|  The stock market's down, should I be worried? Major stock indices, cryptocurrencies and technology shares are all off to a rough start in 2022 as inflation, political uncertainty and the ongoing COVID-19 pandemic fuelled by the Omicron variant continue to play havoc in the markets. What does that mean for your investments? Financial experts say now is a good time for a gut check on your overall risk tolerance but not the best time to abandon your long-term investment strategy. Ottawa-based portfolio manager Derek Dedman says it’s usually best to wait until after a market downturn to make adjustments, as a short-term move when things look rough put your long-term prospects at risk. After things have stabilized, however, it could be prudent to re-evaluate your risk tolerance. "Maybe my portfolio was too risky because when we did start seeing some volatility and I started seeing some prices drop, I had a tough time and I wasn't sleeping well at night and I had this inclination to move and I was having to phone my advisor every three days," he says. Global News reporter Craig Lord has more here.  The impact of steady interest rates The Bank of Canada did not hike its benchmark interest rate on Wednesday despite pressure to cool surging inflation and a red-hot housing market. The central bank's officials did suggest change was on the horizon though and offered hints at where consumer and housing prices could head in the months to come. Governor Tiff Macklem said the bank is lifting its emergency measures tied to the COVID-19 pandemic that kept interest rates at rock-bottom levels and signalled that lending rates could start to rise as early as March. Though many economists had expected the Bank of Canada to act this week in an effort to curb the 30-year high in inflation, other experts noted to Global News that supply chain constraints, not the bank’s policies, are currently the most significant cause of price hikes on groceries and other consumer goods. "So this idea that we're going to raise interest rates and all of a sudden the cost of your strawberries is going to come down, I think is not the right way to really look at what's happening,” personal finance expert Rubina Ahmed-Haq said. The situation is similar in the country’s housing market, with rapid price escalation tied more closely to a lack of supply, real estate experts said. For further information on when you can expect inflation and the housing market to start cooling, read more here.  Inflation hits low-income Canadians harder Until inflation starts to reverse course, it’s Canada’s lowest-income families who are going to be struggling the most, experts say. Price hikes on groceries, gas and other basic necessities compound for those already struggling to make ends meet, economist Tu Nguyen explained recently to Global News. It’s a pain that John and Susan Redins know well. The Ottawa-based pair were already struggling to get by on disability support from the Ontario government and are finding their typical strategies for stretching their limited dollars are no longer enough. "After the bills and rent is paid, we're lucky if we have $50 a month for food," Susan says. "And now with the prices going up, it's even less. So something has to give.” Global News reporter Craig Lord has more on the disproportionate impact of inflation here. ________________________ – THE QUESTION – “I am 71 and both my wife and myself have to RRIF our RRSP this year. My question is where should I put this extra income until I'm ready to use it?“ — A Money123 reader “It sounds like you are retired and do not need the cash flow from your RRIF for day-to-day expenses yet. You have three issues: spend or invest the cash, best way to invest it, and can you do anything about the tax? Your new RRIF income is a good opportunity to think about your retirement lifestyle. Is there something more you would find fun or meaningful to do with it? Most people settle into a lifestyle without thinking about it. Live your life intentionally! There are millions of options. For example, would you like to travel more or enjoy more entertainment, like dinners, shows, or sports events? Do you want to keep it to give you a feeling of security, or for possible long-term expenses like a retirement home or medical expenses? Or is there a cause important to you that you would like to donate to, such as helping family or a charity? When you know what you want to do with it, you will know whether to keep it relatively liquid so you can access it whenever you want or to invest it more effectively for the long term. The RRIF income is taxable. To defer your tax as long as possible, instead of having it paid to you monthly, you can set your RRIFs to send you the minimum withdrawal only once per year in December. You can only avoid tax by creating some sort of offsetting tax deduction. If you have any RRSP room left, before you the end of the year, you can contribute the maximum, even if you have to borrow it. This gives you an offsetting tax deduction that you can claim over several years to offset your RRIF withdrawals. You can also get an offsetting tax credit if you donate it. The most effective way to offset the tax and get a much larger portfolio is the "RRIF Meltdown Strategy." Borrow to invest enough so that your RRIF withdrawals pay the interest payments. For the lowest interest rate, use a mortgage or secured credit line against your home. The interest should be tax-deductible to offset the tax. If you don't do anything about the tax, at least you can reduce future tax. You can contribute it to your TFSA, if you have room, or just invest in a non-registered account tax-efficiently.“ -Ed Rempel, blogger, fee-for-service financial planner & tax accountant, edrempel.com. ___________________________ Want your money question answered by an expert? Get in touch! | 
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