Retirees differ from younger investors because their financial needs and goals focus more heavily on stability with a very low appetite for risk. Some retirees are attracted to additional income to supplement their pension plans and public pension benefits. Pension benefits may or may not sufficiently cover the expenses of a desired lifestyle. As well, pension income is vulnerable to periods of high inflation. So generating additional revenue without introducing unacceptable risk poses a dilemma for pensioners. Equity investments do not solve the pensioner’s puzzle because economic downturns or periods of high market volatility can severely impact the value of equity investments. There is too much risk with a strategy too heavily weighted with stocks.

Retirees need guaranteed income streams insulated from market downturns and inflation. In the face of this dilemma, pensioners prefer a diversified portfolio to supplement pension income. MDL diversifies your investment portfolio to generate reliable income streams while minimizing the risks of inflation and market downturns.

A reliable and well-diversified portfolio usually combines fixed-income securities, low-risk dividend equity, and annuities. Fixed-income securities include GICs and other fixed instruments, guaranteeing an income stream with no risk.

High-quality dividend equity usually brings greater returns than fixed income with reasonable levels of risk. Quality stocks are attractive because they can grow your portfolio and return dividends as predictable quarterly payments. They offer much lower risk than value or speculative equity and are more resilient than other stocks during market downturns. In addition, quality dividend stocks regularly provide dividend income which can rival the interest rates of GICs. MDL concentrates mainly on very large Canadian corporations such as banks. We focus on Canadian stocks because international equity introduces foreign exchange risk.

Segregated funds offer growth potential but have low or moderate levels of risk and can meet different financial goals (balanced funds, Canadian equity funds). They are similar to a mutual fund but provide a guarantee upon death and at fund maturity. MDL offers segregated funds to guard against early death or severe market downturns.

The maturity guarantee ensures that during a severe market downturn, you receive at least 75% of the initial investment upon maturity, usually set at 10, 15 or 20 years. Sometimes an investor passes away not long after purchasing a segregated fund. The death guarantee ensures that the heirs receive most or all of the initial investment at the time of death.

MDL also offers guaranteed withdrawal benefits (GWB). A GWB annuity guarantees a percentage of your initial investment every year. GWBs are attractive because they provide a predictable income stream and guarantee that income during market downturns while offering the potential for growth. Regardless of market conditions, you withdraw set maximum amounts from the annuity regularly until the fund’s depletion.

For example, an investment worth $100,000 (with withdrawals of $5,000 per year) drops to $85,000 during a market downturn. Regardless of market conditions, you are still entitled to the $5,000 annual withdrawal. Your $100,000 investment is guaranteed. During market booms, you are entitled to larger withdrawals because you will gain a share of the annuity’s additional profits.

MDL will monitor your account’s performance. We set benchmarks for expected performance and advise you when we rebalance your portfolio and re-allocate its assets. During periods of market volatility, we weigh fixed-income and guaranteed investments more heavily than equity investments. During periods of market growth, we shift some portfolio assets to quality equity to grow your portfolio.

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