Low-risk investment ideas for retirees

Higher returns mean higher risks. Are you willing to make the trade off?

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From the Summer 2014 issue of the magazine.

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Q: I have $100,000 invested in low-rate GICs in my RRSP. I’m a 63-year-old retiree and don’t need this money for five more years. Are there any other ‘secure’ investments or ones with very minimal risks that will give me a better return? I have $200,000 in registered mutual funds, and want to keep a balanced portfolio.

—John Tobias, Russell, Ont.

A: Interest rates have been in this insanely low Twilight Zone for a few years now. Homeowners are demonstrating their love of low rates by taking on huge mortgages and lines of credit. But retirees like you have very few places to find yield. Exchange-traded funds (ETFs) that focus on corporate bonds or that hold dividend stocks might do a bit better. But higher returns mean higher risk and you might not be willing to make that trade-off for a few grand more a year. My advice would be to step back and look at your overall retirement plan, including CPP, any other pension income you have and your home. Could you afford to take more risk? Could you shift your mutual funds to lower-cost funds or ETFs to increase return? It’s okay if you decide your current plan is the best you can do given the low-rate zone we’re in.

Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal finance question? Write to us at ask@moneysense.ca

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