Retirement is the ultimate goal, yet it’s a stressful one. Canadian investors work all their lives hoping to make enough money to live off of for decades into an unknown future. So, when it comes to protecting that income, you want to put all your efforts towards it.
That’s why today, we’re going to go over the three steps investors should make to protect their retirement income and to make the most out of it with the least amount of stress.
Image source: Getty Images
Invest in long-term GICs
While interest rate hikes by the Bank of Canada aren’t ideal, it does mean that bond yields increase. This also goes for interest rates for Guaranteed Investment Certificates (GIC), often at very long maturity dates.
A GIC is basically a loan to a financial institution or corporation, with a fixed rate provided in return. Financial institutions in Canada are incredibly safe, as there hasn’t been a banking crisis in over 100 years. What’s more, only three banks have closed since 1923, none of which have been included in the top banks in Canada.
So, that’s why Canadian investors wanting to receive high interest on long-term investments should consider GICs for their retirement goals. Not all of it, but a large portion. For example, Royal Bank of Canada (TSX:RY) currently offers a 3.9% guaranteed rate for a 10-year non-redeemable GIC. That’s compound annually as well, so you’re gaining 3.9% each and every year on your investment.
If you were to put a large chunk of your retirement income into that 10-year GIC, you can look forward to safe returns of 3.9% for at least the next decade.
Next step: Passive income
You’ll want to take some of your retirement investments and put it towards dividend stocks to create passive income. This helps you in two ways. First, you can use that passive income to reinvest in stocks. You’re therefore investing more money into your future investments, but without using your own cash in hand.
The second benefit is that you can look forward to creating more passive income to be used in retirement. Investors can use this passive-income stream to help fund their retirement rather than depending solely on a pension, Canadian Pension Plan (CCP) or even their Registered Retirement Savings Plan (RRSP). This could help you wait until reaching age 70 to claim retirement benefits, maxing out in the process.
A great option to consider is a high-yield stock that is an essential business. For example, Slate Grocery REIT (TSX:SGR.UN) is an excellent choice. It offers monthly passive income and is in the grocery real estate business in the United States. It holds a diverse range of grocery properties across the country, providing a dividend yield of 8.82% as well as of writing. That’s one to bring in now before shares start to climb higher when the market recovers.
Finally, speak with a financial advisor
There are some things that come down to an individual level. These are long- and short-term goals that investors want to achieve before they reach retirement, along with retirement goals. And they’re incredibly important but can only be addressed through one-on-one conversation.
If you’re hoping to pay for your child’s wedding and education, take a trip around the world, buy a home, or pay off debt — all of it has to be dealt with. Yet it also means that you need a plan in place. That plan can be discussed with a financial advisor, helping to guide you through the process while also checking off your must-haves.
By using these three steps, you’ll be sure to have created an ultimate retirement guide that will see you surrounded by cash and passive income while keeping stress to a minimum.
