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Tailor a retirement savings plan for each stage of life

Published on: September 11th, 2019

In a study last year1 , over half of Canadians (53%) aren’t sure they are saving enough for retirement. Among those on the cusp of retirement (aged 55+) only 14% had a formal retirement plan and were saving regularly to meet their retirement goals.1

Perhaps it’s something you’ve worried about, too. Or if you’re younger, perhaps you’re wondering if you should be worrying.

What’s the best way to feel confident about achieving your retirement goals? Whether you’re 30 years from retirement or three, a diversified, well-managed portfolio of funds can help provide the mix of savings, income, and growth you need, as these examples show.

The building years
  “Go for growth” is likely to be your investing mantra at this stage of life. Thanks to kids, mortgages, and a propensity for accumulation, these years tend to be typified more by spending than saving. However, time is totally on your side. With a long investment horizon, you can focus on growth-oriented equity mutual funds, knowing that you’ll have plenty of time to ride out any temporary market downturns. You’ll also benefit the most from compound investment growth.

Whatever else is going on at this busy stage of life, consider beefing up your holdings with funds that have the best potential for long-term capital appreciation. Because building your nest egg is your primary objective, you’ll need to ensure that you have an optimal cross-section of domestic and international equity funds. We might also want to investigate country- and sector-specific funds to enhance diversification and to capitalize on specific opportunities, currencies, or economies.

Peak earning years
At this stage in your life, you may be mortgage-free (or close to it) and be earning the highest salary of your career. Your children have left home and are independent. With more income and fewer expenses, these are typically your biggest earning years and (not coincidentally) your biggest tax-paying years.

For most people at this stage, there is still lots of time for the growth potential of equity funds. That said, it’s a good idea to investigate funds that can also minimize your tax bill. Corporate class mutual funds, for example, offer all the investment choices you want with the added benefits of tax-efficient distributions and easy, tax-smart asset re-allocation within the fund family.

It goes without saying that this is also the time for us to make doubly sure you’re taking full advantage of tax-advantaged accounts, including Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).

Pre-retirement years
With retirement on the horizon, this is the stage when we want to start gradually shifting your fund portfolio away from capital appreciation and towards capital preservation and income generation. In the same way that dollar-cost-averaging (buying in small increments on a regular basis over time) is a smart way to acquire mutual funds, it’s an equally smart way to transition out of them.

Now may be the time to use this approach to start moving into the funds that will provide your retirement income stream. This doesn’t mean selling off all your growth-oriented funds. But by starting well in advance, you can enjoy the luxury of slowly rebalancing. Even if your anticipated retirement is 10 years away (or more), let’s talk about what’s next and set up the steps we’ll need to implement your plans.

Tailored for you
Whatever life stage you’re in, it’s important to ensure that your portfolio is within your own tolerance for risk so you can sleep at night. Remember that we’re here to help. Professional advice can help you clarify your short-, medium- and long-term goals and craft a mutual fund portfolio to help you reach your financial objectives. Over time, as your life evolves, we can make sure your portfolio stays aligned to your changing needs and objectives.


Sources: 1The 2018 Retirement Savings Poll, Angus Reid Forum, January 2018.

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