Whether you’re 30 years from retirement or three, a diversified, well-managed portfolio of mutual funds can help provide the mix of security, income, and growth you need to reach your retirement goals. But what that portfolio looks like will change over time, as these three scenarios illustrate.
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 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 including an optimized cross-section of domestic and international equity funds that have the potential for long-term capital appreciation.
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 (hopefully) are independent. With more income and fewer expenses, these are typically your biggest earnings years and, not coincidentally, your biggest tax-paying years.
For most people at this stage, there is still a lot of time for the growth potential of equity funds. 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).
With retirement approaching, you’ll want to start gradually shifting your fund portfolio away from capital appreciation and toward capital preservation and income generation.
Now may be the time 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 or 12 years away, we can talk about what’s next and set up the steps to implement your plans seamlessly.
Whatever life stage you’re in, remember that we’re here to help. As your life evolves, we can make sure your portfolio stays aligned to your changing needs and objectives.
Larry Kleinmintz, R.H.U., T.O.T., M.D.R.T.
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