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As Canadians approach the age of retirement they have fewer financial options and less ability to make up for market downturns. ((iStock))

An inter-generational cliché is that the younger generation is always in a hurry — quick to get on with a career and quick to spend its cash.

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An investment irony is that younger people actually have so much time that, as long as they start some sort of plan — whether it is buying stocks, bonds or pokey GICs — they will wind up with mountains of cash when they are set to retire.

It is really the older generation that is in a hurry, facing more immediate financial problems for which there might not be a terrific solution.

The 2008 crash

Take the stock market meltdown of 2008 and early 2009.

The under-40 crowd could — although not many did — take their equity losses in stride, confident in the knowledge that they had sufficient years to make up the downturn.

That was not the way with retirees or the close-to-retired crowd.

"They were way more aware of the downturn and what it meant to their finances," said Sid Giroux, a financial planner based in Okotoks, a suburb community south of Calgary.

Simply put, as Canadians approach the age of retirement they have fewer financial options and less ability to make up for market downturns.

For example, if a 55-year-old started contributing equal annual payments to an RRSP and managed to squirrel away $12,000 by the time they retired at 65, they would have $17,305 in savings.  The interest rate in this hypothetical case is seven per cent.

By way of comparison, a person who saves $12,000 by age 35 and then stops contributing to their RRSP will have more than $91,000 when they reach 65 years old. This calculation is based upon the same seven per cent annually compounded interest rate, showing how the extra time the investment has to grow pays off.

Stock fire sale

Market timing can be another problem for those nearing retirement age.

'Is the glass half full or half empty? Your portfolio is down 30 per cent. Is it really, or is it just down 30 per cent from a year ago?' —Brian Emery, financial planner

For example, if a person has kept a large portion of his or her portfolio in equities, they could be forced to cash out regardless of the high or low level of the stock markets. After all, they might need the money for living expenses.

And when they reach the age of 71, Ottawa forces people to withdraw a percentage of their RRSP money on an annual basis.

This is where a reality check is sometimes needed when markets go sour. Even faced with a market downturn, retirement-age Canadians need to remember that, if they have had money in stocks and bonds for many years, their overall net worth still has likely increased, analysts said.

"Is the glass half full or half empty? Your portfolio is down 30 per cent. Is it really, or is it just down 30 per cent from a year ago? Over the last 10 years you may have doubled your money even with the downturn," said Brian Emery, a financial planner with the Meridian Credit Union office in Orangeville, Ont.

In fact, even when nearing retirement, you might wish to take advantage of current lower equity prices to buy high-value stocks, such as banks and consumer-oriented companies, on the theory that an upwards correction is in the cards, experts say.

Putting your nestegg in several baskets

Another possibility is sinking your cash in a series of GICs or bonds with different maturities in what is termed an "annuity ladder."

"People facing retirement want guaranteed income, and they also want liquidity," Olivia Mitchell, a professor of insurance and risk management at the Wharton School of the University of Pennsylvania, wrote in the June online edition of Financial Planning, a U.S. personal finance magazine.

In this strategy, a couple close to or at retirement age begins purchasing an annuity (an investment product that pays out a fixed amount of cash each year), until the combined payout from their fixed-income investments and their stock portfolio equals what they want in retirement income.

Looking at the plan

Re-evaluating one's financial plan regularly as you get close to retirement is a must.

In some cases, that could mean reducing expectations about travel or purchasing that cottage property.

In other situations, it might mean considering a part-time job to stretch a portfolio. In the United States, for example, there were more than 27.2 million people 55 years and older employed in November 2009. That was an increase in older employment of almost 10 million a decade earlier.

"As the couple starts to think more and more about retirement, it is important to review their plan to determine if they are able to retire in the next couple of years and enjoy the lifestyle that they envision," said Andrew Dedousis, a financial expert with Meridian's Guelph branch.