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How Can You Protect Your Retirement Income Stream From Inflation?

Jul 7, 2022 12:14:14 PM The MacMillan Estate Planning Team Trust Planning, investments, Investment Trust

The current inflation rates in Canada and around the world have skyrocketed over the last few months and are not expected to settle anytime soon. Canada’s inflation rate alone has soared to an almost 40-year high, which is much higher than even the economists expected.

The Bank of Canada has raised interest rates as a means of bringing it under control. However, this has had a minimal impact. Inflation continues to affect many areas of our lives, including our day-to-day purchasing power, our ability to save, the value of our assets and investments, and our long-term retirement planning.

Many Canadians who are looking to retire soon, or are already retired, are worried about how high inflation will potentially devalue the income they thought they were going to have during their retirement years.

Sheri MacMillan, CEO and Founder of MacMillan Estate Planning, says, “Inflation is especially a risk to retirees because many of us are living so long in retirement, in fact some of us may even spend four to five decades in retirement... Although it may be tempting to cash out of your investments and hide everything under the figurative mattress, wealth in cash is typically not a good idea during periods of high inflation because its value is eroded in real terms.”

For families looking to counteract inflation, as well as protect their retirement nest egg, from market volatility and other undue risks, we recommend a tool called an Investment Trust.

At MacMillan Estate Planning, we advise that our families and retirees put a certain percentage of their estate into an Investment Trust. This amount should be what they feel they need to protect to ensure they have a comfortable and worry-free retirement.

What is an Investment Trust?

Essentially a bespoke trust for your investments, or in layman’s terms, an ‘investment’ trust, this tool benefits from key features afforded to both inter-vivos trusts AND investments held under The Insurance Act.

What is are the benefits of an Investment Trust?

Investment Trusts are afforded many special benefits due to them being governed by Insurance Law and its origins in Trust Law. These benefits include creditor protection and the ability to bypass probate. They protect a retirement nest egg, leaving Canadians to ‘play’ around with the rest of their money as they see fit, rest assured that they are benefitting from enhanced protection and predictability.

Another benefit of an Investment Trust is a principal guarantee, which especially comes in handy during times of uncertainty and market volatility, like during the 2020 global pandemic.

Sheri MacMillan explains, “We start with a principal guarantee on our investment selections… When we were experiencing the ups and downs of Covid, our clients were calm because their investments had already been protected in advance of that surprise. Even though the markets were volatile, their portfolios were protected from the downturns because they started with principal guarantees.

There are many other benefits to Investment Trusts that help not only retirees, but business owners, and farmers, too

Investment Trusts are just one of the many estate planning strategies available to families that can provide a level on certainty during these uncertain times. Sheri empathizes, “There must be a level of certainty in your estate at that juncture when you’re transitioning from your working career or slowing down. You’ve worked hard to build your estate. It should be for you and your family to benefit from.”


Want to know more?

To find out more about Investment Trusts or other estate planning strategies that could benefit you in retirement, register for our upcoming estate planning webinar at www.macmillanestate.com/seminars, or call 1-833-266-6464 to schedule a complimentary consultation with one of our expert estate planners.

At MacMillan Estate Planning, our team of professional trust and estate practitioners, chartered accountants, financial planners, and legal professionals look forward to assisting you with the design of your estate plan and will ensure you build, protect, and enjoy your wealth. The information provided is general and may not be suited to your objectives or sufficient to ensure the protection of you and your family. You should not act on this information without providing MacMillan Estate Planning with the opportunity to ensure that it is suitable for your unique situation.

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