5 steps to take before offering a financial lifeline

Although you may have seen your retirement nest egg dwindle in the pandemic’s market downturn, family members struggling with debt or seeing the dream of home ownership float away may see your remaining retirement savings as a lifeline. Before agreeing to help, make sure you will not be putting your own financial future at risk.

The COVID-19 economic shutdown was a financial tsunami for many Canadian families. Primary and secondary earners who thought that their jobs were secure were laid off – some permanently. Government income supports and relief programs have helped in the short term but left many far short of their monthly cash flow needs.

Longer term, the pandemic will mean major economic and lifestyle adjustments for some Canadians as they struggle with debt, unemployment, and catch-up mortgage payments. And they may turn to those they think are financially secure for financial help.

As hard as it may be, you need to make sure that your own financial future is secure before agreeing to help a family member, friend, or caregiver. Your financial advisor can help, but whether you use an advisor or handle your own investments, here are some steps to take and resources that can help you understand whether you can truly afford to help out:

Step 1

Net Worth Calculator
Your first step should be to review your current financial situation. Check your most recent investment account statements. Did you lose money in the downturn? How much? Did you incur additional debt? How much?

Step 2

Investment Recovery Calculator
How long could it take your investments to recover its value after a market downturn?

Step 3

Retirement Budget Worksheet
Think about whether your own budgetBudget A monthly or yearly estimated plan for spending and saving. You work it out based on your income and expenses.+ read full definition needs have increased or decreased because of the pandemic. Will you travel less? Will your health care needs be higher?

Step 4

Retirement Cash Flow Planner
Now you are ready to calculate your cash flow taking into account government and private pensions as well as any investment income you might need now and in the future. If your RRIFRRIF See Registered Retirement Income Fund.+ read full definition has changed in value, you can recalculate your mandatory withdrawals using our RRIF withdrawal calculator.

Step 5

Decision time. You are now in a good position to decide whether you can help without putting your own long-term financial security at risk.

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