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Dale Jackson

Personal Finance Columnist, Payback Time


It’s been a rough year for Canadians investing for and in retirement as they get squeezed between skyrocketing borrowing costs on one side, and dismal stock market performance on the other.

Things would look pretty grim if success or failure was based on one year, but it’s not. The longer-term view reveals a few silver linings that could get your retirement plan back on track in 2023.    


Most sound retirement plans call for the elimination of debt but a four per cent increase in the benchmark interest rate this year alone might seem like quicksand for those hoping to get there.


The Bank of Canada has signalled the inflation-fighting measure is at, or very near, its end until the central bank can get a fix on whether it is working. That likely leaves borrowers facing variable and fixed-mortgage rates above five per cent in the new year. For many, the monthly cost of servicing mortgages, reverse mortgages, or home equity lines of credit (HELOCs) has more than doubled, leaving less for savings.

Interest rates for unsecured debt such as student loans or personal lines of credit are even higher.   

We haven’t seen rates this high since 2008, but they still dwarf the all-time Bank of Canada high of 16 per cent in 1991. While rates might seem high for a generation that has only known rock-bottom interest rates, these are historically normal times.


There are two sides to every trade, however. A loss for borrowers is a gain for lenders who have had to suffer low-fixed income yields for the past three decades.

Returns on guaranteed investment certificates (GICs) have also topped five per cent, and yields on investment grade government and corporate bonds are also on the rise.

That gives investors the opportunity to shift portfolio assets from volatile equity markets to the safety of fixed income; allowing them to achieve long-term return goals with much less risk.    


Shifting your portfolio from equities to fixed income will probably take time in the wake of this year’s double-digit stock market decline. “Buy low, sell high” is the rule and selling now is probably a bad idea.

Both the TSX Composite and S&P 500 indices - benchmarks for a diversified portfolio - have declined in value by about 10 per cent this year.

Inflation concerns, rising interest rates, and pandemic lockdowns have been a strain on equities and the economy despite decent corporate earnings growth.


Stock markets ebb and flow, but always go up over the long term. Last year the S&P 500 advanced by an eye-popping 27 per cent and the TSX Composite gained 22 per cent.

Returns are more consistent if you slice stock market performance into five-year averages, which suggest upside potential in the near future. If you go back five years and include this year’s carnage, the S&P 500 has still advanced by nearly 50 per cent and the TSX Composite is up by nearly 30 per cent.

Trimming equities, and separating the beaten-down stocks with potential from duds is a tough exercise in timing that could require the help of a qualified advisor.