|  Grappling with the soaring cost of living in retirement Decades-high inflation levels have come at a bad time for those in or eyeing retirement. When inflation is running rampant, one of the common cures is higher wages. But for those who just retired, the soaring cost of living is forcing many to find clever ways to cut costs. Recently retired Marylou Cyr from Campbell River, B.C., is one of those people. The 62-year-old said she hit a wall after two years in the pandemic, and despite wanting to put in a few more years to pay off her remaining mortgage, she decided it was time to retire. But as she attempts to set a firm budget for her and her husband Mike, who still works seasonally, inflation has become a complicating factor in cutting down expenses. "I am very concerned with the inflation, the rising food costs, as well as the rising gas costs. I think those are two main things," she said. Personal finance expert Pattie Lovett-Reid said she’s confident she and other recently retired Canadians will make it through the current cost of living challenges. "What I can tell you is that we got through it,” she said, referring to the “outrageous” inflation levels of the 1980s. “But you don't get to it by sticking your head in the sand. You get through it by looking at your plan and tweaking your plan because you've been thrown a curveball.” For more on how inflation is pushing some Canadians to reimagine retirement, read the final instalment of Global News’ Sticker Shock series.  Bank of Canada hikes 50 basis points — again Speaking of inflation, the Bank of Canada raised interest rates 50 basis points to 1.5 per cent on Wednesday in an effort to tamp down rising costs. The increase marks the first time the bank has hiked rates 0.5 percentage points in back-to-back decisions in nearly 25 years. And it’s likely not done yet. "The pace of further increases in the policy rate will be guided by the Bank's ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the two per cent inflation target," the bank said in a statement. And on Thursday, deputy governor Paul Beaudry said the bank may need to raise its key interest rate to three per cent or beyond to ensure inflation doesn't settle in long term.  "We're scared that this inflation becomes entrenched," he told reporters.
Read more on the latest rate decision here.  How to manage your growing debt Filling your car with gas, buying groceries and paying bills — all while dealing with rising interest rates — have left Canadians across the country struggling with debt. Consumer debt spiked by 8.6 per cent in the first quarter of 2022, climbing to $2.3 trillion over the last year, according to Equifax Canada's June 2 Market Pulse consumer credit trends and insight report. "We are starting to see that rise in Canadians really noticing their debt levels," Taz Rajan, community engagement partner at Bromwich and Smith, a Canadian debt relief and consolidation service, told Global News. And one in three Canadians don't know where to turn for relief, according to a recent Ipsos poll conducted on behalf of MNP LTD. So what can Canadians in this situation do? Global News reporter Irelyne Lavery spoke to personal finance experts for their debt management tips. ________________________ – THE QUESTION – “My RRIF has suffered a very significant loss, I am now considering to cash all of it and put it in GICs. They say that it would not be a good move, but at age 76, I am very concerned about the future.” — A Money123 reader “This year has been a rough one for investors. As of May 31, the S&P 500 is down 13 per cent but the TSX is only down one per cent, due mainly to strong performance from energy stocks. Canadian bonds, as measured by the FTSE Canada Universe Bond Index, are down 10 per cent. When interest rates rise, bonds fall, so 2022 has seen a terrible start for bonds. The good news for bond investors is higher rates mean higher future returns – eventually. I can appreciate how concerning it is for an investor at any age or stage to see their portfolio plummet. I have clients in their 30s who have been nervous about their investments this year, let alone a 76-year-old retiree. My take is that selling all your investments in response and putting everything into GICs is an option, albeit with drawbacks. For one, if you are only taking the minimum withdrawal from your RRIF account, that would be less than six per cent of the account value at age 76. That means the other 94 per cent of your portfolio, despite the decline, remains invested. When investments go down, it is common for investors to worry they may continue to fall. If you are down 10 per cent, what happens if things fall another 10 per cent, and 10 per cent after that, and so on? Ten per cent declines happen about once a year for stocks and tend to last only a few months. Returns after significant stock market declines tend to be quite strong historically. The point is that if you are only taking modest withdrawals from your account, your investments can recover over time. When stocks fall, the losses are only temporary until you make them permanent by selling. That said, if you are really uncomfortable and worrying a lot about your investments, that may be a sign you were invested too aggressively in the first place. You should re-evaluate your risk tolerance with your adviser and consider a reduction in your investment risk as opposed to selling everything at once. GICs are becoming more appealing to conservative investors as some one-year rates are approaching four per cent. For people who were unprepared to have losses on their bonds, I can appreciate why GICs are garnering attention. They may finally be back in vogue for the right investors.” -Jason Heath, managing director, CFP, Objective Financial Partners Inc. ___________________________ Want your money question answered by an expert? Get in touch! | 
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