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Guest Writer Article: Top 5 Financial Risks Facing Seniors Today

September 15th, 2009


Guest Writer Article – Mark Pretorian at Manulife Securities Inc.

The objective of this article is to help seniors make educated investment decisions. In the past, retirees could comfortably live on income generated by savings accounts. Today however, with historical low interest rates, thousands of older Canadians seek higher returns from investment products to make ends meet. Understanding today’s inherent investment risks are crucial for seniors relying on investment income to meet their expenses.

Here are the top 5 financial risks facing seniors today:

  • Double-Dip Recession

Today’s greatest financial risk is what experts call ‘A Double-Dip Recession’. The risk that gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a second economic downturn just as markets start recovering. For many seniors it might be the second 15 – 30% loss which will truly impact their retirement lifestyle.

  • Fraud

Seniors who grew up in the 1930’s, 1940’s and 1950’s were commonly raised to be polite and trusting. These attributes unfortunately make them the perfect targets for con-men. Bernard Madoff, Earl Jones and Vincent Lacroix are but a few of the alleged con-men unmasked by the latest recession. More than ever, seniors need to carry out their own due diligence about the investment firm and the individuals managing their money.

  • Focus

Successful investing is about managing risk. Unfortunately for many seniors, investing is mostly about sprinkling money between too many investments. Warren Buffett has often said, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

  • Misleading fund names

Mutual fund names often inappropriately reflect their investment risk. Investors can be misled in believing that mutual funds with such names as ‘government’ or ‘income’ will not carry risk. In fact, the value of such investments will likely fluctuate depending on market conditions.

  • Confusion over account statements

Most investment firms account statements reveal very little about performance, fees and commissions. It is crucial for older investors to ask their financial professional to calculate these figures and provide them in writing if they are not available on their account statements.

Mark Pretorian at Manulife Securities Inc.
(514) 421-7090 ext 270

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