Q&A: Where to invest retirement money?

Question: I am 58 and my husband is 60. We are both still working and contributing to our RRSP. Our question is, with all of the turmoil in the market these days, should we lock in to a money fund what we have saved so far? We are not invested in anything high risk but we would like to retire in the next two years so what we have saved so far is crucial to that plan. Thank you for your consideration. – Sue H.

Gordon Pape responds: If preservation of capital is your absolute number one priority, then some type of cash investment like a money market fund, GIC, or high-interest account is certainly an option. However, you will have to accept a reduced rate of return as a trade-off. The average money market fund returned 3.25 per cent in the year to May 31. If interest rates rise, you should do slightly better over the next couple of years, but it would be unrealistic to expect a return of more than 3.75 per cent annually.

If you decide on a money fund, choose one with no sales commissions and a low management expense ratio (less than 0.8 per cent).

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