem everything
and move into something that seems risky. Major financial mistakes
made late in life will never be made right. You no longer have
the luxury of time or youth to recoup your losses and still
Set credit lower limits. Get your elderly
parents on the federal telemarketing “Do Not Call” list, and
ensure their credit limits are reduced. Limit the number of
credit cards to help simplify things.
Consolidate accounts. If you (or your elderly
parents) have RRSPs, investments, and TFSAs at a myriad of financial
institutions, try to consolidate these accounts with the organization
or the financial advisor you trust the most. As people age,
simple is better for all concerned (both the elders and those
The real trick to this is making these changes while your mind
is still functioning at a high level. It’s better to be too
early than too late. Don’t let your ego get in the way and procrastinate
until your faculties are diminished. At that time, the change
will be much harder and relatives will likely have to step in
to provide assistance.
Generic Mutual Fund Disclaimer
Commissions, trailing commissions, management fees and expenses
all may be associated with mutual fund investments. Please read
the simplified prospectus before investing. Mutual funds are
not guaranteed and are not covered by the Canada Deposit Insurance
Corporation or by any other government deposit insurer. There
can be no assurances that the fund will be able to maintain
its net asset value per security at a constant amount or that
the full amount of your investment in the fund will be returned
to you. Fund values change frequently and past performance may
not be repeated.
Personal Opinions & Recommendations Disclaimer
The foregoing is for general information purposes only and
is the opinion of the writer. This information is not intended
to provide specific personalized advice including, without limitation,
investment, financial, legal, accounting or tax advice. However,
please call the author to discuss your particular circumstances.