Think it’s Too Late to Save for Retirement? Think Again

Retirement is still possible, but you may need a new strategy with growth stocks like Shopify (TSX:SHOP)(NYSE:SHOP)

| More on:

“I’ll probably never retire” is a phrase I hear more often now. Unfortunately, this claim is believable. Most Canadians have little to no retirement savings. Some are relying on the equity in their home, but that may not be enough to fund multiple decades of living expenses. 

If you feel like you’re falling behind, here are some ways you could catch up. 

Aggressive growth strategy

Most retirement investment advice focuses on safety and reliability. But if you’re 60 years old and just a decade away from retirement, you can’t really rely on compounding returns. 

You need a new approach to accumulate wealth, which probably involves an aggressive growth strategy. Growth stocks have delivered immense returns in recent years, and there’s no reason to believe they’ll slow down. These aren’t risky penny stocks, either! 

A well-known tech stock like Shopify (TSX:SHOP)(NYSE:SHOP) has delivered a jaw-dropping 5,839% return since 2015. That’s a compounded annual growth rate of 78.6% over roughly seven years. To put it another way, you could have invested $10,000 in Shopify stock in 2015 and turned it into $583,900 by now. 

Can Shopify continue to deliver such performance? Absolutely. The company’s worth $211 billion right now, while its largest competitor is worth $2 trillion. The global e-commerce market is worth well over $20 trillion. There’s plenty of room to grow. 

If you have modest savings right now, consider a tech growth stock to help you accumulate wealth rapidly. 

Systematic withdrawals

If the tech growth stock approach is too aggressive for you, there is another way. You could stick to the traditional strategy of investing in blue-chip dividend stocks. But if you’re close to retirement, you may need to add another element to your strategy: withdrawals. 

A systematic withdrawal plan is ideal for retirees with limited savings. Essentially, you’ll sell a percentage of your stock portfolio every year to fund your lifestyle. Statistical studies show that selling between 3% to 4% of your portfolio should help you live off your capital indefinitely. 

How does this work? The statistical studies analyzed stock market returns over the past few decades. On average, stocks deliver a total return of 6-7% a year. So, selling less than that should allow you to retain your capital over the long run. 

This strategy should allow you to retire on a few hundred thousand dollars.

Retirement is achievable

It’s never too late to start retirement planning. Even if you have little to no savings right now, you could flip the script quickly. An aggressive, tech-focused growth strategy should help you accumulate wealth. Alternatively, you can plan to sell a fixed percentage of your stock portfolio every year. 

A little research and a new perspective is all you need to achieve retirement. Good luck!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify.

More on Investing

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Investors: Buy These 3 Stocks for $3,480 Yearly Tax-Free Income

One significant benefit of a TFSA-based dividend income is that it doesn’t weigh down your tax bill.

Read more »

a-developer-typing-lines-of-ai-code-while-viewing-multiple-computer-monitors
Tech Stocks

Could Constellation Software Become the Next Berkshire Hathaway?

Constellation Software's (TSX:CSU) capital-allocation strategy is similar to that of Berkshire Hathaway (NYSE:BRK.B).

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, November 8

The TSX Composite benchmark remains on track to end the week with strong optimism as it currently trades with 2.4%…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Bank Stocks

Best Stock to Buy Right Now: TD Bank or Manulife Financial?

Manulife continues to see momentum in its business and stock price, while TD Bank stock remains down and out.

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »