In this episode of Your Retirement Planning Simplified, Joe and Lindsay examine the Income Protection Quadrant of the RISA framework, focusing on strategies to secure guaranteed income in retirement.

They discuss the benefits of annuities, defined benefit pensions, Canada Pension Plan (CPP), and Old Age Security (OAS) to create an income floor that covers essential expenses. For retirees who prioritize safety over growth, this approach minimizes uncertainty, making it ideal for those seeking financial security in volatile markets. Learn how to implement this strategy and optimize your retirement income plan for peace of mind.

What You’ll Learn in Today’s Episode

Income Protection Quadrant: The episode focuses on the second quadrant of the RISA framework, which is ideal for retirees who prioritize financial security and prefer guaranteed income over growth potential.

Guaranteed Income Products: Tools like annuities, Canada Pension Plan (CPP), Old Age Security (OAS), and defined benefit pensions are discussed as essential components of creating an income floor to cover basic expenses in retirement.

Annuities for Income Security: Annuities are highlighted as a popular option for retirees who want to lock in guaranteed income for life, offering stability but sacrificing growth potential and flexibility.

Trade-offs of Income Protection: While income protection strategies provide peace of mind and eliminate market risks, they also come with trade-offs, such as losing control over lump sums, reduced growth potential, and possible erosion of purchasing power over time.

Actionable Advice: Listeners are encouraged to take the RISA assessment to identify their retirement income style and align their current or future retirement strategies with their preferences for risk and security.

Ideas Worth Sharing

·       "If you prefer a high degree of certainty, income protection is your key to peace of mind in retirement."

·       "Annuities are like a personal pension—guaranteed income for life, no matter what happens in the markets."

·       "It's all about minimizing uncertainty and locking in a stream of income to cover your essential expenses."

·       "There's no such thing as a free lunch in retirement planning—there are always trade-offs."

·       "The goal is simple: cover your basic expenses with guaranteed income and leave the rest for growth and flexibility."

Resources

Joe Curry

Take the RISA HERE – Take the Retirement Income Style Awareness - a 15-minute assessment designed to help you more clearly understand which retirement income strategies align most closely with your preferences. 

Ep # 106 – Understanding Your Retirement Income Personality for Success with Wade Pfau

Ep # 111 – Flexibility or Security: Weighing the Pros and Cons of a Total Return Retirement

info@retirementplanningsimplified.ca

Retiring with Certainty

5 Building Blocks for an Income Protection Strategy

Retirement can look different for everyone. Some prefer growth and flexibility with their savings, while others prioritize stability and certainty. If you fall into the latter group, then the income protection quadrant of the RISA (Retirement Income Strategy Assessment) framework may resonate with you. The RISA approach covers basic living expenses through guaranteed income sources. The goal is to minimize uncertainty so you don't have to worry about market volatility impacting your ability to cover essential costs.

Who Should Consider Income Protection?

The income protection quadrant could be a good fit if you want to ensure your retirement nest egg lasts and prefer predictability.

This strategy appeals to those who:

- Prioritize certainty and want essentials covered no matter what
- Don't want to rely on markets to fund basic expenses
- Are focused on minimizing uncertainty

It's perfect for individuals who may not have robust investment portfolios or prefer simplicity and security over growth potential.

Building Blocks of Income Protection

The cornerstone of this approach is reliable income sources to pay for your basic needs. This may include:

- Pensions
- Government benefits like CPP and OAS
- Annuities

Annuities, in particular, can create pension-like income in retirement. You give an insurance company money upfront, and they provide you with guaranteed income for life or a set period of time.

A popular tactic is to use these sources to create a "floor" of income for essentials. Then, you invest any excess in discretionary spending and added flexibility.

Weighing the Tradeoffs

An income protection strategy offers stability but lacks flexibility. Consider the key pros and cons:

Pros:
- Peace of mind knowing income is secure
- Simple approach without active investing
- Lessens worries over market swings

Cons:
- Assets become illiquid/inaccessible
- Lose potential for investment growth
- Can't leave money to heirs
- Purchasing power may erode over time

Ultimately, there is no one-size-fits-all retirement plan. Assessing your priorities using a framework like RISA can help you craft an approach aligned with your goals and risk tolerance.