For most of our working life, we have been conditioned from the start in thinking about retirement one day in the future. Every January and February we are bombarded by the financial institutions and their advertising, encouraging us to save for our retirement through RRSPS. These days, money and retirement is one of the most pressing concerns for Canadians from coast to coast. So after all the years of saving and investing there comes a day when we move away from the wealth accumulation of our money to the wealth distribution of our wealth.

These are two completely different animals and it’s important that you understand the differences of both. In many cases, most investors aren’t even aware of these two wealth differences, but potentially there could be additional risk in your retirement if you don’t understand these two distinct scenarios.

In the Wealth Accumulation years, you put money into a portfolio, diversify based on your risk tolerance, make changes in your investments as need be and wait for the law of compound interest to take over. Mistakes in this structure can be overcome by waiting out the market corrections, by adding additional money to the plan or simply just making investment changes. Mistakes that get made are frustrating but you the investor is not pulling money out for income therefore we can say, “ah, we will fix those issues in the future.”

In the Wealth Distribution stage, you don’t have the one thing you have in Wealth Accumulation and that’s time. There is much less time for portfolios to correct in market crashes, you can’t just throw more money into the portfolio to make up for mistakes, because at this stage you are withdrawing money and that money is needed to fund your retirement. It’s even more important that your risk levels be reviewed every few years and they may need to be reduced the older you get. Getting good competent financial advice is never more important than in the Wealth Distribution years. As I say, anyone can manage money on the way up, but only a professional should manage money on the way out. One thing we have noticed with our clients is that, the older they get, the less they care to completely stay current and relevant in the portfolio and plans. Retirees have more important issues on their life bucket list than watching stock market reports. So if you’re in this stage of life, maybe it’s time to take your hands off the wheel and delegate to a professional.