Want to Retire Wealthy? Follow These 3 Steps

Prospective retirees can follow three steps to build retirement wealth and secure their financial futures, despite the perennial threat of inflation.

| More on:

Rising inflation makes it difficult to lay down the groundwork for a safe landing in retirement. Canada’s inflation rate of 5.7% last month is the highest since August 1991. The reading in early March showed a spike when oil hit US$130 per barrel. While the rising cost of living can erode retirement savings, would-be or future retirees need to remain focused on building their nest eggs and protecting them.

You can overcome inflation blues and still retire wealthy or live comfortably by following three steps. These steps were successful in the past and are applicable to the present. The key is to follow through while making a few sacrifices here and there.

1. Save and invest

Money produces nothing if you keep it idle. Investing is the way to grow cash on hand and build retirement wealth. Maximizing tax-advantaged or tax-sheltered investment accounts like the TFSA and RRSP is also a must if the goal is to secure your financial future. Users of these accounts hold income-producing assets, mostly dividend stocks. Because money growth is tax-free, balances compound faster.

2. Change spending habits

The current situation requires adjustment in spending habits not only for retirement savers. Forego splurges and avoid needless purchases so more cash can go towards retirement savings. Also, avoid obtaining new loans or limit them to good debts that returns something of value.

3. Estimate income and expenses

The third crucial step is to estimate income and expenses in retirement. Revisit your monthly budget and factor in post-retirement costs, including medical. Since the CPP and OAS pensions won’t replace the average pre-retirement income fully, identify potential income sources to cover all financial needs. Since time is your friend, invest as early as now.

Long-term investing

Bank of Montreal (TSX:BMO)(NYSE:BMO) and Imperial Oil (TSX:IMO)(NYSE:IMO) are quality stocks you can buy today and hold forever. Both have dividend track records of more than 100 years. The big bank stock is the dividend pioneer, while the energy stock is a Dividend Aristocrat.

Keep reinvesting the dividends to realize the miracle effect of compounding. By the time you retire with a substantial nest egg, the capital remains intact, and the dividends become your regular income streams.

BMO started paying dividends in 1829 and the record is seven years short of 200 years. During the dividend bonanza on year-end 2021, Canada’s fourth-largest bank announced a 25% dividend hike, the highest percentage increase among the Big Six banks.

As of March 23, 2022, the share price is $148.01, while the dividend yield is 3.48%. Given a gateway to the affluent California market, market analysts are bullish on BMO. Their 12-month average price target is $168.21 — a 13.6% upside potential.

Apart from the 140-year dividend track record, Imperial Oil has raised its dividends for 26 consecutive years. The $38.45 billion integrated energy company reported killer earnings ($2.47 billion) and considerable free cash flow ($1.23 billion) in Q4 2021. At $57.47 per share, current investors are up 26.73% year to date and partake of the 2.43% dividend.

Focused strategy

Inflation is a perennial threat, especially to people approaching retirement. However, a focused strategy to overcome its impact will ensure that you’ll have more wealth to enjoy the sunset years.

Should you invest $1,000 in Bank of Montreal right now?

Before you buy stock in Bank of Montreal, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bank of Montreal wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

Muscles Drawn On Black board
Dividend Stocks

Where Will Power Corporation Be in 5 Years?

Here's how Power Corporation of Canada (TSX:POW) stock could generate double-digit returns and outperform financial sector peers in five years...

Read more »

view of skyscapers from below
Dividend Stocks

Where I’d Invest $5,500 in the TSX Today

Seeking to invest $5,500 in the TSX? Here’s a look at two stellar picks that can provide decades of growth…

Read more »

shopper buys items in bulk
Dividend Stocks

The Smartest Consumer Defensive Stock to Buy With $2,700 Right Now

Here's why Loblaw (TSX:L) is among the best consumer defensive stocks investors can consider in this increasingly uncertain environment.

Read more »

Forklift in a warehouse
Dividend Stocks

How I’d Build a $250 Monthly Income Stream With $14,000

The trick to earning $250+/month is reinvesting dividends and adding to your portfolio over time.

Read more »

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

The Top Canadian Stocks to Buy Immediately With $4,000

Insurance stocks are some of the strongest options, because we all need to pay it! And these three look top…

Read more »

dividends grow over time
Dividend Stocks

This Incredible Monthly Payer Is Down 17% and Looks Irresistible

Are you looking for an alternative source for a monthly paycheck? This stock is an irresistible deal to lock in…

Read more »

top TSX stocks to buy
Dividend Stocks

This Monthly Income TSX Stock Paying 2.7% Looks Like a Bargain Today

Savaria is a TSX dividend stock that has crushed broader market returns over the past two decades. Is the Canadian…

Read more »

data analyze research
Dividend Stocks

This Canadian Blue-Chip Down 36% Is a Once-in-a-Decade Opportunity 

Rarely does an opportunity come to buy a blue-chip stock at a decade-low price. It helps you catch up on…

Read more »